Origins of the High Yen Crisis

The crisis of Japanese capitalism which sent the current wave of foreign investment into Asia was widely referred to as the endaka fukyō (the high yen recession). Although it began in the early 1980s, it manifested itself most dramatically in the yen’s 50 per cent appreciation (from ¥240 to the dollar to ¥160) from September 1985 to August 1986, its soaring to ¥120 in January 1988, and its subsequent fluctuation around the 130 mark. Although I examine the period 1980–87 in most detail, one cannot fully grasp the forces at work unless one sees this period in its historical context. I therefore briefly review the main features of the years leading up to this crisis, in particular the period after 1974.