The weak Japanese yen is increasingly changing Japan’s economy. The currency remains under pressure against the U.S. dollar, creating both winners and losers across the country.

At the end of June 2026, the dollar briefly traded around ¥162. That marked the yen’s weakest level against the dollar in roughly four decades.

The situation has major economic consequences. Export-oriented companies can benefit from a weaker currency. However, households and businesses that depend on imported products face higher costs.

As a result, the weak yen has become much more than a foreign exchange story.

Weak Japanese Yen Raises Import Costs

Japan imports large amounts of energy, food, and raw materials.

Therefore, a weaker yen makes many overseas purchases more expensive in local currency. Companies may then pass some of those additional costs to consumers.

Japan’s Cabinet Office reported in June that producer prices had been rising. Consumer prices were also increasing moderately.

This creates a difficult situation for households.

Even when salaries rise, purchasing power can remain under pressure if living costs increase at a similar or faster pace.

The Bank of Japan has also highlighted this issue. It has noted that real wages depend on whether nominal wage growth can outpace inflation.

Exporters Can Benefit From a Weaker Currency

However, the effects are not entirely negative.

A weak Japanese yen can benefit major Japanese companies that generate substantial revenue overseas.

For example, exporters receive dollars, euros, and other foreign currencies from international sales. When those earnings are converted into yen, their value can increase.

Furthermore, Japanese products can become more competitive internationally when measured in foreign currencies.

This dynamic can support some manufacturers and multinational companies.

Nevertheless, the benefits are uneven.

Research from the Daiwa Institute of Research estimates that the weak yen’s impact on real GDP over the previous year was actually negative by around 0.14%. The institute found that higher import costs were more noticeable for many households and businesses than the currency’s positive effects.

Small Businesses Face a Different Reality

Large exporters and smaller domestic businesses can experience currency depreciation very differently.

A manufacturer with substantial overseas revenue may benefit. In contrast, a restaurant importing ingredients may face higher expenses.

The same problem can affect retailers and manufacturers that rely on imported materials.

Consequently, smaller companies may have to choose between absorbing higher costs or increasing their prices.

Both options create challenges.

Absorbing costs can reduce profit margins. Meanwhile, increasing prices can discourage customers.

Therefore, prolonged currency weakness can widen the gap between companies that benefit from international revenue and businesses focused primarily on domestic consumers.

Japanese Households Feel the Pressure

For ordinary consumers, exchange rates can seem distant from daily life.

However, the impact eventually reaches supermarket shelves, utility bills, travel expenses, and imported products.

This is particularly important because Japan depends heavily on imported energy.

Moreover, a weaker yen reduces Japanese consumers’ purchasing power overseas.

International travel becomes more expensive. Imported electronics, luxury products, food, and other goods can also cost more.

Therefore, currency depreciation can affect household confidence even when employment remains relatively stable.

Japan’s government described the economy as recovering moderately in its May assessment. However, it also noted weak movements in consumer sentiment.

Tourism Gets a Currency Advantage

Tourism presents another side of the story.

For international visitors, a weak yen makes Japan relatively cheaper.

Foreign travelers exchanging dollars, euros, or other stronger currencies can receive more yen. Consequently, hotels, restaurants, retailers, and tourist attractions can become more affordable for overseas visitors.

This can support Japan’s tourism economy.

However, the situation works in reverse for Japanese residents traveling abroad.

Foreign hotels, restaurants, transportation, and shopping become considerably more expensive after conversion into yen.

Therefore, currency weakness can encourage inbound tourism while discouraging some outbound travel.

Bank of Japan Faces a Difficult Balance

The weak Japanese yen also creates a challenge for monetary policy.

Higher interest rates can theoretically support a currency by making yen-denominated assets more attractive.

However, policymakers must consider the broader economy before tightening policy aggressively.

The Bank of Japan has specifically acknowledged that yen depreciation can influence inflation expectations and underlying inflation. Therefore, it continues to monitor foreign exchange developments and their effects on prices and economic activity.

Japan also raised its policy interest rate in December 2025 as policymakers became more confident about continued wage growth.

Nevertheless, monetary policy alone does not determine exchange rates.

U.S. interest rates, global risk sentiment, capital flows, energy prices, and geopolitical developments can also move the yen.

Government Intervention Has Entered the Spotlight

Japan has another tool available: intervention in foreign exchange markets.

The Ministry of Finance is responsible for Japan’s foreign exchange intervention policy. Official records show that the ministry continues to publish monthly and quarterly intervention data.

Intervention can create powerful short-term movements.

However, changing the long-term direction of a currency can be much harder if the underlying economic conditions remain unchanged.

Indeed, the yen was weakening again on August 12 as markets continued to assess the possibility of further Bank of Japan tightening.

Therefore, policymakers face pressure to address the causes of currency weakness rather than relying only on intervention.

Inflation Makes the Yen Debate More Important

Japan spent decades struggling with weak inflation and deflation.

Today, the challenge is different.

Consumers are dealing with higher prices while policymakers are trying to create sustainable wage growth.

This makes the exchange rate particularly important.

If the yen weakens further, imported inflation could increase. However, aggressive interest-rate increases could also create risks for economic activity.

Therefore, policymakers need to find a delicate balance.

Weak Yen Is Creating Winners and Losers

The biggest lesson from the weak Japanese yen is that currency depreciation does not affect everyone equally.

Exporters with large overseas operations can benefit. Tourism businesses may also gain from increased purchasing power among international visitors.

Meanwhile, households can face higher prices.

Import-dependent companies may experience rising costs as well. Furthermore, Japanese travelers and consumers purchasing foreign goods lose purchasing power.

That uneven impact helps explain why the yen has become such an important economic and political issue.

Japan’s economy is still showing signs of moderate recovery. However, continued currency weakness is changing how that recovery is distributed.

For Japan, the question is no longer simply whether the yen will recover. The bigger issue is how long-term currency weakness could reshape consumer behavior, corporate strategy, inflation, tourism, and the country’s broader economic structure.