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TheOnlySaneOne
07-06-2005, 07:15 AM
Okay, considering I'm going into politcal science, I figure I had better know this. When reading the news, I sometimes come across the statement that the dollar has lowered compared to the yen and it always seems to be a horrible, evil event. Why is this such a travesty? Shouldn't Japan's economy improving and becoming comparable to that of the US a good thing?

clairobscur
07-06-2005, 07:33 AM
It is indeed a good thing, and anyway, the dollar losing ground to the yen could be very advantageous for the USA since it boosts the exports (american products becoming cheaper for a Japanese consumer). It depends on the circumstances.

If you intend to study political sciences, you might want to read more serious medias.

Johnny L.A.
07-06-2005, 08:51 AM
FWIW: When I was a little kid, there were 360 yen to the dollar.

Whack-a-Mole
07-06-2005, 10:00 AM
Whether it is "good" or not depends on which side of the fence you sit on.

If the dollar lowers versus the yen then Japanese products become more expensive to US consumers and US products become cheaper to Japanese consumers. So, in the short term this is bad for US consumers as it costs more to buy your Japanese made product. However, it is good in that it can spur US companies to build more stuff and export it to Japan which can mean more jobs for those in the US.

Of course, there is a delay in any of this. Patterns of import and export will lag behind movements in the currency but if the situation remains you should see the above happen. I say "should" because the real world adds all sorts of extra complexity to the mix such as trade barriers, tarriffs, government subsidies to an industry and so on. In a "perfect" free economy the two currencies should reach an equilibrium and not move much relative to each other at all.

Shalmanese
07-06-2005, 11:47 AM
The first thing you have to learn about economic reporting in the news is that when the dollar goes down, it's bad news. When the dollar goes up, it's bad news. When inflation goes down, it's bad news. When inflation goes up, it's bad news...

The Controvert
07-06-2005, 01:51 PM
So if the dollar is unchanged and inflation is unchanged, is that good news or bad news?

Schnitte
07-06-2005, 02:07 PM
That's bad because it shows the economy lacks dynamics.

Whack-a-Mole
07-06-2005, 02:11 PM
So if the dollar is unchanged and inflation is unchanged, is that good news or bad news?

Using Shalmanese's rule of thumb in economic reporting it is a "bad thing". After all the economy is supposed to perpetually get better right? So holding still can't be any good.

Of course again the answer depends on who you are and why the rates are remaining static. Usually as an economy grows the currency strengthens along with it (and vice versa). However, there are artifical ways to prop up a currency that skew it from where it probably should be in a perfect model. Many times it is not even the government who floats the currency doing the propping up. Would it surprise you to hear China (and Japan) has been propping up the dollar against the yuan (and yen)?

Even by the buttoned-up standards of central bankers, Alan Greenspan is not an effusive man. But one economic phenomenon has driven the U.S. Federal Reserve Board Chairman to reach for the superlatives: in March, he marveled at the "extraordinary" efforts of China and Japan to prop up the dollar by pumping money into U.S. bonds.

SOURCE: http://www.time.com/time/asia/magazine/article/0,13673,501040628-655458,00.html