Marisa Unger, Ben Melhorn, Nikita Kuznetsov, Cassie Thill Team Awesome Group 5- JPY PROJECT 2 Marisa Unger, Ben Melhorn, Nikita Kuznetsov, Cassie Thill

Historical Relationship Japan has notoriously held very low interest rates With the global recession, the Federal Reserve decreased US interest rates to a level comparable to Japan. Japan continues to remain the lowest of the 10 global economies, however. Interest Rate Differential and Exchange rate with of JPY/USD obviously correlate. -Carry Trade Strategy has become less desirable -The unwinding of previous CTS due to the lower interest rates of the US have caused reinvestment in the JPY and therefore strengthening of the value of the currency.

Most recent central bank meetings: Bank of Japan – JUNE 16, 2009 No interest rate change expected Economic stability is dependent on economic revival abroad Financial conditions (weakening employment and income) are still difficult but there are signs of improvement: Exports, production, and public investment have increased Long-term growth and inflation are suspected to remain unchanged Main objective is price stability (domestic focus) Federal Reserve – APRIL 28-29, 2009 No interest rate change expected – will maintain 0-0.25 % range Economy continues to weaken: -Continued job loss -Inflationary pressure But has signs of slow stabilization: -Household spending has moderated Main objective: Price stability Speculation: No interest rate change in the near future, however, increasing inflationary pressures from domestic stimulus may encourage an increase in the exchange rate in the long-term.

Works Cited: http://fx.sauder.ubc.ca/ http://www.fxstreet.com/fundamental/interest-rates-table/ http://www.bis.org/cbanks.htm