how a lower currency value isn’t a sign of poor economy like in Japan?
In: Economics
The actual numbers on currency are not particularly important when comparing different currencies. Instead, you should look at the development of the currency over time. In other words: if you have a certain amount of the currency, can you buy more or less than previously? And can you exchange the currency for more or less of other currencies?
Let’s say you can buy an apple for a dollar in the US, or for 100 Yen in Japan. Now fast forward ten years. The same apple costs 1,5 dollars and 125 yen. Which currency is doing better? Well, the yen has decreased less in value, so probably the yen – and the Japanese economy – would be doing better in this example.
Or lets say that you can exchange one dollar for 100 yen. One year later, you can exchange one dollar for 87 yen. Which economy has been doing better? Probably the Japanese, because it takes more dollars to get the same amount of yen.
And so the value of each unit of currency is only interesting over time.
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