Japanese Forex Market

Japanese Forex Market is the foreign exchange market of Japan, the economy whose ranking is four in the world. The external trade of Japan has consistently produced trade surplus for its country which has evidently boosted up the Japanese Forex Market. In the year 2005, it has been observed that Japan's trade surplus was just knocking on the door of the 100 billion US Dollar mark. This has jacked up the world demand for the Japanese Yen. With respect of export of goods and services, the world ranking of Japan is five.

Japanese Forex Market saw a down turn during most of the 1990s especially between 1990 and 1997 because the economy was passing through the phase of collapse of an asset bubble. The Japanese economy saw a heavy fall in prices of all kinds of assets and real estates. The property developers were the hardest hit ones and were unable to pay off the loan debts to the banks and consequently led to a crises in the banking sector.

This crisis led Japanese government along with the Bank of Japan has been on the fore front of controlling the foreign exchange along with the foreign exchange reserve through the utilization of the monetary policy tools. They control the foreign exchange reserve through buying and selling of the national currency, Yen takes place. The most general phenomenon of governmental control seen in this floating rate regime in Japan is through the selling of Yen. This step is performed in order to control the appreciating domestic currency.

At the end of the month of February 2007, the exchange rate of yen with respect to US Dollar was 117.33, an appreciation of 2.5%.

The factors that had positively affected the Japanese Forex Market are the positive trend employment generation, expansion in the index measuring the consumption of the household sector, trade surplus along with surplus in the current account of the balance of payment. Among all these factors the most significant of them all is the generation of surplus in the trade sector. It rose by more than one trillion Yen from the previous month. Another very important factor in this is the positive growth rate of domestic consumption. It has been observed that the domestic consumption grew at a positive rate of 0.4%. This factor is considered to be very important because this consumption growth had a negative trend in the last fiscal.