Reasons for the Yen's Weakness and Future Prospects
A weak yen is a situation in which the value of another currency has increased relative to the Japanese yen. Recently, the depreciation of the yen has had a significant impact on the Japanese economy.
One of the main reasons causing the Japanese yen to weaken is the Bank of Japan's zero-interest-rate policy. The Bank of Japan has adopted a zero-interest-rate policy in an attempt to inject large amounts of capital into the Japanese stock market. This is expected to strengthen the Japanese yen against other currencies.
In addition, the Japanese economy is said to be weakening against the yen. The slow growth of the Japanese economy and the worsening balance of trade have caused the yen to weaken.
Foreign investors selling Japanese yen to buy other currencies are also causing the yen to weaken. Foreign investors are taking advantage of the volatile price of the Japanese yen to buy other currencies at lower prices.
In addition, the COVID-19 pandemic is also causing the yen to weaken. The pandemic has suppressed economic activity in Japan and has caused the yen to depreciate as foreign investors have sold Japanese yen and are strongly seeking to buy other currencies.
As described above, there are a wide range of causes that have contributed to the onset of the depreciation of the Japanese yen. The Bank of Japan's zero-interest-rate policy, developments in the Japanese economy, foreign investor activity, and the impact of the COVID-19 pandemic could all continue to cause the yen to weaken.
The Japanese yen was at high levels relative to other major currencies at the end of 2019. Therefore, the value of the Japanese yen may decline further after early 2020.
In particular, the economic impact of the global novel coronavirus could reduce the value of the Japanese yen. Not only are Japan's retail, tourism, and financial sectors affected, but also the Japanese yen used in foreign currency trading is greatly affected.
Going forward, the value of the Japanese yen may fluctuate depending on the economy affected by the U.S. new coronavirus and the policies adopted by Japan. If the U.S. economy improves and Japan improves its policies, the value of the Japanese yen may increase. Otherwise, the value of the Japanese yen may continue to decline.