In 1995 the Japanese yen was trading at 93.96 yen per dollar and by the summer of 1998 the yen/dollar exchange rate stood at 140.79, having risen in every year of the 1995-98 period. What economic and financial factors would likely have contributed the most to this sharp fall in the exchange value of the Japanese yen against the U. S. dollar? Using the demand and supply framework shown in Exhibit 25-5 illustrate diagrammatically how the economic and financial factors you cited above would have lowered the international value of the yen vis-à-vis the American dollar. Should the Bank of Japan have intervened more aggressively during this period of erosion in the value of the yen? Why or why not?

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The Answer of In 1995 the Japanese yen was trading at 93.96 yen per dollar and by the summer of 1998 the yen/dollar exchange rate stood at 140.79, having risen in every year of the 1995-98 period. What economic and financial factors would likely have contributed the most to this sharp fall in the exchange value of the Japanese yen against the U. S. dollar? Using the demand and supply framework shown in Exhibit 25-5 illustrate diagrammatically how the economic and financial factors you cited above would have lowered the international value of the yen vis-à-vis the American dollar. Should the Bank of Japan have intervened more aggressively during this period of erosion in the value of the yen? Why or why not?

In 1995 the Japanese Yen Was Trading at 93