Over the course of late summer and early fall, Japan’s currency, the yen, appreciated heavily, causing major problems for the Japanese economy.  Though the Japanese government has attempted to alleviate the swelling yen, its efforts seem to be in vain as the yen continues on its tumultuous path.  But the yen does not only affect Japan; the yen is such an important currency that it is impacting countries from the USA to India.

The basic gist of the yen situation is, as Tanya Chothani (the IB and AP Economics instructor) put it, “The yen is becoming stronger, as opposed to the dollar, but it’s hurting the Japanese economy because when the yen appreciates, Japanese goods become more expensive and Japan is an export-based economy.”  Foreign companies are more reluctant to buy expensive Japanese products now that the yen has appreciated out of control.

Japan’s actions to intervene in the crisis have been all but futile.  Though Japan is “intervening in currency markets for the first time since 2004,” the yen has still “gained as much as 10 percent against the dollar and 20 percent versus the euro this year” (www.businessweek.com).  Japan is now employing unilateral intervention, a one-sided intervention technique which has fallen out of popularity in recent years.  Their form of intervention is mainly just pouring in capital into their ailing economy.  Many, however, believe that Japan requires the aid of foreign banks.

Jean-Claude Junker, the chairman of the eurozone finance ministers and the Luxembourgian prime minister told the press that “The recent unilateral intervention at the initiative of the Japanese political and monetary authorities is not to be welcomed,” (www.reuters.com).

International aid could perform miracles for the Japanese economy.  The last time Japan unilaterally intervened in a currency crisis was in 1995, “In April 1995, when the yen hit a high of 79.75 against the dollar, Japan intervened. Within a month the yen had weakened 8% and by the end of 1995 it had weakened 23%” (www.online.wsj.com).

Other central banks, such as America’s Federal Reserve and the People’s Bank of China, could help provide capital and aid to depreciate the Japanese economy.   Multilateral intervention seems to be the only option in these dire straits.

The point is, the alleviation of the Japanese crisis is definitely in America’s interest.  AP Economics student, USCHS Junior Ian Ridge said, “[Japan’s economy is] important to the US Economy because of trade, since trade benefits everyone, even if they’re better than everyone because of opportunity cost. “  America must intervene in Japan’s problems to save itself and Japan’s.