When Richard Nixon suspended the convertibility of US dollars to gold in 1972, the fixed rate between the dollar and the yen was exchanged for a floating rate. The international value of the yen rose sharply and is today one of the most attractive currencies on the market as it directs the world's second largest economy. The yen is controlled by a central bank known as the Bank of Japan or BOJ. This central bank is under the supervision of the Minister of Finance. Over the past decade, the yen has fluctuated greatly. From early 1990 through mid 1995, the yen doubled in value from 160/$ down to 80/$. From 1995-1998, the yen lost value and was back up in the 140's/$. The trend in the past year has been a steady increase in value for the yen. Over the past six months, the yen has fluctuated. From April through mid-July, the yen floated between 124/$ and 118/$. Since then it has increased in value falling to the area of 105/$. On Friday September 24, the closing rate on the yen was 104.24/$. Over this next week, the yen rose to a close of 105.0000/$. This means that the yen lost a little value in comparison to the dollar. This slight fall is not representative of what is going on with the yen however. Over the past few months, investors have put money into Japanese stocks. The government is putting pressure on the BOJ to increase the yen supply in order to stave off inflation and curb long-term interest rates. This pressure came after a G-7 meeting in which the members suggested that Japan do something to weaken the yen. Prices and wages are falling and output is below Japanese productive potential. Despite these factors, the BOJ is hesitant about responding because it is concerned that expanding the yen supply will cause inflation. Last week, Japanese companies were becoming more optimistic about economic growth. The BOJ didn't take in cash from money markets on Sept. 30, leaving in twice the normal surplus, so traders felt that the B...
