Transcript Team Awesome

Group 5- JPY
PROJECT 2
Marisa Unger, Ben Melhorn, Nikita
Kuznetsov, Cassie Thill
Historical Relationship
•Japan has notoriously held very low interest rates
•With the global recession, the Federal Reserve decreased
US interest rates to a level comparable to Japan. Japan
continues to remain the lowest of the 10 global economies,
however.
•Interest Rate Differential and Exchange rate with of
JPY/USD obviously correlate.
-Carry Trade Strategy has become less desirable
-The unwinding of previous CTS due to the lower
interest rates of the US have caused reinvestment in the
JPY and therefore strengthening of the value of the
currency.
Most recent central bank meetings:
Bank of Japan – JUNE 16, 2009
•No interest rate change expected
•Economic stability is dependent on economic revival abroad
•Financial conditions (weakening employment and income) are still
difficult but there are signs of improvement:
-Exports, production, and public investment have increased
-Long-term growth and inflation are suspected to remain
unchanged
-Main objective is price stability (domestic focus)
Federal Reserve – APRIL 28-29, 2009
•No interest rate change expected – will maintain 0-0.25 % range
•Economy continues to weaken:
-Continued job loss
-Inflationary pressure
•But has signs of slow stabilization:
-Household spending has moderated
•Main objective: Price stability
Speculation: No interest rate change in the near future, however,
increasing inflationary pressures from domestic stimulus may
encourage an increase in the exchange rate in the long-term.
Works Cited:
1. http://fx.sauder.ubc.ca/
2. http://www.fxstreet.com/fundamental/interest-rates-table/
3. http://www.bis.org/cbanks.htm