The Japanese Yen keeps tumbling, and there’s a lot of factors that go into that. But shouldn’t the massive number of people visiting Japan and buying yen help boost their currency?
In: Economics
Tourism is a relatively weak driver of demand for currency because when exchange rates go up it’s very easy for tourists to either go somewhere cheaper or simply stay home. It’s what economists call “highly elastic”, because demand responds a lot to changes in price.
Exchange rates increase more from foreign exports that are not as elastic. Commodity exports are a clear example, because demand does not respond as easily to price changes and the products themselves might only be found in a few places.
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