The yen is the official national currency of Japan, and is denoted by JPY. The Meiji government introduced the yen to replace the previous complex system of the Edo Period, where there was no fixed exchange rate between the various coins used. The New Currency Act of 1871 established the yen as the official unit of currency and moved Japan onto the Gold Standard. It was named the "yen" because of the direct translation to "round object." In April of 1949, the yen was pegged at 1 USD = ¥360, where it stayed until 1971. At this time, however, the Bretton Woods system collapsed. This international monetary system, based on stable and adjustable exchange rates, was reluctantly switched to a regime of floating exchange rates and the value of the yen started to float as it still does today.
| Moody's Rating |
| AAA |
| S&P Rating |
| AA- |
|
Sovereign credit ratings play an important part in determining a country's access to international capital markets, and the terms of that access. Sovereign ratings help to foster dramatic growth, stability, and efficiency of international and domestic markets. |
What does it look like?
Political Structure
The head of the Japanese parliamentary system is the Prime Minister, who to most is considered a symbol of the state rather than a divine figure. There is a Diet made up of a 500-member House of Representatives and a 252-member House of Councilors. The Prime Minister's cabinet is elected by the Diet from within and the Prime Minister can request that new members be elected if he is dissatisfied with initial elections. There is a Supreme Court, on which judges sit for life.
Prominent Figures
The current Prime Minister of Japan is Junichiro Zoizumi. He was originally a member of the Diet and was elected to 11 consecutive terms. The Japanese Central Bank determines the country's monetary policy, and is governed by bank President Toshihiko Fukui.
Unique Characteristics
Japan is most vulnerable to rising crude oil prices, as it imports all its oil and, being an export-dependent nation, is highly sensitive to rising energy costs. With the continual increase in oil prices in recent years, the value of the Japanese yen has taken a toll.
Japan's foreign trade industry maintains an isolationist view. Japan lags behind the rest of world in regards to foreign trade, bringing about a number of structural problems as well as low productivity for domestic companies. The yen is affected since it only circulates within Japan; this lack of circulation outside of its own country makes the JPY weak.
When the strength of the yen rises, it hurts the manufacturing industry of Japan, which is a large component of the Japanese economy. Companies are investing in lower-cost nations since the yen is so strong and would cost the companies more money to trade with Japan.
Economic Data
| ECONOMIC INDICATOR |
UNITS |
2005 FORECAST |
2006 FORECAST |
Gross Domestic Product (GDP)
|
Billion 95 JPY
(%YA) |
555952
(+0.9) |
565037
(+1.6) |
Private Consumption
|
Billion 95 JPY
(%YA) |
298806
(+0.8) |
302691
(+1.3) |
Consumer Price
Index (CPI)
|
1995=100
(%YA) |
98
(-0.3) |
98
(-0.1) |
Unemployment Rate
|
% |
4.8 |
4.8 |
Total Production
|
1995=100
(%YA) |
102
(+1.8) |
104
(+1.9) |
Current Account
|
Billion 95 JPY
(% of GDP) |
17078
(+3.4) |
16413
(+3.2) |
Exports
|
Billion 95 JPY
(%YA) |
77479
(+3.7) |
81358
(+5.0) |
Imports
|
Billion 95 JPY
(%YA) |
54182
(+4.6) |
57048
(+5.3) |
Investment
|
Billion 95 JPY
(%YA) |
138930
(+0.7) |
141685
(2.0) |
Average Daily Range Over Three Year Period: 1.022269
Average Monthly Range Over Three Year Period: 4.91561
Key Economic Factors
Industrial Production: The IP Index, measuring trends in the output of Japanese manufacturing, mining and utilities, is extremely important for gauging the state of the economy (as industrial production and inventory accumulation are highly correlated with a large share of the variation in national output). The outlook for production is highly dependent on the strength of Japanese exports. However, an impending yuan revaluation is a key issue because this will tend to increase Japan's ability to export to China and also boost the competitive standing of Japanese products on other countries' store shelves.
Foreign Trade: Import and export figures measure the value of goods shipped into and out of Japan. Exports figures (by product and destination) are usually closely followed, along with imports figures, which indicate the strength of domestic demand. Although China has been the chief contributors to Japanese export growth in recent years, the U.S. economy is regaining sway in becoming the most important market for Japanese companies. Forecasts indicate that the re-emergence of the U.S. is a very good thing for Japan. However, the U.S. will take time to have as dynamic an effect in Japanese sales as China has had in the past. Predictions are that double digit export growth figures are unlikely until China develops a renewed taste for Japanese wares.
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