Featured in this podcast is Hiroshi Ugai and Tohru Sasaki. With the current continuation of depreciation, the Japanese yen has fallen to its historical low on a real basis. Amid the sharp rise in energy prices, markets are concerned that yen depreciation may harm Japan’s economy. However, we argue that, although the trade structure has changed, yen depreciation still stimulates Japan’s economy, and those concerns may be largely because it is likely to hit the weakest part of the economy during the pandemic. Next, we discuss the structural background behind the fact that the yen has not returned to appreciation, and various scenarios of the yen’s future. If the Japanese economy realizes an improvement in productivity growth and economic growth, thereby increasing income growth, the yen would stop depreciating at least on a real basis. However, if that does not happen, the currently poor state of the economy could continue or worsen, and the yen could continue to depreciate, both on a nominal and real basis.

This podcast was recorded on Nov 11, 2021.

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