Question

In the mid- to late 1970s, the yen appreciated in value relative to the dollar, even though Japan’s inflation rate was higher than America’s. How can this be explained by improvements in the productivity of Japanese industry relative to U.S. industry?

Short answer

Because of the high value of the yen, the Japanese could continue to provide their products at a discount because of their increased utility in comparison to American efficiency.

Step-by-step solution

Concept Introduction 

Money appreciation refers to the increase in the value of one currency as compared to another in the forex markets.

Explanation 

Despite the fact that Japanese costs increased in comparison to American costs, the yen appreciated because the increase in Japanese efficiency compared to American efficiency allowed the Japanese to continue offering their goods at a discount due to the yen's high value.

Final Answer 

Because of the high value of the yen, the Japanese could continue to provide their products at a discount because of their increased efficiency in comparison to American efficiency.