The yen appreciated sharply in the week following the disaster, climbing from ¥82.9:US$1 on March 10th to ¥80.8:US$1 on March 18th, owing to expectations that funds would be repatriated to Japan to pay for reconstruction. A stronger yen would aggravate the predicament of exporters that are already struggling to cope with damaged infrastructure and broken supply chains. The government has therefore intervened in markets since March to arrest the rise of the yen. We have not altered significantly our forecast for the value of the yen. Despite Japan's weak economic growth prospects in the forecast period, the currency will continue to be supported by the country's current-account surplus and plentiful foreign-exchange reserves. Interest rate differentials between Japan and the US are forecast to remain minuscule in the next 18-24 months, as the Federal Reserve (the US central bank) is expected to keep its funds rates on hold at 0­0.25% until the second half of 2012, while Japan's OCR will remain close to 0%. Japan's low rates will continue to encourage the carry trade (whereby investors borrow in currencies subject to low interest rates and lend in currencies attracting higher ones, profiting from the difference), which should act as a moderating influence on the strength of the yen. We forecast that the yen will strengthen from an average of ¥87.8:US$1 in 2010 to ¥81.2:US$1 in 2012. The currency is expected to weaken slightly against the US dollar in 2013­15 as US interest rates rise more quickly than those in Japan. The yen will be subject to bouts of volatility in the forecast period.