How does changing the interest rate impact the currency value, and are there things that Japan can do to raise the value of the yen regardless of what the rest of the world is doing?

Question

Used to be 100 yen to a dollar. Now it’s 150, but recently there was a 0.25% change to the interest rate and it brought it down ever so slightly to about 149. Are there no other alternatives? Are there down sides to doing this? Does the large amount of tourism in Japan have an impact on this?

In: Economics

Answer 1

Japan intentionally keeps the value of the Yen down. As a manufacturing behemoth it’s in its best interest to have a cheap currency since it gives its exports a pricing advantage while making imports more expensive compared to domestic goods which only serves to bolster the sales of the domestic companies.