Questions and Answers on International Business

2350 Words Jan 22nd, 2018 10 Pages
If the Japanese Yen were to depreciate and all other factors held constant, would that cause a surplus in Japan's balance of payments to become greater, or a deficit to become greater?
Depreciation of the Japanese yen could be viewed as a smart move to relieve a struggling economy, which Japan is very much a part of. For instance, the work of Shinzo Abe has sought to do precisely that ever since he's taken office. "One of the most effective was to depreciate the Japanese yen, in order to stimulate the economy.This move has been effective, for it has immediately enhanced the export of Japanese goods, resuscitated tourism and the related catering and retail industries" (Li, 2013). This move has been so effective in relieving the deficit, many ask why the move was not made sooner, particularly since the stimulation is having such a positive impact on the long-term economic downturn in Japan (Li, 2013). Opinions towards this particular issue tend to be mixed, with some holding the opinion that the main reason was because of pressure from America (Li, 2013). Other's hold the opinion that the main reason was as a result of the earthquake which occurred two years ago (Li, 2013).
2. Why would a company employ a currency hedge?
Hedging strategies are indeed becoming more and more commonplace for companies. "Rather than subject themselves to the random mercy of fluctuating foreign currencies, institutional investors are taking a more active role in…