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Nixon Shocks - strong and the Yen was fixed the Yen was...

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Nixon Shocks The rapid growth of the Japanese economy was halted in the 1970’s. Two policies by U.S. president Richard Nixon had much to do with this economic slump, these are known as the Nixon Shocks. After Nixon normalized relations with China, the first of his shocks came; A 10% tariff on all Japanese imports. Before this, the Japanese were able to export goods to the U.S. at a very cheap rate, and since the Yen was fixed at 360 Yen to the dollar, Japanese imports were a very good deal. The second economic shock came in 1971 when Nixon took the dollar off the gold standard. Because Japan’s economy was so
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Unformatted text preview: strong, and the Yen was fixed, the Yen was undervalued, taking the dollar off the gold standard allowed the Yen to float. It increased in value 14% in one year. With prices of Japanese imports essentially skyrocketing, the short term demand went down. Less demand means less production, and the Japanese economy found itself in a hopeless tailspin. The long term significance of the Nixon shocks foreshadowed decades of trade tension between Japan and the U.S. The short term significant of the Nixon shocks plummeted the Japanese economy into a recession....
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