Interesting things are happening right now with Japanese Yen exchange rates in the aftermath of the disaster. So Japan is having to sell foreign assets in order to afford their rebuilding operation. This increases the demand for Yen in the currency exchange market, which in turn increases the strength of Yen. This might sound good to those who believe a strong currency is the sign of a strong economy. However this can have seriously negative implications for Japan's economy, especially in a time when they are trying to recover. When a nation's currency is strong, relative to other currencies that is, it makes the goods produced there relatively expensive for the rest of the world. Sony and Nissan may run in to trouble competing in the global market when all of a sudden their electronics and cars provide the same quality as before, but now at a higher price. This of course leads to reduced demand for Japanese goods which leads to fewer jobs in Japan, and the scent of recession begins to hang in the air.
Luckily for Japan, this is all being avoided for the time being thanks to Europe's central banks, the Federal Reserve, and the Bank of Canada, who have coordinated to fight the rising exchange rate of the Yen against the US dollar. So they are selling Yen like it's going out of style and helping their economy maintain balance.
There are however many uncertainties in this situation. The selling of Yen coupled with the Japanese government selling foreign assets counter each other, and it may be hard to keep the two balanced. Also the Bank of Japan is printing money to also try and weaken their currency, adding to the complexity of the situation. Only time will tell how this will pan out, but it is good to know the world supports Japan and is concerned for their recovery.
More deatils here
(This was posted by Trevor Murphy-Mannix)
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