Germany to Pass Japan as Third-Largest Economy, Helped by Weak Yen

Re:Germany to Pass Japan as Third-Largest Economy, Helped by... by Jeff_Brown on Tuesday October 24, 2023 @10:38AM (#37999773)

"Helped by weak yen" is a little misleading. It suggests the exchange rate exogenously impacts the relative value of an economy's output. If Japan was producing a ton of good stuff, and then its money devalued, why would that reduce the value of what it made?

In fact, of course, exchange rates are endogenous. The value of the yen reflects the relative value of what Japan makes to what other countries make. If a currency's value falls (and there was no change in the money supply) what it means is people value that country's output this year less than they did last year.

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Re:Germany to Pass Japan as Third-Largest Economy, Helped by... by Retric on Tuesday October 24, 2023 @10:51AM (#37999975)

Exchange rates reflect cash flows not just total economic output.

Foreign investors poring money into a country will prop up exchange rates even without any changes in total economic output. Similarly outflows from foreign investment dividends depress exchange rates.

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Re:Germany to Pass Japan as Third-Largest Economy, Helped by... by wolverine876 on Tuesday October 24, 2023 @12:04PM (#38001120)

I thought (not being in finance) that the exchange rate reflects supply and demand for Yen, which depends on:

* Demand for products sold internationally and denominated in Yen (not US dollars, for example).

* Demand due to perceived risk of the Yen's future value

* Supply of Yen printed by the government

* Supply due to Yen sold to purchase imports

Maybe some other things I'm not thinking of.

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