The yen continues to appreciate as Japan struggles to get a handle on recovering from the March 11 earthquake and tsunami, the unresolved crisis at the Fukushima No. 1 nuclear power plant, and the inability of the administration of Prime Minister Naoto Kan to implement policy actions to deal with the catastrophe.
The yen recently ventured near its March 17 high of ¥76.25 against the dollar. Although its advance has been paused by the yen-selling, dollar-buying intervention, its future course remains uncertain. What is behind the yen's surge and what will be its impact on the economy?
First of all, a foreign-exchange rate allows the currencies of two countries to trade, so it must reflect the relative performance of their economies.