Currency Manipulation and Its Impact

Running Head: CURRENCY MANIPULATION
1
CURRENCY MANIPULATION
AUTHOR’S NAME
UNIVERSITY OF AFFILIATION
Currency manipulation is a policy operation of monetary. Currency manipulation occurs when
the government sells or purchase foreign currency in exchange for their domestic currency while
having an intention of influencing trade policy and exchange rate (En.wikipedia.org, 2017).

CURRENCY MANIPULATION 2
Do you think the Japanese government is engaging in currency
manipulation?
The Japanese economy has undergone slow economy declination. The output activity of
Japanese was deteriorating. In the sense of an increase in the rate of unemployment, negative
inflation rate. Several banks had failed too as financial sector confidence diminished. With the
aim of bringing an end to economy deflation and stabilize the financial system, there was a
constraint on the traditional policy instrument efficiency since the rate of policy interest was at
zero.
Abe campaign demonstrated the aim of manipulating the yen so that exporters could benefit.
Among his campaign manifesto was to manage the value of the yen to help the Japanese
exporters. The policy under Japanese central bank of accelerating the purchase of government
securities, hence expanding the money supply leading to higher inflation. The support from the
government of Abe of this policy shows the manipulation done on the currency. The Japanese
yen continued to lose its value against dollar currency. This policy favored Japanese exporter and
stimulated demand in domestic. This is because of a cheap currency, cheapens the export
currency price, making the exports more attractive to the buyer from international through
undercutting competitors (Money.cnn.com, 2017).
What should other nations do about this?
Other countries have tried to devalue the currency to remain at the competitive edge. While the
united states have disagreed to follow the suit of devaluing its currency. The move of devaluing
the currency has intensified the fears of trade war among the nations. Other nation should