LW - on the dollar-yen exchange rate by bhauth

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Welcome to The Nonlinear Library, where we use Text-to-Speech software to convert the best writing from the Rationalist and EA communities into audio. This is: on the dollar-yen exchange rate, published by bhauth on April 8, 2024 on LessWrong.
Recently, the yen-dollar exchange rate hit a 34-year low. Why is that?
6-month US Treasuries are paying around 5.3% interest. Japanese government bonds are paying about 0%. That being the case, you can borrow yen, trade it for dollars, buy US bonds, and get more interest. That's called a "yen carry trade". The risk you take in exchange for that money is that the exchange rate will shift so that a dollar is worth less yen.
But of course, it's also possible that the exchange rate will shift in the other direction, and that's what's happened recently. From 2020 to now, $1 went from 105 to 150 yen.
That being the case, I'd normally expect inflation to be higher in Japan than the US - their currency became less valuable, which makes imports more expensive. Yet, that's not what happened; inflation has been higher in the US. In Japan, you can get a good bowl of ramen for $6. In an American city, today, including tax and tip you'd probably pay more like $20 for something likely worse.
The PPP / nominal GDP of Japan is now ~1.5x that of the US, and I'd argue that's actually an underestimate: PPP estimates don't account for quality of services, and a lot of Japanese services are higher-quality than their US equivalents. But that's not to say I envy how the economic situation of people in Japan has changed. While inflation was lower in Japan than America, wages barely increased, and real incomes of most Japanese fell.
In some countries, you can argue that crime or lack of property rights or inadequate infrastructure keep labor values down, but that's not the case for Japan. So, we're left with some questions.
Question 1: Why would an hour of labor from an American be worth 2x as much as an hour from a Japanese employee?
I remember talking to an economist about this once, and he said, "that means Japanese labor is just not as good as American labor" - but he was just wrong.
(He didn't even consider the possibility that Japanese management culture was the problem, because obviously inefficient companies would just get outcompeted.) There's something about a lot of economists where, when they have some model and reality disagrees with them, they seem to think reality is wrong, and aren't even inclined to investigate.
I'll have to get back to this later.
Question 2: Why do Japanese automakers operate some factories in America instead of importing everything from Japan?
I can answer this one:
Direct labor is generally