Part of Abenomics has been the weakening of the yen. The yen has been losing value steadily for the last few months, and last week, it even briefly reached ¥100 = $1 USD. Nothing special happens if the exchange rate hits that mark, but it’s symbolically significant. Nice, round, even numbers always make people happy.

Beyond the significance of a ¥100 to $1 exchange rate, there are lots of implications to a weak yen. A lot of people automatically assume that a weak yen is a Bad Thing. After all, it’s weak! Weak is bad, right? It’s a little more complicated than that.

We’ve talked before about the bigger implications of Abenomics but, frankly, I’m sure not many of you care that much. You’re probably not an economist, and not a lot of this affects you directly.

So I thought it might be helpful to take a look at how ordinary people are affected by Abenomics and the weak yen.

To a Foreigner

Chances are, if you’re reading this you probably live outside of Japan. In that case, good news! The weak yen is pretty much an all-around Good Thing for you. Foreigners, for the most part, benefit a lot from the weak yen.

Let’s say that you like to buy things from Japan, whether it’s a book, CD, skein of yarn or anything else. A weak yen means that these things are going to be relatively cheaper for you, so you’ll be able to buy more of your precious, precious anime.

If you’re planning on visiting Japan sometime in the near future, then even better! A weaker yen probably works in your favor. As you exchange the currency from your home country into yen, the exchange rate should favor you and give you more bang for the buck.

The only bad situation for a foreigner that I can think of is if your business depends on people in Japan buying your product. A weak yen means that the exchange rate hurts Japanese people trying to buy foreign products, but I imagine that this applies to few people reading this.

To Somebody Living in Japan

If you’re living in Japan, then the weak yen is kind of a mixed bag. The yen you earn in Japan is worth less abroad, so importing things from overseas is more expensive. Good luck getting those exotic Western animation DVDs!

But the weak yen can also be beneficial to people in Japan. If you work for a company that relies on exporting things outta Japan, then good news—people abroad will be able to buy more of your products since they’re (relatively) cheaper.

This is pretty common. Japan’s economy has historically been export-based, so many Japanese companies benefit from the weak yen. You can see some of the positive effects on Japanese companies as the Nikkei has steadily risen in the last few months.

Where Does It Go From Here?

In a nutshell, that’s how the weak yen should affect you right now.

But this is an incredibly simplified overview of the weakening of the yen. As its value goes down more and more, its more complicated effects will emerge. And who knows? In a few months, the story of the yen might make us all wonder what the hell a Bitcoin is.

Header photo by epSos.de

Japan’s economy is floundering. The population is shrinking. China is growing and is going to eat Japan’s lunch. And so on and so on.

China will take over the world! . . . as soon as this toxic cloud lifts.

Aside from the fact that Japan, unlike China, doesn’t have a perpetual cloud of haze above it at all times, more and more people are saying that things ain’t so bad in Japan after all. Things might even be looking up!

I’ve written before about how Japan’s doing a hell of a lot better than most people assume it is, but since last year’s election, more and more people are saying that Japan’s on the up and up.

Here’s what’s been happening:

The Situation in Japan

In Japan’s most recent elections, the Liberal Democratic Party (LDP) won a majority in parliament, pushing the Democratic Party of Japan (DPJ) out of power.

The relatively conservative LDP has elected a new prime minister, Shinzo Abe, and has started really experimenting with Japan’s economy.

Since they’ve gained power, they’ve started tinkering with the Yen. It’s been slowly, but surely, dropping in value since December. That sounds bad, but it’s actually kind of good for Japan.

A weak Yen means that foreign products are more expensive for Japanese people, but it also means that it’s more attractive for other countries to buy things from Japan and, more importantly, that the exchange rate is pretty good while I’m over here.

The government has also considered a super stimulus — pumping over $100 billion into the Japanese economy to kickstart the whole thing.

Will it work? Economists are cautious, but optimistic. Japan is trying something different from the rest of the world, but that’s probably a good thing, since the policies tried by the rest of the world are generally failing.

One of Japan’s biggest defenders has been Nobel laureate Paul Krugman. Krugman, who writes regularly for the New York Times, has defended Japan’s economy. He’s written that while Japan’s economic history has been “a lousy story,” it’s still much better than other places in the world.

And more recently, he’s been saying that Japan might once again be the “country of the future.”

What Could Go Wrong?

But there’s a lot of things that could derail Japan’s climb to the top. Japan’s importing more than it’s exporting, racking up a huge trade deficit.

And the declining Yen has ruffled some feathers abroad. Other countries have threatened a currency war if the Japanese don’t stop so blatantly manipulating their currency.

Plus, not everything’s good news with the LDP — they’ve hinted at basically retracting any apologies that Japan has given for its wartime actions, and been hawkish about other East Asian policies.

Still, you have to root for them to succeed economically. These economic policies could help Japan – and maybe the world – turn things around.

I thought that the article did a good job of talking about Japan’s “myth of failure,” but I also thought that it painted kind of an incomplete picture. Here’s what the author said, and how I would have clarified:

History

If you’ve studied Japan’s history, then you probably know at least a little bit about the Japanese economic powerhouse of the 20^th century. If not, let me give you a super quick rundown.

After WWII, Japan’s economy really went into overdrive and eventually became one of the fastest-growing, most powerful economies in the world. Japan revolutionized the way people did business, changed how people viewed management, and was one of the first big, non-western economies. Business people across the world learned Japanese to be able to do business with this rising power. Japan was even sometimes called “Japan Inc.” because of its enormous economic might.

But by the end of the 80s, Japan’s economy hiccuped and has never since returned to the levels of economic prosperity it once had. Since then, Japan’s economy has become the butt of many jokes in the west.

What Japan Does Right

By many measures, the Japanese economy has done very well during the so-called lost decades…By some of the most important measures, it has done a lot better than the United States.

Despite not having the fastest-growing, most awesome economy ever anymore, Japan’s doing pretty good by a lot of measurements. It’s infamous for having one of the best life expectancies in the world and hell, even Japanese dogs live insanely long.

Japan’s unemployment is pretty low, its infrastructure is pretty modern, the yen is strong, its healthcare system is great, and has some of the fastest internet speeds in the world.

So everything’s great in Japan, right? Well, not exactly.

What Japan Does Wrong

While I definitely agree with the NYT article that things in Japan aren’t as bad as people sometimes make it out to be, that’s not to say that things are all sunshine and rainbows in Japan; it definitely has its share of problems too. After all, the grass is always greener on the other side.

And it’s not like these problems aren’t acknowledged or known about. One of the biggest recent books about Japan, Dogs and Demons, talks exclusively about what’s wrong with Japan. Although I personally didn’t like the book a whole lot (mostly the writing style), it definitely highlights some cultural, governmental, and societal problems in Japan right now.

Japan’s unemployment numbers might seem pretty good, but the official numbers don’t always reflect the reality of the situation. Employment figures might not count those who might only be working part time, those who don’t report their unemployment, or those who have just given up altogether.

Some people talk about the strong yen as a sign of Japan’s success, but a strong currency doesn’t always necessarily work in a country’s favor. If anything, a strong yen discourages other countries from buying goods from Japan because they’re so expensive.

Also, some of the ways the author measured success in the Times article seemed kind of shallow. He says that since Japan has so many expensive clothes, luxury cars, and some of the tallest buildings in the world (like the upcoming Tokyo Sky Tree), it must be doing great:

The Japanese are dressed better than Americans. They have the latest cars, including Porsches, Audis, Mercedes-Benzes and all the finest models. I have never seen so many spoiled pets.

That sort of line of thinking doesn’t really make sense to me. These are really materialistic, shallow markers of economic success. Sure, there’s a correlation between material wealth and economic success, but think of it this way: the celebrities you see on MTV’s “Cribs” have lavish homes, expensive cars, and the latest gadgets, but they’re far and away from the richest, most successful people in the world.

But the biggest failing of this article is that it really glosses over important social issues like the changing culture of love and marriage. Japan’s economy doesn’t exist in a vacuum outside of Japan’s culture and society, and the explanation the author gives to Japan’s declining birthrate – food security – is pretty unsatisfactory.

Putting It All Together

Japan should be held up as a model, not an admonition.

Japan and its economy haven’t failed, I definitely agree with the Times article about that much. Reports of Japan’s death are greatly exaggerated.

But that doesn’t mean there isn’t room to be critical. I think that the author largely presents a false dichotomy – either Japan is a failure, or it’s a resounding success. In reality, the situation is a lot more complicated than that. Look beyond what the author shows us.

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