Yen Drops to 155 against USD. Currency Collapse at Work, -32% against USD since 2021, -50% since 2012

Turns out, collapse of the currency is the price Japan is now paying for years of crazed monetary policies.

By Wolf Richter for WOLF STREET.

Today, the yen dropped to ¥154.7 to the USD, a 34-year low, despite endless copy-and-paste jawboning by Japanese authorities and some market intervention – selling hard-earned dollars to buy back yen that the BOJ had created in such reckless abandon – to prop up the yen.

The yen has plunged by 32% against the USD since 2021 when other central banks started moving away from QE and 0% or negative policy rates; and it has collapsed by 50% since 2012 when newly elected prime minister Shinzo Abe implemented his economic policies (“Abenomics”) of fiscal profligacy funded by money printing, huge amounts of money printing that was reinforced in 2016 by the institution of Yield Curve Control, which kept the 10-year yield near 0%.

The Bank of Japan has taught global central banks a huge lesson over the past dozen years: You can get away with endless amounts of money printing, no problem – see how we’re doing it? – essentially buying over half of the national debt with freshly created yen, plus a bunch of other securities, and there won’t be any bad consequences. Now that lesson has turned out to be fake. The yen is collapsing. There’s a price to pay after all: the destruction of the currency:

The only thing that is amazing is how long these kinds of crazed monetary policies can be maintained before something breaks, but then something does break, something big, like a currency. And the free-lunch theory that had driven all this turns out to have been fake.

The BOJ has started to react in tiny baby steps, but there is nothing in these tiny baby steps that would stop the destruction of the yen – it’s still destroying the yen, but in slightly smaller increments.

The process started in December 2022, by which time other central banks were hiking their policy rates in big increments and had turned to QT. That was when the BOJ “shocked” markets by lifting the ceiling of the 10-year JGB yield band to 0.5%. In 2023, it lifted the ceiling to 1%. And in October 2023, it discarded that explicit ceiling. Then at the policy meeting in March, the BOJ:

  • Maintained QE, said it would “continue its JGB purchases with broadly the same amount as before,” about ¥6 trillion per month ($40 billion), based on market conditions.
  • Scrapped its negative interest-rate policies by lifting the short-term rate by a breathtaking 10 basis points, OMG, from -0.1% to 0.0%, its first rate hike since 2007.
  • Kind of ended yield-curve control but without throwing it out completely.
  • Officially ended purchases of equity ETFs and J-REITs, though it had stopped buying them in 2023.
  • Slowed but didn’t stop the purchases of corporate paper and corporate bonds and said it would end them altogether in about a year.

So the BOJ has done only a few micro-steps to move away from its crazed monetary policies, but it’s still largely stuck in these policies, it’s still pursuing them, just at a slower pace.  Currency destruction at work.

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  180 comments for “Yen Drops to 155 against USD. Currency Collapse at Work, -32% against USD since 2021, -50% since 2012

  1. michael says:

    I pity the poor Japanese savers.

    • Harvey Mushman says:

      Yes, me too. The Japanese who bought U.S. treasures should be doing quite well though.

      • andy says:

        In approx 3 years the Yen lost 30% to the dollar. 20+ year US treasuries lost 50% to the dollar.

      • Saxons Wrath says:

        Once the US loses its world reserve currency status, which will happen sooner than we want, people everywhere will be saying…

        “Why didn’t I buy the yen on the Dip???”

        As Hemingway said, “How did I go bankrupt? Slowly at first, and then all at once…”

        Politicians, the handmaidens of bankers everywhere, are simply speeding this bankruptcy process along.

        • Wolf Richter says:

          Funny to read this comment on an article about the yen plunging against the USD.

        • BillMc says:

          Let’s check back in 10 years and see how that prediction plays out. FYI, that’s the same one being rehashed since, as far as I am aware, the 1980’s.

        • Brant Lee says:

          ” loses its world reserve currency status…”

          Against what country’s paper currency?

          And don’t say the BRICS. Who could ever prove there are gold reserves in any of these countries supporting currency, they currently do not back even their own currencies with anything. Much less being able to trade in paper for gold from them? Good luck.

          Enjoy the dollar status. We all in the U.S. have reaped many benefits and continue to do so.

        • typecheck says:

          @Saxons Wrath

          Oh. How about gold? Gold is still the backup currency accepted as the method of settlement cross border.

        • BobC says:

          To quote a wise man, “RTGDFA!”

    • Home toad says:

      Japan needs a gentle nurturing woman to save it. But instead a beast from the sea, “Godzilla” has wreaked havoc on the island of yen.

      Wolf, you say, “Japan is largely stuck in these policies,” it sounds as if they are not the most skillful monetary fighters. If they have remained stuck for so long, it’s possible it’s a Japanese thing. Old Japanese saying “a frog in the well does not know the ocean”

      How do you say wolf in Japanese….Okami.

    • OutsideTheBox says:

      See ?

      Evens savings represent a risk !

      Savings can constitute an actual loss.

      Squirrels take note.

      • Home toad says:

        A Japanese squirrel is not pleased, his nuts have lost their lustre.

        I don’t think the Japanese people piss and moan like americans do, I don’t think they protest like Americans do. I wonder what a pissed off Japanese person does? Maybe they just scratch themselves and continue on like we do here but without all the wing flapping?

        • Lauren says:

          I took a trip to Japan last fall. I was pleasantly surprised at how far my money went there relative to the U.S. I looked at several local subreddits and they are in fact very pissed about rising prices like the rest of us.

        • Robert (QSLV) says:

          Hara Kiri.

      • Cas127 says:

        “Squirrels take note.”

        Squirrels may have their nuts stolen one by one, slowly.

        Reckless speculators talk big…until reality chops their nuts off…quickly.

        Then, hysterical and helium voiced, they squeal in anguish for the Nuts Government to pivot…

    • Zoroto says:

      Why does the average Taro care about the value of the JPY? Inflation is still lowish, and unless he wants to travel (and he doesn’t), he won’t see the effect.

      The main drawback is that Tokyo is inundated with low-class, tattooed weebs driving around go-karts in cheap cosplay. It is really getting unbearable that Japan has become the equivalent of Phuket and Bali for a large number of tourists.

      • ChrisFromGA says:

        Doesn’t Japan import practically everything? Certainly, they have no oil so gas must be ridiculously expensive.

        • toshin says:

          The US gave Japan the permission to buy energy from the country that should not be named. So, it could have been worse.

    • max says:

      collapse against US dollar is nothing compared to ounce of gold

      approximately 50, 000 yen in 1998
      now approximately 300, 000 yen

    • Cas127 says:

      Agreed…but their nightmare has been going on for 30+ years…not really just 10.

      And…see, also, ZIRP, US, 2012-2022 (and, maybe, really 2002-2022).

      (The fact that this latter fact seems to go unmentioned in the main post is…disconcerting).

    • toshin says:

      The smarter ones bought gold. There are more and more of them.

  2. Phoenix_Ikki says:

    So many “F around and find out moment lately” from these central banker morons, it would be super hilarious to laugh at their ineptness if their terrible policy don’t actually effect middle and working class…Looks like Japan is no different.

  3. Sc73 says:

    Hi Wolf, thanks for this article. Japan is what every developing country tries not to be but more or less in the same track with a lag

    What was the intended consequence of this money printing by BoJ? Who is suffering now?

    • DownFed says:

      The purpose of printing money is to maintain negative real interest rates (interest rate – inflation rate). If real interest rates are negative, the only entity that would buy sovereign debt is an entity with a monetary printing press. And that is a central bank.

      • cas127 says:


        Can’t be said enough.

        Too many people (including, periodically, dishonestly, the Fed) behave as though ZIRP was some sort of natural, market-driven result.

        Definitely not from 2011 on.

        The Fed, acting as a non-economic actor (Returns? We don’t need no stinkin’ returns!) simply printed unbacked fiat so as to

        1) fund the Treasury’s perpetual deficits while,
        2) gutting US interest rates, resulting in,
        3) the gross mis-valuation of USD denominated assets yet
        4) misrepresenting its role in the whole friggin’ mess.

        There was a (semi) honest case to be made for (some degree) of Fed intervention/ZIRP’ing but DC itself never felt that it was truly strong enough to be honest about what was actually going on.

        That’s how “money printing” becomes “Quantitative Easing”.

  4. Oldtimer says:

    Japan is pursuing a policy of devaluation on purpose to gain a competitive edge on China.
    China will start next.

    • Wolf Richter says:

      That’s nonsense. There was nothing purposeful about it. It was an unintended consequence. There are always unintended consequences of money printing. They don’t show up right away. But eventually they do. It’s not a free lunch.

      Most big Japanese manufacturers already produce in China, Thailand, the US, in Mexico, etc. They have offshored a lot of production years ago.

      • Scrappy Doo says:

        Hey Wolf,

        Speaking about offshore- a while back I read that most Japanese corporations with offshore operations only repatriat around 10% of their profits. I wasn’t sure why; a cultural corporate anomaly (partnership with host country, good relations) and/or prevention of risking higher inflation? Those were the 2 possibilities I thought why they such a practice – I thought there’s a good chance you know why.

        • 91B20 1stCav (AUS) says:

          Scrappy – at least in the old days in the moto-biz, the goal was achieving dominant global market share (by achieving lowest mfg. cost per unit) was the driver, the corps. deciding the world areas they would make their money, selling their products cheaply, breaking-even (or even below cost) in their high-volume US markets, while selling for very high profit in others (those old enough will recall the ‘dumping’ tariffs the US levied against Japanese motorbikes and bearings…).

          may we all find a better day.

      • Zoroto says:

        Japan is an export oriented economy (both direct, and more and more tourism-focused). The cheap yen is great for the profits of the exporters and the tourism industry. It also makes for great propaganda headlines — the Japanese don’t like to do anything more than pound their own chests about how much foreigners love them.

    • toshin says:

      “China will start next.”

      Wrong. China is moving up the value chain. Many of those factories in popping up Vietnam, Mexico, Bangladesh, India, etc, are Chinese-owned, sourcing parts from China. At the same time, China has become the largest user of industrial robots.

  5. Robert says:

    I thought the Japanese would be smarter than that because the make great cars.

  6. HR01 says:

    Aye, the yen has much further to fall. Next stop, 175.

    This will drag the yuan down too. Chicoms faced with a dilemma. Defend the currency or prop up the zombie companies. Screwed either way.

    • Doc wilson says:

      Still up over 100% from 1970

    • joe2 says:

      I hope not. I bought yen at 151 for a trip in SEP thinking a major first world country would not let their fiat go to crap. Of course I am possibly the worst trader in the world. In the long term the world catches up with me, but in the short term……..

      Wolf, you know Japan, how low do you think it will go?

  7. Curiouscat says:

    Wolf – Do you think this is the unsuccessful result of the BOJ trying to maintain a growing economy is the face of a declining population, which seems impossible? If so, many other countries will face this in the coming decade.

    • Curiouscat says:

      Ok. I know this an obvious question. A better question might be what else could they do?

      • Von Meren says:

        Allow more immigrants?

        • Anthony A. says:

          You mean like Canada is doing? That will work just like it has there.

        • MiTurn says:


          I think you’re at least partly right. I wonder what the role of demographics plays in this. In some ways Japan is a test bed of what happens when an aging population is confronted with the realities of post-modern economics.

          According to the median age in Japan in 2020 was 49.5 years and only 16% of the population was 20 years old or younger.

          Yowzers. I suspect that this is history making, although a great many European countries have near-similar numbers.

      • Einhal says:

        Maybe an economic system that requires permanent growth isn’t feasible.

        • spencer says:

          Frictionless financial perpetual motion requires that “income not spent” (monetary savings) is reintroduced into the economy without an expectation for any destabilization in the price level. It necessitates that it will be invested in real-investment outlets, like during the Golden Era in U.S. economics.

          That is why there will be an economic depression. The drag and time decay chain (“radioactive cascade”) has been a long time in coming, c. 1965.

          The U.S. Golden Age in Capitalism took place when the upper income quintiles’ taxes were the highest.

          Was the 1982 Velocity Decline Unusual?
          JOHN A. TATOM

          It’s no happenstance that velocity declines with mature economies.

        • joe2 says:


        • phusg says:

          > Maybe an economic system that requires permanent growth isn’t feasible.

          Rubbish, all we need is an infinite habitable and resource-full planet(s). Oh wait…

      • ChrisR says:

        The economists and bankers could start by asking themselves does financialisation alone work? (That’s without fundamentals?) The QE experiment suggests it does not.

        If reports are true, “they” intend to fix things by jumping the shark and transitioning to some Blockchain crypto “currency.” As they think that will enable them to conveniently keep transferring wealth by stealth. Compliance may possibly be achieved by citizens being caged in by their social credit scores.

    • HowNow says:

      People talk about an aging society in terms of declining consumption, productivity, and gdp per capita (akin to productivity) and that it’s axiomatic that, if there are fewer and fewer available to replace the retiring workers, it’s doomsday. Is that a false assumption? Can increasing productivity from technology (ai, robotics) offset population decline? Is consumption growth an absolute requirement for an economy to survive?

      • phusg says:

        Certainly possible, just consider long periods in history where there was no consumption growth but the economy didn’t collapse.

        But we tend to look down on low consumption lifestyles as primitive and are pretty much addicted to more and better. All the best trying to change that mindset.

        • joe2 says:

          “All the best trying to change the mindset.”

          Total BS. The elite consume like pigs and tell the rest to downsize. Leaders lead by example, not with lies. Were bug dishes on the menu at Davos? Did they bicycle to get there?

          And don’t give me “carbon offsets”. A carbon offset is a donation to an NGO to print more propaganda.

        • Home toad says:

          8 billion humans+ inhabitated our globe

          Getting rid by half will give me room to breath and stretch my legs, maybe raise some toads.

          More and more people will not add to a more tranquil – peacefully state of mind for the humanoid.

          Keep the people working, come home, crawl into their box, all the while their surroundings environment becomes more dangerous, unhealthy and in-hospitable.

          So another 8 billion should do the trick.

        • joe2 says:

          Home Toad

          “Getting rid by half” you forget you don’t get to chose which half you are in.

      • Kent says:

        Consumption growth is an absolute requirement for the working class to continue working instead of taking the property of the investment class. But yes, increasing the productivity of the youth resolves the doomsday scenario.

  8. Jake Bodhi says:

    Maybe a good time for American tourists there?

    • rojogrande says:

      I think it is. My brother said it was already relatively inexpensive when his family went last May. Very different from when he lived in Tokyo from 1988 to 1991 at the very end of the bubble. A friend and his wife are visiting right now and have said the same thing. We’re planning a trip for late summer before our son starts college.

      • MiTurn says:

        My son lived there for five years in the 2010s. He said that in the cities people lived cheek-to-jowl but the countryside was relatively empty of people.

    • BobE says:

      A good exchange rate should help Japanese tourism and exports to the US.

      Inflation in Japan is the biggest problem. Weimar Germany was a very popular place to visit and vacation in the 1920’s since it was so cheap. That didn’t help the average German citizen very much.

      As far as exports, even with a debased currency relative to the dollar, can they compete with China and South Korea on price? Japan was known as the low-cost leader in cheap exports in the 1970’s before China and Korea figured it out.

      The IMF was formed in the 1940’s to prevent countries from debasing their currencies too much to gain unfair competitive export advantage. I suspect Japan is nowhere near China for depressed wages and low-cost exports. They may be more competitive with South Korea.

      • BobE says:

        Currently, Japan has been selling luxury and reliability at a higher cost.

        It may become more affordable to buy a Lexus or high-end Sony in the coming year. What else do they have that China doesn’t?

        They’ve moved well-beyond the cheap Datsuns of the 1970’s and have competed very well.

        • Wolf Richter says:

          Most of the Japanese vehicles sold in the US are assembled in the US or in Mexico.

        • Hubberts Curve says:

          Japan is still a powerhouse of high end industrial manufacturing. From machine tools, to robots, to chip equipment, to control systems , the only equivalent products come from Germany. While painful to consumers this will give the price edge to Japan.

        • Gattopardo says:

          “What else do they have that China doesn’t?”

          Um, like, quality made stuff?

        • toshin says:


          Right, like all those smartphones or all those EVs made in Japan. Oh wait…

          You still have that 1990s version of the world…

        • Mitchell says:

          Wolf, while “most of the Japanese vehicles sold in the US are assembled in the US or in Mexico”, what percentage of the components (alternators, engines, suspensions etc) are still manufactured in Japan? What percentage of the total value of a car is final assembly vs component cost?

        • Wolf Richter says:


          Hondas sold in the US were the most “American-made” cars for years. Tesla has bested Honda in recent years. Of the top 12 “Most American” models, #1-4 are Teslas, #5 is a Honda, #6 is a Volkswagen, #7-11 are Hondas (incl. Acura), and #12 is the Toyota Tundra. The US legacy automakers are further down. That was for 2023.

          Much of the component industry has moved to China and Mexico, but also Thailand for certain components, and some other countries, and the US still has a substantial component industry; and components in Japanese cars sold in the US are more likely from China or Mexico than Japan. Japan has had a big trade deficit for years.

          When it comes to offshoring, your enemy are the legacy US automakers, not the Japanese automakers.

  9. kiers says:

    After nearly 2 decades of reassurance, the west copped to it:

    Opinion piece in Bloomberg, by Allison Schrager, Columnist: “It’s Now Clear That QE Was a Colossal Policy Mistake”

    What central bank credibility?

  10. Ken C says:

    *Please* don’t confuse me for an MMT advocate. I get it, I agree completely with this blog’s raison d’etre. There is no free lunch. We’re good.

    That said, you can’t have monetary policy discussions without talking about inflation. If you’re saying Japan’s inflation is going to 4% or 8% or worse, okay. Put down your marker if that’s the case. The Yen has “collapsed” against USD. But not against house or hamburger. Yet, anyway.

    • Wolf Richter says:

      There’s plenty of inflation in Japan. And Japan’s inflation doesn’t fully show up because a lot of the inflationary items (the entire healthcare system and much of the public transportation system for example) are government controlled, and price increases facing consumers are those that the government puts in place, which are small. But they’re taxpayer funded, and so the bill for inflation comes in through the back door. The government has also subsidized wholesales of energy products (gasoline, etc.) and some other products to slow/halt price increases. So retail prices of those items haven’t risen as much, but the government paid for the inflation, and taxpayers are paying for it through the back door.

      • HowNow says:

        So this is, in some fairly important elements of the economy, a centrally controlled economy. A hybrid of a socialist/capitalist system?

        • Wolf Richter says:

          The Japanese government has always despised markets. The economy is not centrally controlled. But it’s controlled. The system of keiretsu is also part of this. “Japan Inc.” is what this is called today. You can google that.

      • eg says:

        Sounds suspiciously like civilization.

  11. Minutes says:

    They need to raise rates to defend their currency

  12. TVP says:

    Gradually, then suddenly.

  13. R2D2 says:

    Japan’s GDP per head (PPP) is now by far the lowest in the entire G7. It’s on a par with many Eastern European, ex-Soviet, ex-communist countries, such as Poland. A low GDP per head, plus its tanking currency, astonishing levels of national debt, and a shrinking population, mean Japan has some serious problems right now. The country is a mess.

    • Julian says:

      Bobber, this is the first time I’ve read such a pessimistic comment from you!

      • Bobber says:

        Hopefully I’m not optimistic or pessimistic. I try to base my predictions on past events and behaviors, as well as basic math.

    • BobE says:


      I agree 100%.

      The Fed has been notoriously fast in implementing QE at any sign of trouble. (Early 2019, and the pandemic in 2020). They’ve been rather late in implementing QT even though I agree with Wolf that the roll-off so far has been impressive. It will still take many years to roll-off the effects of QE using the current QT when it took less than 2 years to build up QE to spectacular levels at a record breaking pace.

      Interest rates seem to be the opposite. It took over 5+ years to lower rates after HB1 and the GFC. Foreclosures were pummeling homeowners from 2008-2012 and the economy was good from 2012 to 2020 but the Fed let rates meander down. I personally believe they should have lowered rates more aggressively from 2008-2012 to prevent the widespread pain and then slowly raised rates during a good economy to prevent HB2. It took 1 year to raise rates back up to the original 2008 rates at the sign of inflation.

      • BobE says:

        I guess I could put it more harshly.

        The Fed needs a Super Computer to control the rates based on hard data. ie Housing Bubble 2 became bubbly in 2017. Prices deviated very far from the inflation line and the market became speculative.

        I believe that the Fed decided everyone was happy in 2017 during their 3 martini Happy Hour and decided to do nothing despite what the hard data was saying. However, at the first sign of perceived trouble for the economy, they panic and instantly implement QE.

        They are not using hard data to control the system. A computer that doesn’t drink martinis would do a much better job.

        The Drunken Sailors are being led by the Drunken Officers who fell into a stupor at the wheel.

    • Wolf Richter says:

      PPP is a stupid thing, and has been debunked many times. It’s meaningless.

      • JS says:

        That’s new information for me. Why is PPP meaningless? It seemed like a great way to spread economic output across a population to assess productivity gains, education, etc. What am I missing?

        • Nick Kelly says:

          In PPP even very poor countries don’t seem that bad. In a poor country a house or apt will rent for a fraction of what it would in a prosperous country, so the much lower amount has parity. The fact that the rental unit is substandard by the G7 standard doesn’t count because it is par for the poor country. Note this only works for stuff made internally. Anything imported has to pay world price.

          There are some good or at least well- intentioned aspects. A person in a country far down the US $ level of income won’t feel inferior to his neighbors because he doesn’t have indoor plumbing, like Russia where this is true for the majority. Russia looks not too bad in terms of PPP even though median wealth is nine hundred dollars, behind India at 1000. .

          It’s kind of like a golfing handicap. where players with great skill levels can play and even lose to players not as skilled. But real competition is objective.

        • Wolf Richter says:


          Scroll down to “Issues” and start reading. There are a lot of “issues,” so make sure you have some time and read all of the issues:

      • Zoroto says:

        Maybe so, but it is a fact that the real wages in Japan have been decreasing for what it is now, 26-27 months?

        People are undeniably getting poorer. Countryside Japan doesn’t look more prosperous than any place in Eastern Europe.

        • Wolf Richter says:

          My wife is of the Bubble Generation, they became adults during the bubble, started working at big companies during the bubble. They felt rich when they traveled overseas, they made lots of money and had lots of fun and lived at home then, and life was good. We want our bubble back used to be a common sigh in the decades that followed.

      • Auld Kodjer says:

        RIP, Big Mac Index

  14. Seba says:

    Very naive question: Did the ultra low and then negative interest rate policy work as well as it did for all the years prior simply because they were in a small minority of countries doing it? And then things started to blow up when big economies across Europe and NA got in on the same act?

    From my other reading, other authors claim that besides the demographics issue Japan has also been trying to preserve its export oriented economy, according to them there are various ways to achieve it like tariffs but the ultimate goal essentially is to reduce purchasing power for households. If that’s the case then I’m thinking they’d be able to keep inflation down even with loose monetary policy, but then that all goes to sh*t when inflation hits the entire global supply chain.

    I’m not a finance guy (obviously lol) so take it easy on me. Just trying to wrap my head around it

  15. Julian says:

    As you Wolf said, “Japan can afford it, but countries like Argentina, Venezuela and others cannot”.

  16. Johnny5 says:

    When you say that the BOJ is “selling hard-earned dollars” to defend the Yen, I assume this means they are selling treasuries to acquire the dollars to exchange for yen.  My point isn’t to be pedantic, but to ask whether or not this adds to the downward pressure on treasury prices in any meaningful way, or are these transactions too small relative to the overall treasury market?

    • Wolf Richter says:

      They might also be unloading the reverse repos at the Fed (dollar cash they parked at the Fed). This would be the easiest and most liquid to buy yen with.

      • MM says:

        Wolf, wouldn’t it make more sense to take a dollar loan (by pledging treasuries) via the FIMA repo facility?

      • CharlieH says:

        Wolf and Johnny5,

        Whatever is going on does appear to be correlated with Treasury prices. The data shows that the movement in the 10Y Treasury price has been tightly correlated with the price of the yen (in dollars/yen, not the usual yen/dollar). Plot both versus time, and you’ll see that since the beginning of 2021 the correlation has been positive and very tight. I don’t understand why this is so, but this behavior strongly suggests there some kind of arbitrage is at work.

        Maybe I’m confused here, but if the BOJ is selling Treasuries to buy yen, then I’d expect the yen to rise as the Treasury price declined, producing a negative correlation. Instead, the opposite is true.

        Wolf, this would be a great one to analyze. Maybe you can figure out what’s going on here.

  17. King Nether says:

    Basic economics at work. The bright side for Japan is, however small, that this will (or should) result in their exports becoming more competitive. Sadly, at the same time their imports become more expensive with the ultimate bottom line of a lower standard of living. Essentially, the parents and grandparents will assuradly have lived a more comfortable life than their kids and grandkids. That is nothing that any parents want for their children.

  18. cb says:

    It is much worse than you show. The Yen has fallen more than the falling Dollar, sure.

    But look at the Yen against Gold for a picture of the real damage the BOJ has done.

  19. shangtr0n says:

    Wolf has written about this a bit recently in another article entitled “Are Foreign Holders Finally Bailing Out of the Incredibly Ballooning US National Debt?” (I’m not sure if we’re allowed to post links in comments).

    Quoting him here: “Japan’s holdings, after dropping sharply last year, have zigzagged up again this year, and in October ticked up to $1.1 trillion, up by 3.2% from a year ago.

    “Late last year, the Ministry of Finance sold some US-dollar assets, presumably Treasury securities, or let T-bills mature without replacement, to get the dollar-cash, and then blew $68 billion in dollar-cash to buy yen in the foreign exchange market to prop up the yen after it had plunged to ¥150 to the dollar by October 2022.”

  20. Bond Vigilante Wannabe says:


    Do you think the Japanese central bank will be able to reverse the yen currency deterioration? If so, do you see them doing something?

    • Wolf Richter says:

      Hike to 4% or 5% and $100 billion a month in QT might be a good start.

      • Anon says:

        Do you think there’s any realistic chance they will actually do something like this?

      • Zoroto says:

        They can’t do that. The number of companies that would go bankrupt essentially immediately is astronomical (zombie companies). This would lead to very high unemployment which is a much worse place to be. As you know, you cannot fire full-time employees in Japan unless the company goes out of business. The only possible way they fire people today is by spinning off the unprofitable parts of the company, and closing them. But this practice is frowned upon, as it goes against the “harmony” of the Japanese society.

        No way they will raise the rate to 4-5%. Perhaps 2-3%, but even that’s doubtful.

        • Zoroto says:

          I think if it gets bad, they will try to tame inflation by doing price stops and such measures. It worked quite well in Hungary in 2023, bringing down inflation from 20+% to <5%.

        • Wolf Richter says:

          That’s what they said about the Fed too. Verbatim, in 2021. Right here on this site in the comments.

          Look, higher interest rates that consumers earn are going to light a fire under consumer spending, especially in Japan, where people sit on a lot of savings. Higher interest rates widen bank profit margins, which makes them more aggressive in lending, so that they can make more money, and that’s stimulative. Lots of bad things happened because of NIRP and ZIRP. And abandoning this idiocy is a good thing for the economy. And lots of good effects come off it. It might also get rid of some deadwood, and that’s a good thing too.

        • phusg says:

          All sounds very sensible and would get my vote Wolf, but why then do you say that the Japanese are largely stuck with these [current loose monetary] policies?

  21. MCDON says:

    Japan is on track to become the next Argentina where nearly the entire population has fallen into poverty.
    Japan is the laboratory for “crazed monetary policies”
    Massive government debt
    Declining population
    Declining tax receipts
    Increasing social services costs due to a rapidly aging population

    With 0% interest the BOJ is allowing the yen to collapse and inflation to skyrocket. If the BOJ raised interest rates to match or exceed the inflation rate the interest on the debt 1.3 quadrillion yen would bankrupt the country. The government of Japan is rapidly heading for bankruptcy with the national debt forecast to skyrocket 240% over the next four years.

    Currently the US is adding $1 Trillion to the debt every 100 days. According to the IMF Japan is “a laboratory from which other countries are beginning to draw lessons.” US congress needs to take note. Japan is the example regarding what not to do regarding government debt, government money printing, monetary policy and immigration.

    • Wolf Richter says:

      1. The Japanese deficit is small comparted to the gigantic US deficit. According to your link, it was ¥33 trillion in 2023. That’s US$210 billion, about 1/10th of the US deficit (I didn’t factcheck your source, I just took it as is)

      2. Higher interest rates that consumers earn are going to light a fire under consumer spending, especially in Japan, where people sit on a lot of savings. Higher interest rates widen bank profit margins, which makes them more aggressive in lending, so that they can make more money, and that’s stimulative. Lots of bad things happened because of NIRP and ZIRP. And abandoning this idiocy is a good thing for the economy. And lots of good effects come off it. It might also get rid of some deadwood, and that’s a good thing too.

    • BobC says:

      Number of times Argentina has defaulted = 9
      Number of times Japan has defaulted = 1 [due directly to defeat in WW2]

      Your analogy is faulty.

  22. JeffD says:

    Real estate also collapsed spectacularly in Japan. In 1995 there were multi-generational 100 year mortgages signed for million dollar homes. Now Japan is littered with fairly large homes no one wants for around $30K, sometimes even “free”.

    • Home toad says:

      Japan is littered with fairly large homes no one wants for 30k?
      That sounds crazy?
      But that unicorn on my roof says it’s true.

      • Coffee says:

        Due to constant earthquakes homes built to a standard 30 years ago aren’t anywhere near the standards today. I think Japanese homes are built to last only a few decades by design.

        It’s easier to build to the current standard then retrofit.

        • Home toad says:

          I wonder in what way the Japanese built houses differs from our houses here in the US.
          Our straw houses here last for quite a while?
          Some cement, 2x4s, sheetrock, OSB, roofing and siding, wiring, plumbing, windows, flooring, doors and a dog?

          Maybe the bam-boo ?

      • Zoroto says:

        It’s completely true. You can buy a huge landed house in the countryside for essentially nothing. Of course, it will be an old, Japanese style home, which while very charming and many people love it, it’s not exactly the most comfortable way of living.

        The keyword is the countryside though. Housing prices in the 3 major cities (Tokyo, Osaka, Fukuoka) have been steadily rising.

  23. DR_ECE_Prof_FinanceGuy says:

    The Nikei gained 65% since 2021 and doubled (all approximate, eye gazing of the chart) since 2011. How do we reconcile this with Yen drop? Rich becoming richer? if one doesn’t venture out of country does foreign exchange matters (perhaps they have been practicing JAGA like MAGA and living with home made products. MAGA can benefit from their experience)?

    • Einhal says:

      More that when the currency is debased, assets reprice in that debased currency.

      • John H. says:

        Speaking of asset price manipulation:

        “…it is most emphatically not good practice for monetary policymakers to try to target asset prices directly.”
        — Ben Bernanke, Japanese Monetary Policy: A Case of Self-Induced Paralysis, (1999), describing the perils of setting market rates and prices

    • Wolf Richter says:

      Devaluation of the currency against those assets.

  24. James says:

    Haven’t followed this a
    Story. Thanks wolf

  25. danf51 says:

    Exactly what impact does this have on the Average Japanese ?

    What kind of inflation is the average Japanese experiencing ?

    Isn’t the carry trade still alive and well which seems like an excellent hedge ?

    Do the inflationary pressures of a declining currency outweigh the deflationary impact of a crashing population ?

    • Wolf Richter says:

      Everything that is imported — and a lot is imported — got a LOT more expensive. For example, boots on the ground reporting. My wife just got back from Japan. Tokyo has a lot of great French and Italian restaurants, and she said the prices are just shocking, very visible on the wines (they’re a bunch of women who like wine), but also other specialty products that are imported.

      A lot of energy products are imported, but the government started subsidizing wholesalers in 2022 to keep retail prices down, to the taxpayer ate the inflation.

      Healthcare inflation is borne by the taxpayer, though the copays (which a small) have gotten bigger.

      There’s lots of stuff.

      • esop says:

        At UC Berkeley business class with Prof Victor Niederhoffer, late 60’s, reading Adam Smith: Your greatest financial risk will be currency risk. Nice to learn early.

  26. jon says:

    what is the impact of Yen dropping in real life to Japanese population ?

    In usa, although USD i strong w.r.t. other currencies but the purchasing power of usd for common Joe has gone to the drain.

    • Wolf Richter says:

      Everything that is imported — and a lot is imported — got a LOT more expensive. For example, boots on the ground reporting. My wife just got back from Japan. Tokyo has a lot of great French and Italian restaurants, and she said the prices are just shocking, very visible on the wines (they’re a bunch of women who like wine), but also other specialty products that are imported.

      A lot of energy products are imported, but the government started subsidizing wholesalers in 2022 to keep retail prices down, to the taxpayer ate the inflation.

      Healthcare inflation is borne by the taxpayer, though the copays (which a small) have gotten bigger.

      There’s lots of stuff.

  27. Poor like you says:

    Japan’s CB policy is a lesson in the illusion of control.

  28. Bs ini says:

    You know a great deal about Japan and yes they need to start raising rates yet refuse to do so . Will happen soon in your opinion?

  29. LordSunbeamTheThird says:

    Either the authorities will let the yen absolutely collapse or its going to rebound. I have posted this before but I was in the USA with UK pounds when the exchange rate was 2.10 dollars and it was obvious that it had gone too far. Its the same situation for the yen.
    Personally I think the yen is going to rebound sharply at some point because the exchange rate is based on base rate differentials being pushed down -hard- by the BoJ. The Japanese government has over a trillion in external assets to support the yen. The Japanese themselves have 7 trillion in external assets with a quarter of the population heading up to stinging inheritance tax leaving aside repatriation of funds.
    So I believe the yen will surprise on the upside in foreign exchange markets while inflation takes off at home i.e. that the Japanese will lose domestic purchasing power while gaining external purchasing power.
    They already bought their local infrastructure, housing is cheap, everything works. So a disorderly collapse in the yen? No but the Japanese pensioners probably face hard times.

  30. Anon says:

    Come on who could have seen this coming!!!

  31. Gen Z says:

    As a former Bank of Canada governor once alluded, a lower Loonie means more exports. The Canadian dollar was at 71 cents USD at that time. People on the financial blogs were panicking that the Bank of Canada would devalue the currency below 70 cents.

    • Wolf Richter says:

      “We” are not panicking. The Japanese people are pissed though. Their holdings in yen got seriously devalued. Forget traveling overseas.

      In addition: Everything that is imported — and a lot is imported — got a LOT more expensive. For example, boots on the ground reporting. My wife just got back from Japan. Tokyo has a lot of great French and Italian restaurants, and she said the prices are just shocking, very visible on the wines (they’re a bunch of women who like wine), but also other specialty products that are imported.

      A lot of energy products are imported, but the government started subsidizing wholesalers in 2022 to keep retail prices down, to the taxpayer ate the inflation.

      Healthcare inflation is borne by the taxpayer, though the copays (which a small) have gotten bigger.

      There’s lots of stuff.

      • Zoroto says:

        The average Japanese (like the average American) never travels overseas. IIRC, the % of people holding a passport is almost the same between the two countries.

        That said, they do love to travel domestically, but even that’s getting too expensive now as accommodation prices are going through the roof because there are just too many foreign tourist which can pay the high prices with the yen being as cheap as it is.

        The average Japanese can forget about a skip trip to Niseko or the more popular places in Nagano. This was never this way before.

        • Flashman says:

          Have you seen the cost of skiing in the US? Average person can’t afford it either. Inflation and income disparities hitting the world.

    • Gen Z says:

      Therefore, input costs for exports will increase due to more yen required per USD?

      This is a currency trap which affects savers in the end. A 25% decrease in forex value negates a theoretical 5% 1 year CD

  32. spencer says:

    A dollar bill which turns over 5 times can do the same “work” as one five-dollar bill that turns over only once.

  33. Sledgehammer says:

    Is there a splendid bubble in the Japanese real estate market?

  34. Swamp Creature says:

    Waiting for the yen to hit 360 to the dollar like it was in the 1970’s.

  35. Wes says:

    The BOJ and the decline of the yen? Exchanging yen for gold to side step the free fall? The PBOC also increasing their gold holdings selling yen for gold and maybe even dollars. Gold was trading just over a $1000.00 a ounce in 2016. It hasn’t looked back since then.

    • Wolf Richter says:

      So who is selling them all this gold? Who is dumping the gold that these central banks are buying? What do they know that we don’t?

      • Gattopardo says:

        No, no, no, Wolf, it’s like the housing market. No one wants to (or has to) sell, so any buying places immediate upward pressure on prices. To the moon, you know.


      • Flashman says:

        Isn’t that what gold mining companies do? Someone has to purchase what they produce. Jewelry is getting expensive.

    • JimL says:

      Nutty goldbugs going to nutty goldbug.

      Everyone else recognizes that investing in productive assets pays more in the long run.

      Waiting for the nutty goldbug to cherry pick starting and ending points.

  36. MM says:

    Not good when you’re a huge net importer of energy…

  37. Markymark says:

    If I saw my currency getting flushed down the porcelain goddess, by forces beyond my control, I’d be inclined to get some gold and a bit of silver, in a New York minute, while I still could, with what I got. Just saying that’s just me.

    In these parts, such thinking is construed as utter heresy, but I’m old school.

  38. American Dream says:

    Book your flights to Japan today…. Or tomorrow might get cheaper!

  39. Bman says:

    I think the BOJ has been done a great job monetising Japan’s debt. It was getting to a level where it was unsustainably high and now it’s manageable. And it”s done this without generating inflation or massively devaluing the currency. Regarding the latter point, if you look at chart of the JPY versus EUR, GBP and AUD since 2006, the Yen is off its lows. The USD is strong against every currency.

    I think the debt monetisation is permanant. I don’t think the BOJ will send the JGBs it has purchased. They will probably raise rates further but won’t embark on QT.

    The Japanese stock market has been a big beneficiary of the weaker currency. Even in USD terms, Japanese equties have been strong outperformers in Asia. There are lots of currency senstivie stocks in Japan which have been beneficiaries of a the Yen depreciation.

    Japan has proved that MMT can work. However, Japan has big advantages in that most debt is held domestically and the Yen is seen (somewhat bizarrely) as a safe haven curency. It’s also helped that BOj has convinced everyone that it’s been buying bonds to stimulate inflation rather than monetatise debt. If it didn’t use this subtefuge, it wouldn’t have worked.

    • Wolf Richter says:

      “Japan has proved that MMT can work.”

      You cut off the sentence. There’s a part missing. The rest of the sentence reads “…until it blows up the currency.”

      That’s the same problem Argentina et al. ran into as well.

      • Bman says:

        Agreed – and I’m not a proponent of MMT. However, there are big differences beween Japan and countries like Argentina where there’s a lot of offshore debt and the currencies are seen as anything but a “safe haven”.

  40. SoCalBeachDude says:

    How come Toyota prices in the US haven’t fallen by 50% since 2012?

    • Wolf Richter says:

      Most Toyotas you can buy in the US are made in the US or in Mexico.

      • ru82 says:

        Yep. Those USA Toyotas are bought with USD which has appreciated against the YEN too. So that USD cash in USA banks is going up in value vs the YEN. Good for Toyota.

    • Gattopardo says:

      And because they don’t need to fall. Plenty of demand for those vehicles.

  41. grimp says:

    “There is no free lunch”

    Day 1 of macroeconomics.

    Yet the MMT Charlatans somehow gaslight the gullible into believing that somehow the printer can magically counterfeit wealth. It must be some kind of challenge to economists – finding the free lunch. Akin to an engineer wasting his life and capital pursuing the perpetual motion machine.

    • 91B20 1stCav (AUS) says:

      grimp – very well-said. One should never underestimate the propensity of at least some of one’s fellows to believe in magic…

      may we all find a better day (…as magical as that may sound…).

  42. Double Bluff says:

    Wolf: Time to ban the Hemingway quote.

  43. Nick Kelly says:

    Japan has issues but don’t worry about Japan. In most years gun murders are less than ten. In one year the country of 100 million plus had ZERO gun murders. Even property crime is rare, vandalism unheard of. Women especially say they feel safe after dark. No one feels the need to pack heat for self protection. No mobs have stormed the seat of govt.

    One thing Japan has in common with most of the Anglosphere, like the UK, there are no preachers in politics. Possibly this is because most Japanese profess no religion. One Western expert on Japan, asked about religion there, replied: ‘the religion of Japan is Japan.’

    • Kent says:

      I had a friend recently return from a long vacation in Japan (I’ve never been there). He was astonished at how clean and orderly the country is. Culture can cure a lot of ailments.

      • 91B20 1stCav (AUS) says:

        …might make one think a bit more about on-the-ground nature of national cultures (am considering that and Hollywood’s cinematic appropriation of Kurosawa’s ‘The Seven Samurai’ in Sturges’ ‘The Magnificent Seven’…).

    • tom10 says:

      Guns & God, and hold my beer…v.s. clean, orderly, and subservient.

  44. BeeKeeper says:

    YTD from Asia: KRW (-7.8%) following the JPY lead; CNY (-2.0%); IDR (-2.9%), close to a record low; INR (-0.3%), also close to a record low; THB (-7.4%); PHP (-2.7%); and MYR (-4.2%).

    It’s not only JPY !!! FED is trying to weaken USD, otherwise whole global economy will blow up dragging US down with them into global depression. So no matter what US inflation or economic status is, there will be push for weaker USD (monetary and/or fiscally). USD is topping up here.

    • Wolf Richter says:

      The other way around: the other central banks will have to hike rates or keep rates high, to protect their currencies. That works. Mexico and Brazil have proven that over the past 3 years.

  45. TK says:

    Since 2012 ish their stock market tripled. Looks like money printing is good for equities. Makes no sense

  46. TSS Madison says:

    More Fun Facts…
    USD/JPY is around 154 today. USD/JPY was 358 in 1971, and was 76 in 2011, which averages to 3.8% decrease every year for 40 years for a total of 78%. So any guesses as to how long to complete the cycle back to 154?

  47. Einhal says:

    This makes me want to go back to Japan and see the cities I didn’t (and the portions of Tokyo I missed). I went a few years ago when the USD was about 110 yen.

    I was jealous when I was there. I’ve never seen such a clean, orderly society before where everything just “works.”

    Not a huge fan of the cigarette smoking, but it seems that even that is dying down with the younger generations.

  48. Alex says:

    Doesn’t a completely export orientated economy was
    want a weak currency?

    They could easily appreciate yen significantly by raising interest rates from essentially zero.

    Sorry looks like deliberate engineering bun the Japanese central bank.

    • Wolf Richter says:

      No. Japan has had a trade DEFICIT for years, and they have to pay for their imports (that exceed exports) with collapsed yen. Chart via TradingEconomics:

  49. cas127 says:

    Just for some longer term historical context (although *both* Japan and the US have seen a *lot* of changes – mostly weakenings – of their domestic productive economies)…

    1971 – (Pre abandonment of Bretton Woods) – 360 Yen to Dollar

    1978 – 180 Yen to Dollar (Illustrates how BW had propped up USD, unsustainably)

    1985 – 261 Yen to Dollar – Weaker Yen continues to gut US trade balance so,

    1988 – Post Plaza meeting/fix – 126 Yen to Dollar – Attempt to force Japan to stop weakening of Yen in name of Japan export model.

    2011 – Peak of Yen strength at 76 to Dollar. First draft of what post-intl finance implosion world might look like when central banks start to lose ability to manipulate things.

    Dollar had lost 80% relative to 1971 BW Yen by this point. Best guess of what true relative productivity between US and Japan really is…shorn of central bank distortions. (And this is Japan following a 20 yr beat down…what must an honest Chinese Yuan – USD look like? Aieeee!!)

    Today – 150 Yen to Dollar neighborhood…

    Although American’s are pretty ignorant of FX issues (historically having produced most of its own goods internally…until the real slide of last 50-60 years) the fact is that FX rates are tremendously important and telling.

    They are how huge foreign economies try to interact/coordinate/reconcile/torpedo one to the other, in the realm of production.

    They are the pre-eminent free market…until the respective G’s get involved…then interventions occur which redefine the daily lives of everyone in their nations (devaluations, explicit or implicit – via domestic inflation).

    Americans need to learn a *lot* more about the defining (and frequently) hidden variables that rule in the FX mkt.

  50. Vaultec says:

    You guys know that bitcoin would solve all this…. right?

  51. WMG says:

    – I don’t fully buy the idea that Abenomics has destroyed the yen. I also think that a rising USD against more than th eyen alone also had a MAJOR impact.
    – One also has to keep in mind that rising US interest rates (as they have been in the last say 2 years) also is a force pushing the USD higher (against e.g. the yen).

    • Wolf Richter says:

      The central banks of Mexico and Brazil knew how to protect their currency in face of inflation and Fed reaction to inflation: hike early and by a lot. Their currencies did very well against the USD.

      The BOJ is hung up in all the wrong lessons it learned by having gotten away for too long with its NIRP and money-printing policies. And it ignored inflation and it ignored the global reaction to inflation. Authorities at the MOF and BOJ figured they could protect the yen by jawboning and by market intervention (selling USD assets and buying yen). They were only able to slow the yen’s collapse with those policies.

  52. IronForge says:

    Still a Vassa-State Hog-Tied to Murica.

    I grew up on 300Yen/01U$D, which was modified in the Mid-Late 80s.

    I’m no Fan of their Monetary Policies; but there are Politicians who are Lobbying to drive the Exchange Rate to 200Yen to the U$D to make Exports more attractive.

    IMHO, in this Day&Age – Industrial States need to promote more “Protectionist – leaning” Policies to maintain their Base.

    Tough call, because they’re outsourcing much of their SME work abroad to SE Asia.

    Hopefully, they’ll stop buying up U$Treasuries and take positions similar to Beijing where they’re reducing the usage of U$Ds for Non-Murican Trades and shifting their U$Treasury Holdings towards the Short End (which makes far more sense now with the Murican Debt Pile soaring skyward).

    • Wolf Richter says:

      “… to drive the Exchange Rate to 200Yen to the U$D to make Exports more attractive.”

      Japan has had a trade deficit for years, and with a trade deficit, a lower yen hurts more than helps.

      Japanese companies have excelled at offshoring production to China, Thailand, other Asian countries, Mexico, Europe, and even to the US. For example, most of the Japanese branded cars that are sold in the US are assembled in the US or Mexico, with components from the US, Mexico, China, Thailand, Canada, etc. In terms of US content, the Honda/Acura models were at the top for years until Tesla’s models knocked them off. The Japanese models are crowded into the top (ranking by

      But a weaker yen helps inflate the yen-profits of Japanese companies with overseas profits because they get to translate their USD/EUR profits that stayed overseas into more watered-down yen for reporting purposes.

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