Throughout this assignment, appendices provided by the teacher have been utilized. Additional appendices are found on the assignment’s last page. All utilized appendices are stated throughout.
Task 1) Based on appendix 1, calculate the percentage change in YEN rate of exchange from 2 April 2012 to 2 April 2014. Explain the influence on Japan’s foreign trade.
Task 2A) Explain why the Japanese government wants to create in increased rate of inflation.
Task 2B) Explain how ‘’Abenomics’’ must contribute to increasing the rate of inflation in Japan. Include different reasons for inflation.
Task 3) Based on appendix 2, analyze the demographic development Japan. Assess which influence the development will have on Japan’s public debt.
Task 4) With the macroeconomic indicators in appendix 3 as your starting point, analyze the reasons for the economic growth in Japan. Include additional appendices in your analysis.
To calculate the percentage change in the exchange rate of the yen, the first thing to find is the difference in percentage points. This is done by taking the year 2014 from appendix 1, when the exchange rate was 5.22, and draw the 6.77 which was the price in the year 2012. This results in a value of -1.55. We then divide the -1.55 from the base year, and will thus the percentage change in yen, which is calculated, -1.55 / 6.77 = -22.895.
As we can easily observe, Japan's currency has weakened as the exchange rate of the yen has fallen from 6.77 to 5.22 against the DKK. That means that their currency is cheaper against the DKK. A strong currency will reduce a country's competitiveness, as this makes it more expensive for other countries to buy another country’s items. Therefore, the very moment the Japanese currency has weakened, it will cause an improved competitiveness, as it, ceteris paribus, will be cheaper for other countries, including Denmark, to trade goods in Japan. It will therefore have a positive impact on the export of goods abroad, while it will have a negative impact on the import of goods, as they will be more expensive to buy , for example raw materials in other countries, and will thereby increase production costs. Development occurs due to changes in the supply and demand. Since it appears in appendix 5, that the Japanese yen has fallen by 16% compared to the dollar, Japan will therefore be much more competitive on the international market.
As of May 2017, the exchange rate of the yen has risen again, sitting at 6.03 against the DKK. This means that their competitiveness has weakened compared to April 2014, since it will now be more expensive for other countries to buy items from Japan. Due to this, it has a negative impact on export, since other countries will now have to pay more for exporting goods from Japan.