The Weak Yen: A Double-Edged Sword for Japan

A Record Low for the Yen

As of mid-2025, Japan’s currency is hovering near ¥160 to the US dollar, its weakest point in more than three decades. This ongoing slide has sparked a mixed response: foreign tourists are flooding in to take advantage of their stronger currencies, while locals and long-term residents are increasingly feeling the pressure of rising prices and shrinking purchasing power.

The yen’s value has been affected by a number of long-term economic policies. Japan’s central bank has kept interest rates low in an effort to stimulate domestic growth and inflation. But in doing so, it has widened the gap between Japan and countries such as the U.S., where higher rates have made the dollar more attractive to investors. That shift has directly weakened the yen and for now, the government seems unlikely to reverse course.

Bargain for Tourists

For international travelers, the weak yen is great news. A vacation in Japan, already rich with culture, cuisine and convenience, has become significantly more affordable. Luxury accommodations, high-end meals and even day-to-day costs such as transportation and entrance fees now offer incredible value for visitors from abroad.

This shift has driven a major tourism boom. Inbound travel has surged past pre-pandemic levels, with record-breaking monthly arrivals reported throughout 2024 and into 2025. Major tourist hubs such as Tokyo, Kyoto and Osaka are buzzing with international visitors, and lesser-known regions are also enjoying increased attention thanks to Japan’s push to distribute tourism more evenly across the country.

Foreign spending is also boosting the economy. Travelers are staying longer, spending more and exploring wider. For small businesses in retail, hospitality and dining, this inflow of cash is a welcome boost after several slow years.

But Burden for Residents

While tourists enjoy the benefits of favorable exchange rates, Japanese residents are experiencing the opposite. A weaker yen makes imported goods more expensive, and that’s a big deal in a country where much of the food and fuel is brought in from overseas. Everyday essentials, from coffee and bread to gasoline and smartphones, have seen steady price increases.

With wages largely stagnant, the rising cost of living is putting pressure on families and working professionals. International travel has also become prohibitively expensive for many locals. Fewer Japanese residents are taking overseas trips and even domestic travel has seen a dip as accommodation prices spike to meet tourist demand.

Long-term foreign residents and expats are similarly affected. While income paid in foreign currencies stretches further, those earning in yen must now rethink their budgets and spending. For many, everyday life has become noticeably more expensive over the past two years.

Tourism Tensions and Economic Trade-Offs

The influx of visitors, while economically beneficial, hasn’t come without tension. Kyoto, Mount Fuji and other popular destinations have seen growing issues with overcrowding, strain on infrastructure and friction between tourists and locals. Some areas have introduced tourist taxes, reservation systems or signage asking visitors to respect local customs.

This has sparked a broader conversation about the sustainability of Japan’s tourism boom. While the weak yen continues to attract travelers, communities are trying to find ways to ensure that growth doesn’t come at the cost of local quality of life. Balancing economic recovery with social and environmental health has become a key challenge for policymakers and municipalities alike. The result is a deeply divided economy: thriving on the surface for visitors but more fragile for those who live here. The weak yen has proven to be a powerful force, one that’s reshaping travel, trade and everyday life across the country.

Looking Ahead

The weak yen is shaping Japan in powerful ways. On one hand, it has created a rare window of opportunity for tourism, boosting local economies and attracting global attention. On the other hand, it has placed new financial strain on residents and exposed the growing divide between visitor spending and local affordability.

As Japan looks ahead, the real question isn’t just how long the yen will stay low, but how the country will manage the consequences. Whether you’re visiting for a week or building a life here, the impact of currency is now something everyone in Japan is feeling.

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