The following chart shows the numbers on the average nominal rate (NER) and real exchange rate (REER) of the Japanese Yen against several foreign currencies

(such average index numbers are called real effective exchange rates):

Since December 2012, Japan has a new Prime Minister, Shinzō Abe, who has introduced a new economic policy (“the Abenomics”) advocating, besides structural reforms, an aggressive monetary easing to foster the economic growth that has been very low for several years. Explain the evolution of the exchange rate of the Yen in this context.

Transcribed Image Text:

2011 2012 2013 105.7 105.2 87.1 101.3 100.0 79.7 2014 81.5 75.1 2015 76.6 70.3 2016Q3 93 83.6 NER REER