Question

What was the “high yen crisis”? How did Japanese firms respond? How did this contribute to de-industrialization in Japan beginning in the late 1980s?

Answer 1

High yen crisis happened during the 1980's in Japan when manufacturing sector was high on scale than services exports. Since Japan relies heavily on exports which caused a lot of foreign exchange happening, the economy of Japan started inflating causing a strong upheaval in Yen's value.

The firms were asked to decrease their production by a slight margin in order to manage the inflow of Money. Increase in value of Yen caused an increase of goods in economy which thereby disturbed the normal life.

Japan started investing heavily in other countries to maintain their economy and also by participating in open market operations. They also started to lending money to other countries in 0% interest. These were a few steps taken during de -ndustrialization in Japan.