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Japan's Bubble, Deflation, and Long-term Stagnation$
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Koichi Hamada, Anil K Kashyap, and David E. Weinstein

Print publication date: 2010

Print ISBN-13: 9780262014892

Published to MIT Press Scholarship Online: August 2013

DOI: 10.7551/mitpress/9780262014892.001.0001

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The Japan-US Exchange Rate, Productivity, and the Competitiveness of Japanese Industries

The Japan-US Exchange Rate, Productivity, and the Competitiveness of Japanese Industries

(p.104) (p.105) 4 The Japan-US Exchange Rate, Productivity, and the Competitiveness of Japanese Industries
Japan's Bubble, Deflation, and Long-term Stagnation

Robert Dekle

Kyoji Fukao

Murat Ungor

The MIT Press

This chapter explores the relationship between the nominal exchange rate and the real exchange rate in Japan, along with the process by which industries adjust to higher real exchange rates. It looks at the yen–dollar exchange rates as well as the productivity and competitiveness of Japanese Industries, separating the Japanese economy into three sectors: High-productivity-growth manufacturing, low-productivity-growth manufacturing, and low-productivity-growth services. The chapter shows that labor sometimes moves from more productive sectors to less productive sectors and that long-run movements in the real exchange rates are influenced by the relative productivity performance of producers of traded goods. It also examines the effects of the yen’s movements on the sectoral allocation of Japanese employment and how the high yen increased the production costs of Japanese industries relative to those in the United States.

Keywords:   nominal exchange rate, real exchange rate, Japan, productivity, competitiveness, yen, employment, production costs, Japanese industries, United States

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