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Why is it that Japan's currency went up after the tsunami?

Dollars to Yen

After March 11th, the dollar to yen ratio drops until the 16th. What causes the value of currency to rise as the stock prices plummeted?

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2 Answers 2

Money, like anything else, is subject to the demands of people. There are times when money is in high demand. This drives up its value.

People in Japan want cash because they have an immediate need to buy emergency supplies as well as rebuild and replace damaged items. This is why the yen strengthened. This is probably why the market plummeted as people liquidated some of their stocks to get cash.

The Bank Of Japan (BOJ) will not stand for a rising yen, however. It is pulling a Bernanke and printing yen in an effort to keep it weak.

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Agreed, but note it's not just the BOJ printing money, the central banks of the G7 are also dumping Yen to help keep it's value down. –  matt Apr 1 '11 at 14:59
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Another factor is that a natural disaster ends up having a positive effect on GDP (if the country is already wealthy.) Everything needs to be rebuilt, and this takes money. It's one of the greatest flaws of GDP calculation, because it doesn't write off the damage as a capital loss.

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See "broken window fallacy". –  DJClayworth Apr 1 '11 at 13:35
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