Analysis of Factors Affecting Exchange Rate of Rupiah against Japanese yen, Period 1997 - 2008

This research attempts to analyze which factors can affect exchange rate of rupiah against Japanese yen over 1997q4 until 2008q1. This research employs Error correction Model (ECM) in order to see the relationship between exchange rate and macroeconomic fundamentals such as money supply, interest rate, and income both in short run and long run. The result shows that in the short run, interest rate significantly affects exchange rate of rupiah against Japanese yen, while money supply and income do not significantly affect exchange rate of rupiah against Japanese yen. ln the long run, money supply and income significantly affect exchange rate of rupiah against Japanese yen, while interest rate does not significantly affect exchange rate of rupiah againts Japanese. Keywords: Exchange rate, macroeconomic fundamentals