Even though Japan may seem to be a tiny piece of land on the planet, but it compensates this shortcoming in terms of its rich history, a strong economy and its population. Japan has one of the longest sustained societies, one of the most productive population and it ranks as the 10th largest country.
Japan claims the most efficient businesses in the world. The economy has major investments in two main sectors:
• High-end Services
• Specialized Manufacturing
The main imported items include the following:
• Agricultural products
• Raw materials
• Transportation goods
Japan imports goods from countries like:
• The United States
• Saudi Arabia
Japan exports finished products like:
• Science Equipment
• Luxury Watches
The countries that buy from Japan are:
• The United States
• South Korea
• Hong Kong
The Japanese Economic Policy
Bank of Japan is the authority that deals with the country’s monetary policy. While the bank can be compared to the US Federal Reserve, the Ministry of Finance can be considered something like the US Treasury. The Ministry also has some influence over the country’s monetary policy. It moderates Japan’s forex transactions. While the Ministry determines the Yen’s target value, it is the Bank of Japan that enforces the value by taking steps.
Economic Signs and Essential Releases
If you are a forex trader, you must keep an eye on the following economic indicators and fundamental reports released by Japan.
1. Tankan Surveys
In other economies, the Tankan Survey can be compared to the Purchasing Managers Index. In these surveys 0 is used as the mid-point. Business confidence is indicated through positive numbers while reducing confidence is indicated with negative numbers.
2. Employment Rate
Employment rate is crucial to any economy. In the Japanese economy, this rate is generally directly related to the Tankan Surveys because most of the population in Japan works in high-end services sectors or in high-tech industries.
3. Core Machinery Orders
In the Japanese economy, Core Machinery is utilized for completing business processes. The best examples are:
1. Factory equipment
2. Specific machines made in factories in Japan
3. Mining equipment
4. Consumer Price Index
Bank of Japan releases the Consumer Price Index to indicate the latest inflation level in the country. The inflation in Japan is very low compared to other countries.
What Influences the Yen?
The Yen is the 3rd largest currency on the forex in terms of volume, and the following things have an impact on its value.
1. Carry Trade
The Japanese Yen is quite affordable, and more so in the long-run. This is because the country has dramatically low rates of interest for several years. This allows investors and businesses to raise money for just a few points above zero. This means that the Yen in most probability will have the same value even in the future.
2. Oil Prices
Even though Japan has a high technology industrial base, it doesn’t have its own oil. They meet all their energy needs with oil imported from outside. And, the increase oil prices significantly impact import costs affecting the balance of trade.