eli5: How is Japan’s currency so weak if it’s a economic superpower?
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I think you are confusing the denomination with its strength. It does not matter what the actual numbers that are printed on the bank notes say. A currency is strong if people want to buy it. This is again due to a strong economy with more exports then imports, which is why people want to buy the currency so they can buy products in that country for export.
Most currency started as a fixed weight of gold or silver. But exactly how much varied a lot. For example the US dollar was initially based on the Pesos which was an 8th of a Spanish gold mark. So right at the start a single Spanish mark could buy you eight dollars even though the currencies were literally the same strength as they had the same gold weight.
When currencies got off the gold or silver standard they were subject to inflation. This causes the currency to weaken as the value drops. But after the inflation the currency can stabilize at the new value and even become stronger. In the case of Japan there were some inflation at the end of the 1800s which caused the Yen to drop to $0.30 but then stabilized at that value as the Japanese economy improved. Then during WWII there were a new era of inflation which brought its value to $0.003. But after the war the inflation was stopped and the yen have been on average stronger then the dollar. So it is currently at $0.01 which is quite strong compared to how other currencies have developed.
Just because ~100 of it is worth 1 USD doesn’t mean its weak, that just means one of their currency is 1 cent instead of 1 dollar. The denomination is simply different. How much value you can get out of it per how much you can earn is a different story. Can you afford a house and food and stuff while working a job paid in Yen? Then its probably fine.
You may have a similar question as I have about why Russian currency becoming a similar value vs the USD is a problem and why Yen is not if its the same price. That’s because what you can buy with a Russian Ruble is not the same as it was.
They are artificially propped up by the US, their economy has done nothing but shrink for decades, that’s unsustainable unless you have the world’s hegemonic power backing you.
Export economies benefit by habing a “weaker” currency, since it makes their goods more attractive.
China is accused of artificially weakening its currency for decades. Before China became the prime exporter, Japan occupied that top spot.
It’s currency isn’t weak just because it’s in smaller denominations… think of it like they just use cents. Instead of a can of Coke costing $1.49, it’s 149 cents.
Another way to picture it. Think of a large pizza as an economy. It could be cut into 4 slices, 8 slices, or 20 slices. Each slice doesn’t tell you anything about the overall size of the economy. A slice from a small pizza cut into 4 slices could be larger than one of the 20 slices from the large pizza but that doesn’t mean the pizza is smaller.
Long story short the yen lost value in the later stages of WWII and Japan’s government regulates the price to keep it at what they see as a normal value.
If you’re talking about recent developments that’s a bit more complicated. Japan was kinda the China of the 80’s and saw a lot of economic growth as a result. As countries started relying more on other Asian countries for for goods, and Japan’s economy has slowly declined. Overall the Yen is stronger than the dollar since it’s recovery after WWII, but still weaker than it was in the heyday of the 80’s.
Japan’s interest rates are at 0. The rest of the worlds have been shooting up. If you were to buy almost any other currency against the yen, you’ll be making interest. Sort of like a dividend for stocks. A lot of money has gone into shorting the yen for this carry trade the past couple years.
Also the Japan’s economy has been stagnate for decades. The economic growth/health of a country affects the relative strength of it’s currency. This is further hindered by their population decline.
Those two things are major contributors to a currency’s relative strength.
Japan will sell of value of its currency from time to time to keep inflation down. As such prices for things over there tend to remain steady even during economic upturns and downturns.
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