For many years, the Japanese yen has been appreciating vis-a-vis the U.S. dollar. The yen's strength has been driven by a number of factors, such as a high savings rate in Japan. However, the strong yen has severely damaged the competitiveness of Japanese exports, and thus hampered economic growth for a long time. Accordingly, the new government of Shinzo Abe seems determined to stimulate the economy through a combination of fiscal policy and yen devaluation.
As it became clear that Abe was likely to win the recent Japanese elections, the yen began a substantial slide. Over the past three months, the yen's value vs. the dollar has dropped by 14%, from 78 yen=$1 in early October to...