Yen at 1970s Lows: Is a Stronger Japanese Currency Still Possible?

In this episode, Paul Cavey, founder of East Asia Econ, looks at why the Japanese yen remains historically weak in 2025 and what would realistically need to change before the currency can start to appreciate.

Using East Asia Econ’s data-driven framework, Paul walks through:

How Japan’s cycle evolved over the last year – from rising inflation and tight labour markets to tariff shocks and collapsing confidence.

The impact of US auto tariffs and the subsequent trade deal on Japan’s exports and BOJ thinking.

Why Japan’s current account surplus and net foreign creditor status don’t automatically translate into a strong currency.

The role of fiscal policy, Abenomics-style easing, and the new LDP leadership in anchoring a weak yen.

Why aggregate consumption has failed to recover post-Covid even as per-capita consumption and asset returns improve.

How a shift in policy – moving income from the corporate sector to households – could change the macro story, support aggregate demand, and finally give the BOJ room to hike rates above 1%.

What to watch next: BOJ independence, the December meeting, future rate hikes, and Japan’s 2026 budget debate.

If you’re a professional investor focused on Japan or East Asia, this video gives you a structured way to think about the yen: not just as a trade, but as the outcome of politics, policy, demographics, and household income dynamics.

🔔 If you find this useful, please subscribe and share with colleagues interested in Japan and East Asia.
🌏 Explore our data platform and analysis: EastAsiaEcon.com
📩 Professional investors: contact Paul directly via the website for subscription details.

Hashtags:
#JapanEconomy #JapaneseYen #BOJ #EastAsiaEcon #FXMarkets #MacroInvesting #EastAsia #Abenomics

Chapters / Timestamps

You can adjust a few seconds either way to match the final cut.

00:00 – Welcome to East Asia Econ & introduction
00:37 – Three requests: subscribe, website, professional investor subscription
01:38 – Today’s topic: why is the yen still so weak?
02:30 – Yen at 1970s real lows and near 160 vs USD
03:30 – Japan’s recent cycle and BOJ’s hiking ambitions
04:10 – Inflation shock, rice prices & hit to consumer confidence
04:55 – US tariff shock and BOJ’s downgraded outlook
05:55 – Shocks fade: confidence rebounds and tariffs partly defused
06:40 – Business sentiment improves; BOJ set up to hike again
07:23 – New LDP leader & PM Takeichi: Abenomics-style policy returns
08:10 – Fiscal easing, pressure on BOJ and tolerance for a weak yen
08:54 – Yen slides back toward 160: too-low real rates & inflation
09:20 – Fundamentals: current account surplus & net foreign creditor status
10:11 – Japan’s fiscal position: debt, deficit and recent improvements
12:00 – The missing piece: weak aggregate consumption after Covid
12:44 – Per-capita vs aggregate consumption & shrinking population
13:22 – Household income mix: wages, financial income & social transfers
14:52 – Why shifting income from corporates to households matters
15:55 – Stronger consumption as the trigger for stronger GDP and yen
16:00 – BOJ independence, hawkish voices and the December meeting
16:51 – Why a one-off “dovish hike” isn’t enough for the yen
17:20 – Market needing to price BOJ rates above 1% to shift the FX story
18:03 – What to monitor: consumption, fiscal design & BOJ narrative
19:05 – Summary, how East Asia Econ tracks these trends & closing remarks