Yen's Decades-Long Downtrend: Structural Issues Trump External Shocks

The Japanese yen has reached its weakest level against the U.S. dollar in nearly 40 years, falling past the 163 line and edging closer to 164.

Market analysts say that while short-term external shocks have contributed to the yen's decline, deeper structural problems are the main cause. These include interest rate differentials between the United States and Japan, geopolitical tensions pushing the U.S. dollar higher, sluggish growth in emerging industries, rapid population aging, and other long-standing challenges.

The yen's traditional status as a safe-haven asset during periods of geopolitical turmoil has weakened due to rising energy costs and concerns over global inflation. Japan is heavily reliant on the Middle East for oil imports, which has pushed up global oil prices and widened its trade deficit.

Experts say that structural challenges such as industrial hollowing-out, weak growth momentum, and the mounting pressures of public debt and an aging population prevent Japan from emerging from its prolonged economic malaise. The yen's depreciation is difficult to reverse without tackling these deeper issues.