The depreciation pressure of the Japanese yen continues, and the Japanese economy is under significant pressure

Recently, the Japanese yen has weakened in severe fluctuations, and the exchange rate of the yen against the US dollar in overseas foreign exchange markets has fallen below the 160:1 mark, setting a new record for the lowest since April 1990. After being forced to intervene three times, the Japanese government saw a rebound in the yen and is expected to achieve its best weekly performance in over a year. According to data from the Bank of Japan, authorities spent approximately 9 trillion yen intervening in the foreign exchange market, resulting in a 0.48% decline in the US dollar against the Japanese yen. In contrast, the US dollar has performed poorly due to the dovish bias of the Federal Reserve and the decline in US bond yields. Federal Reserve officials' speeches and economic data from multiple countries will affect the market. The Japanese Finance Minister has hinted that it may alleviate the excessive volatility of the yen, and market analysis suggests that 160 yen may be the intervention bottom line. The depreciation trend of the Japanese yen is likely to continue, putting significant pressure on the Japanese economy, which is not conducive to Japan's exit from deflation. At the same time, it will bring pressure to Japan's retail, energy, aviation and other industries, increasing the burden on enterprises that rely on imported raw materials. The continuous depreciation of the Japanese yen actually reveals that after experiencing the economic crisis of the last century, Japan has encountered serious setbacks in its transformation in the "lost 30 years", with insufficient industrial and innovative development, leading to a continuous decline in its foreign exchange earning ability.

The depreciation of the Japanese yen this round is not entirely caused by the aggressive interest rate hikes by the United States, and some structural problems that have long existed in the Japanese economy have also become factors driving the depreciation of the yen.

Japan heavily relies on imports for important resources such as energy, food, and raw materials, and its demand for the US dollar continues to increase. After the Fukushima nuclear power plant accident in 2011, domestic nuclear power plants in Japan were shut down one after another. Nuclear power, which originally accounted for about a quarter of Japan's annual power generation, dropped to zero in 2014. The progress of restarting nuclear power was slow, and the demand for energy imports further increased.

Japan's trade in goods and services continues to experience deficits. The latest data shows that Japan's trade in goods has shown a trade deficit for three consecutive fiscal years from 2021 to 2023; Although the situation in 2023 has significantly eased compared to the previous year, the total reverse balance between goods and services is still 9.8 trillion yen. Several experts have pointed out that although inbound tourism is doing well against the backdrop of the depreciation of the Japanese yen, with the deepening development of AI technology, Japan's service fees paid overseas will significantly increase, and the problem of service trade deficit will become more apparent.

Although overseas investment returns are substantial, the amount of returned funds tends to decrease. There is a saying in Japan that "there is another Japan overseas", but due to sluggish domestic demand and shortage of manpower, Japanese companies continue to expand their overseas investment scale, which brings huge profits but lacks the motivation to invest back home. They choose to keep profits overseas.

Vishnu Varathan, Chief Economist of Mizuho Bank, pointed out that the authorities are more inclined towards market actions that are carefully considered and seize opportunities in order to achieve maximum results. Maintaining a sense of mystery and surprising the market is an important advantage that the Bank of Japan and the Ministry of Finance hope to retain. The exchange rate fluctuation of the Japanese yen against the US dollar is influenced by multiple factors, including the intervention measures of the Japanese authorities, the release of global economic data, and the policy trends of central banks around the world. Investors should closely monitor these factors when considering investing in the Japanese yen and make wise investment decisions based on analysis.

When it comes to the future trend of the Japanese yen exchange rate, although the yen is currently in an extremely weak state, the trend of major central banks such as the Federal Reserve cutting interest rates and the Bank of Japan slowly raising interest rates will not change. "One drop and one rise" is conducive to the appreciation of the yen. Ding Ke, Director of the Asian Economic Research Institute of the Japan Trade Revitalization Agency, believes that the appreciation of the Japanese yen is inevitable in the future, but the Tokyo stock market may face resistance if it continues to rise. Although Japan's position in certain aspects of the supply chain is still irreplaceable, due to the difficulty of reversing the aging population with fewer children, the overall trend of Japan's economy tending to shrink in the long run is difficult to change.