Japan’s weak yen brings enormous economic gains, not losses—argues economist Yoichi Takahashi.
With the government holding over 100 trillion yen in foreign-currency assets, the yen’s depreciation has generated tens of trillions in unrealized profits that should be returned to the public.
Meanwhile, Donald Trump denounces the weak yen as a “catastrophe” for U.S. manufacturing and criticizes Biden’s inaction.
OECD models show yen depreciation boosts Japan’s GDP while hurting the U.S., contradicting the media-driven “weak yen is bad” narrative.

The yen exchange rate in the foreign exchange market temporarily fell to 160 yen per dollar, and after what appeared to be government–Bank of Japan intervention, it has been fluctuating wildly.
There are many commentaries asserting “yen depreciation = bad,” but Yoichi Takahashi, former Cabinet counselor and professor at Kaetsu University, argues that “the benefits of a weak yen for the Japanese economy are significant.”
As if to support this, former U.S. President Donald Trump, who prioritizes American manufacturing, fiercely criticized the yen depreciation and dollar appreciation.
Depending on the outcome of the U.S. presidential election, there is now a possibility that the trend could reverse toward yen appreciation.
Takahashi asserts that the greatest beneficiary of the weak yen so far has been the Japanese government, and that it should return tens of trillions of yen in unrealized gains to the people while it still can.

Former President Trump posted on social media that the yen depreciation and dollar appreciation are “a catastrophe for U.S. manufacturing,” and he criticized the policy inaction of the Joe Biden administration.

Throughout history, a weaker national currency has been known as a “beggar-thy-neighbor policy.”
A weaker yen is a positive factor for Japan’s GDP and a negative factor for the United States.
This is well known through economic analyses by international institutions.
For reference, in the OECD economic model, a 10 percent yen depreciation increases Japan’s GDP by 0.4–1.2 percent within one to three years, while it decreases U.S. GDP by 0.2 percent.
As evidence, the recent performance of Japanese companies has been strong.
Even the latest Financial Statements Statistics of Corporations by Industry show record-high profits.
Corporate tax and income tax revenues will likely increase as well.
And domestically, the largest beneficiary is the Japanese government, which holds more than 100 trillion yen in U.S.-dollar-denominated bonds in the Foreign Exchange Fund Special Account (FEFSA).
The unrealized gains will likely amount to several tens of trillions of yen.
Therefore, stopping the yen depreciation from within Japan runs counter to the national interest.
However, most media coverage has shaped public perception to believe that “a weak yen is bad.”
The Ministry of Finance has also supported this “weak yen villain narrative” so that attention is not drawn to the FEFSA.

The Ministry of Finance is concerned about rapid exchange-rate fluctuations.
However, complaints have finally come from overseas.
It was a miracle that the United States had not complained until now, and as Trump points out, it may be due to the Biden administration’s inaction.
There are likely staff around Trump who prioritize national interests.
Normally, since the Biden administration receives support from labor groups, it should not have overlooked the fact that yen depreciation harms U.S. interests.
If a Trump administration returns, that will no longer be the case.

Since exchange rates are theoretically the ratio of the money supplies of both countries, and considering that the theoretical value is around 110 yen per dollar, the current yen depreciation has been extremely fortunate.
Japan should consider drawing from the FEFSA’s unrealized gains while this good fortune lasts.

In simple terms, this means selling foreign-currency bonds, and even if this is viewed as intervention aimed at correcting yen depreciation, it would likely not be a major issue now.
Such sales have only a short-term effect on the exchange rate, but they may bring the rate closer to the theoretical value.
However, if there is concern that this might be seen politically as “support for Mr. Trump,” Japan could instead settle maturing foreign-currency bonds rather than repurchasing them.
This is equivalent to selling them, but because it is done through redemption, it would not be considered intervention.
Japan’s outstanding balance of foreign-currency bonds exceeds 100 percent of GDP—far higher than the advanced-country average of around 10 percent.
This is because Japan has repurchased foreign-currency bonds upon maturity, which can be described as “stealth dollar buying.”
Under a floating exchange-rate system, such repurchases should not be made, so Japan should respond naturally and avoid them.
On top of that, Japan should gradually realize the FEFSA’s unrealized gains and return them to the public.
(Former Cabinet Counselor and Kaetsu University Professor Yoichi Takahashi)

Foreign Exchange Fund Special Account (FEFSA)
A special account established for foreign-exchange intervention when exchange rates fluctuate sharply.
It holds foreign currency assets acquired during past yen-selling, dollar-buying interventions, and liabilities in the form of government short-term securities issued to raise yen funds.
As of the end of March 2023, the securities held amounted to 124.616 trillion yen.