Robin Brooks, Senior Fellow of the "Global Economy and Development" project at the U.S. Brookings Institution, posted on X on May 24, "The yen's real effective exchange rate has fallen below that of the Turkish Lira, making it currently the 'world's weakest currency.' What does this mean for the Japanese economy?"

In response, Zhang Yulai, Vice Dean of the Institute of Japanese Studies at Nankai University, pointed out, "Becoming the 'world's weakest currency' reflects the complex situation of the Japanese economy. The current yen depreciation brings more disadvantages than advantages for Japan."

What exactly are these advantages and disadvantages?

Firstly, the expansion of service trade revenue is one of the few advantages of the yen's depreciation. In 2013, the number of inbound visitors to Japan exceeded 10 million for the first time, reaching a total of 42.68 million in 2025. The total consumption by inbound visitors increased from 5.3 trillion yen in 2023 to 9.45 trillion yen in 2025, becoming a new pillar of the Japanese economy.

Secondly, for Japan's trade, the yen's depreciation brings serious negative impacts. Japan, with an energy self-sufficiency rate of only 15% (2023) and a food self-sufficiency rate of approximately 38% (2025) on a calorie basis, heavily relies on imports for energy resources. The yen's depreciation since 2022 has caused import costs to jump significantly, and Japan's trade deficit continues to expand. Furthermore, with the establishment of globalized production systems by Japanese companies, it has become difficult to boost exports of goods trade through the depreciation of the domestic currency.

Thirdly, a more serious impact caused by the yen's depreciation is the decline in national image and the decrease in assets. In U.S. dollar terms, Japan's nominal GDP (Gross Domestic Product), which achieved positive growth in 2023, was overtaken by Germany, which experienced negative growth, dropping Japan to the 4th position globally. Per capita GDP among OECD (Organisation for Economic Co-operation and Development) member countries also fell from 2nd place in 2000 to 24th place in 2025. Long-term yen depreciation has reduced the international appeal of yen-denominated assets, and the confidence that investors worldwide have in the stability of Japanese government bonds has significantly decreased. There is no doubt that the label "world's weakest currency" has pushed up the long-term risk premium and made fiscal reconstruction more difficult.

Fourthly, yen depreciation could also trigger a fiscal crisis or financial crisis. Currently, the outstanding debt of the Japanese government amounts to 1,129 trillion yen, and adding local government debt brings the total to approximately 1,441 trillion yen (as of the end of 2025), with a debt-to-GDP ratio of 218%, indicating that fiscal risk remains high. As the Bank of Japan (central bank) holds more than half of the government bonds issued, financial and fiscal risks further accumulate. The yen's depreciation will certainly reduce confidence in the Japanese economy, and signs of this are already visible in the recent rise in Japan's long-term and short-term government bond yields, indicating that the risk of a fiscal and financial crisis has already increased. (Provided by/People's Daily Online Japanese Edition・Edited by/KS)