Dollar/Yen Purchasing Power Parity Real Yen/Dollar Exchange Rate
It's a bit late to bring this up, but for reference.
Purchasing Power Parity of the Yen
The base point is June 1979,
Prices are the Capital Goods Prices Index for both sides.
U.S. PPI/Final Demand/Private Capital Equipment (1982=100, Not Seasonally Adjusted)
Japan Corporate Goods Price Index/Demand Stage by Use/Domestic Demand/Final Goods/Capital Goods (2015=100)
Real yen/dollar exchange rate is
A real exchange rate is not the exchange rate of currencies, but nominal exchange rate ÷ theoretical exchange rate × 100
The yen’s real strength against the dollar has fallen sharply.
There are occasional discussions of the yen’s real effective exchange rate.
Generally, the real effective exchange rate is often explained as follows.
Real Effective Exchange Rate of the Yen: For each major trading partner, the exchange rate between the yen and that currency (nominal exchange rate) is multiplied by the ratio of the price index of that country/region to Japan’s price index to make it real (real exchange rate). Then, these real exchange rates are weighted by trade shares and indexed by fixing a base point.
In other words,
The Real Effective Exchange Rate of the Yen is the yen's real strength against multiple currencies calculated by dividing the yen’s exchange rate by the theoretical price derived from purchasing power parity for each major trading partner’s currency, then weighted by trade flows and indexed with the base point set to 100;
In short, the real effective exchange rate of the yen represents its real strength against multiple currencies, but in the figure above it shows its real strength against the dollar, not against multiple currencies.
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