Historic Depreciation of the Japanese Yen

 The Japanese Yen is currently experiencing its worst depreciation in 21 years. Currently trading at 0.0074 USD, the future of the Japanese yen does not look safe. In spite of rapid inflation in the world surrounding it, the Bank of Japan is still printing more and more money and also resolving its 10-year bond yield at 0.25% indifinitely.

The fear of investments in Japanese firms is increasing as depicted by the weak performance of Nikkie. Last year (2021), Japan ran a deficit of 1.2 billion USD as compared to its normal 400 million profits. Still, the Japanese economy is in profit, but this profit isn't largely associated with its trades.

 Japan needs oil, and will not reduce its oil imports even as the yen depreciates. A weaker exchange rate and higher oil prices place a burden on oil-importing countries such as Japan. Food imports tended to fall when the yen depreciated.

The yen began depreciating in November 2012 after Shinzo Abe said that the Bank of Japan should print unlimited quantities of yen to raise inflation. 

But there is an upside to this too:

The higher value-added products that Japan exported following the strong yen period may be more competitive abroad. This could allow Japanese exporters to keep foreign currency prices constant, instead of having to lower prices. If this is the case, depreciation would raise firms’ revenues and profit margins rather than their export volumes.

Before the yen started depreciating in 2012, evidence suggested that an exchange rate depreciation could improve trade balances. 

But further weakening could have severe negative impacts ranging from loss in tourism acquired money, loss in value of exports and having consequences in economies of Germany and Canada, whose many imports are an intermediate product from Japan.

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