Japanese Yen Nears 160-Mark Amid Continued Depreciation; Rising Prices Exacerbate Economic Strain on Households

On November 12, the Japanese yen continued to weaken, with the USD/JPY exchange rate approaching the 160-yen mark—a level drawing significant market attention. This has reignited concerns regarding the depreciation of the yen, surging import costs, and inflation. Meanwhile, the Bank of Japan released data showing that the Corporate Goods Price Index (CGPI) rose by 7.1% year-on-year in October, exceeding market expectations. Notably, import prices—denominated in yen—surged by 24.8%. Driven by a combination of a weaker yen, high energy prices, and rising raw material costs, Japanese businesses face persistent pressure on operating expenses, raising concerns that these price increases may increasingly filter through to consumer prices, further straining household finances.

According to a Reuters report on November 12, the USD/JPY pair reached approximately 159.58 during early Asian trading hours, nearing the closely watched 160-yen threshold. Later that day, the dollar climbed as high as 159.94 yen, marking its strongest level in over two months. This movement follows the release of U.S. inflation data for October, which came in higher than anticipated. Coupled with signals from Federal Reserve officials suggesting a potential tightening of monetary policy, market expectations for further U.S. interest rate hikes have intensified. Given the significant interest rate differential between the U.S. and Japan, investors continue to favor dollar-denominated assets, leaving the yen under persistent selling pressure.

As the yen depreciates, the upward trend in domestic corporate prices has accelerated. Data released by the Bank of Japan on November 12 indicates that the Corporate Goods Price Index rose 7.1% year-on-year in October—an increase that surpasses both the 6.8% recorded in September and the 6.5% previously forecast by the market. Within this index, prices for petroleum and coal products rose by 15.9% year-on-year, chemical products by 15.5%, and transportation equipment by 3.2%. Sayaka Yamazaki, head of the Price Statistics Division at the Bank of Japan (BOJ), noted that as costs for labor, raw materials, and energy continue to rise, an increasing number of companies are choosing to pass on these operational pressures by raising product prices—a trend that is driving up prices in business-to-business transactions.

Meanwhile, the surge in import costs has been particularly pronounced. According to BOJ data, the import price index (denominated in yen) rose by 24.8% year-on-year in October, signaling that a weak yen is significantly inflating the procurement costs of overseas goods and raw materials. Given Japan‘s long-standing reliance on imports for oil, natural gas, and various industrial raw materials, fluctuations in exchange rates have a direct impact on corporate production costs. In particular, volatility in energy markets—exacerbated by persistent tensions in the Middle East—has further increased the operational burden on Japan‘s manufacturing and related sectors.

Rising corporate costs are also placing new inflationary pressure on the Japanese public. While an increase in producer prices does not necessarily mean that consumer prices will rise by the same margin, sectors such as food processing, logistics, the production of daily necessities, and retail are all vulnerable to higher energy and raw material costs. According to a report by TV Asahi on October 31, the prices of 1,477 food products in Japan are set to increase in November—roughly ten times the number seen during the same period last year. Faced with a mounting cost of living, some individuals have indicated that they are cutting back on dining out and opting for cheaper food items to save money. Similar complaints have surfaced on the social media platform X; author Yoko Fujimoto even questioned the high approval ratings for the administration of Sanae Takaichi, stating: “The notion that the Takaichi administration enjoys high approval ratings is inaccurate. Thanks to social media, people with common sense can see through Takaichi‘s lies, misconduct, and grandstanding. This ‘high approval rating’ is artificially manipulated. With the yen‘s depreciation fueling inflation and the government taking a large portion of people‘s income in taxes, it would be strange if there weren’t public discontent.”

In light of the yen‘s continued depreciation, the Japanese government has begun to monitor the foreign exchange market more closely. According to a Reuters report on November 12, Atsushi Mimura, Japan‘s Vice Minister of Finance for International Affairs, issued another warning regarding excessive exchange rate volatility, noting that recent fluctuations have been too sharp. Previously, Japan and the United States conducted a joint intervention—buying yen—between late July and early August. However, as the U.S. dollar has strengthened once again, the yen has approached the 160-per-dollar mark, refocusing market attention on whether Japanese authorities might take further action.

Meanwhile, the Bank of Japan‘s (BOJ) monetary policy is also facing a test. To address persistent inflationary pressures, the BOJ has adjusted interest rates several times this year, raising its policy rate to 1.25% in September before opting to keep it unchanged at the end of October. The central bank must now navigate a complex challenge: using monetary policy to curb imported inflation and the downward pressure on the yen, while simultaneously weighing the potential impact of further rate hikes on corporate financing, household loans, and overall economic activity. Citing market analysts, Reuters noted that given the ongoing upward pressure on prices, there is growing speculation about the possibility of another interest rate hike at the BOJ‘s upcoming monetary policy meeting on December 17–18.

For the Japanese economy, while a weaker yen may to some extent boost the overseas earnings of export-oriented companies, its negative consequences—such as rising import costs, squeezed corporate profit margins, and a decline in the real purchasing power of households—are becoming increasingly apparent. Particularly against a backdrop of volatile energy prices and heightened uncertainty in the global economic landscape, finding a balance between stabilizing the exchange rate, controlling prices, and sustaining economic growth has become a pressing, real-world challenge for both the Japanese government and the Bank of Japan.