The Chinese version of France's international broadcasting station Radio France Internationale (RFI) published an article on the 6th titled "The yen at historical lows for approximately 40 years, is the Japanese economy beyond repair?"

The article cited that on the Tokyo foreign exchange market on June 30th, the yen exchange rate temporarily fell to the 162 yen range per US dollar, recording its weakest level in approximately 39 and a half years since December 1986, and introduced that some market participants expressed views that "the yen's depreciation could accelerate further."

Furthermore, it mentioned that the backdrop to the current yen depreciation is not only Japan's unique factors but also the ongoing appreciation of the dollar. It explained, "Due to rising tensions in the Middle East and robust US economic indicators, investors are moving their funds into the dollar, which is considered a safe asset and offers attractive yields. The dollar has also risen against major currencies such as the euro and pound, and the yen's depreciation is largely seen as a result of the dollar's strength."

It also pointed out that because Japan is highly dependent on energy imports, the rise in crude oil prices due to the deteriorating situation in the Middle East is pushing up import costs and increasing dollar demand, which is also contributing to the yen's depreciation. Although the Japanese government has repeatedly stated that it will "take appropriate action as necessary," there is a widespread view in the market that large-scale currency intervention will not occur for the time being. In fact, the Japanese government conducted its largest-ever currency intervention totaling 11.7 trillion yen from April to May, but the yen's depreciation trend has continued even after that, and it argued that "the difficulty of changing the trend with intervention alone became clear."

The article stated that the biggest factor maintaining the yen's depreciation in the market is the interest rate differential between Japan and the US, explaining, "Although the Bank of Japan (BOJ) raised its policy interest rate to 1% in June, it still remains significantly lower than US interest rate levels. As a result, carry trades, where investors borrow low-interest yen and invest in higher-interest dollar assets, have become active. A situation where investors can easily earn interest rate differentials continues, and selling pressure on the yen is intensifying."

It also mentioned, "While some experts are calling for additional interest rate hikes by the BOJ, the yen's depreciation is also a result of Japan's long-standing economic policies." It reported, "Abenomics," launched by the Shinzo Abe administration in 2013, promoted a weaker yen to enhance export competitiveness. The weaker yen allowed export companies to expand their profits when converting earnings from overseas into yen, thereby supporting the recovery of the Japanese economy. Even now, business sentiment among Japanese companies is relatively strong, with the Tankan survey showing an improvement in business conditions for large manufacturers for five consecutive quarters."

It then stated, "The Japanese government's continuation of this policy is related to the fact that export companies hold a significant position within the Japanese economy and possess institutional influence. However, even these export companies are now starting to feel that the 'era of the weak yen' has lasted too long. Many companies are gradually realizing that it will not be easy for Japan to return to an 'era of the strong yen'."

The article pointed out, "Although corporate sales figures look good, rising raw material prices are squeezing profits, and concerns about an economic growth slowdown are emerging. From the perspective of foreign companies, Japan's attractiveness for investment is increasingly declining because its population continues to decrease, its market is shrinking, and real wages have barely grown for about 40 years." It added, "While foreign investors are once again focusing on the Tokyo stock market, this is to adjust their stock portfolios or aim for stock price increases through listed companies' share buybacks, not because they are evaluating Japan's future growth potential. Japanese companies themselves also recognize that future growth opportunities lie overseas, and there is an increasing number of cases where they hold foreign currency earned abroad without converting it into yen, earmarking it for future overseas investments."

It also stated that "while the yen's depreciation is a tailwind for major Japanese export companies, the negative effects of rising energy prices are beginning to offset its benefits." It also pointed out, "Households and businesses that primarily rely on the domestic market are being hit. This is because the weaker yen increases import costs, inflating living expenses and business operating costs. The yen's depreciation is pushing up import prices for food and energy, further burdening households."

The article foresaw, "Prime Minister Sanae Takaichi, who supports 'Abenomics,' has unveiled a large-scale fiscal spending plan. However, concerns about fiscal deterioration are causing government bond yields to rise. Furthermore, the administration's long-term economic plan requests the BOJ to conduct monetary policy in line with Takaichi's economic growth strategy, suggesting that political pressure could complicate the BOJ's interest rate hikes."

It then analyzed that the biggest factor influencing the yen's future exchange rate is the US monetary policy. It stated, "If the US Federal Reserve (FRB) maintains its high-interest rate policy, dollar appreciation and yen depreciation pressure are highly likely to continue. Furthermore, if geopolitical risks increase, the dollar's attractiveness as a safe-haven asset will also strengthen. On the other hand, if the US enters a phase of interest rate cuts or energy prices fall, there is a possibility that the yen's depreciation could be curbed to some extent." It added, "While some market views suggest the yen's depreciation will proceed further, others suggest that the scope for yen depreciation is limited by declining crude oil prices and receding US inflation concerns."