Japanese Yen Devaluation: Effects on Visitors and Locals in Japan

The Japanese yen continues to fall, and it’s changing life in Japan for both tourists and residents. Today, we’ll look at the reasons behind the currency’s decline and its impact on travel, shopping, and daily expenses. We also explore what these changes mean for anyone living in or visiting Japan. See how a weaker yen can work in your favor, but can be a challenge for residents.

Understanding Why the Yen Is Weakening

The Japanese currency has been weakening for several years, and the trend has become more noticeable recently. For example, 1 USD now trades for about 154 JPY on average. Similarly, 1 EUR is worth around 180 JPY, and 1 GBP is about 205 JPY. A significant reason is the interest rate gap between Japan and other economies. 

While countries like the United States and the UK raised rates to fight inflation, Japan kept its rates extremely low. Investors seeking higher returns move their money abroad, reducing demand for the yen and weakening the currency. This growing gap makes it difficult for the yen to recover, as more money continues to flow into countries offering higher returns.

Japan’s long-term economic slowdown also plays a role. Low inflation, slow wage growth, and an ageing population make rapid growth difficult. Uncertainty about the country’s future makes the currency less attractive. Rising import and energy costs add further pressure. Japan relies heavily on imported fuel, food, and materials. When global prices rise, more yen is exchanged for foreign currency, pushing its value down.

The Bank of Japan’s cautious policies and global uncertainty, including geopolitical tensions and market shifts, also contribute. Once a haven, it now struggles to attract investors. However, following the COVID-19 pandemic, the exchange rate became very favorable for tourists, thereby boosting the Japanese economy. At the same time, it has caused issues such as overtourism.

The Effects of a Declining Japanese Yen

A weak currency has far-reaching effects across Japan, influencing daily living costs, business performance, and tourism patterns. One of the most immediate impacts is the rise in import prices. Japan relies heavily on imported fuel, food, and raw materials. When the yen depreciates, companies must pay more in foreign currencies, and these higher costs are often passed directly on to consumers. As a result, grocery bills, utility costs, and everyday goods become noticeably more expensive.

For businesses, it creates a mixed picture. Exporters benefit the most, as Japanese products become cheaper and more competitive for overseas buyers. Industries such as automotive, electronics, and machinery often experience higher sales and more substantial profits. In contrast, small and medium-sized businesses that rely on imported materials face rising operating costs, and many struggle to absorb these expenses without passing them onto customers.

It also affects travel and tourism. For international visitors, it means their money goes further, boosting spending on hotels, food, shopping, and transportation. However, for Japanese residents travelling abroad, trips become significantly more expensive, prompting many to stay domestic.

Meanwhile, wages largely remain stagnant. While large exporters may benefit, most workers feel their purchasing power shrinks as daily costs rise faster than salaries. Overall, the weak currency affects both winners and losers, influencing spending habits, business strategies, and daily life in Japan.

How the Weak Yen Benefits International Tourists in Japan

For overseas travelers, it’s often great news. Your money simply stretches further in Japan. Everyday costs, such as meals, transportation, and attractions, become noticeably cheaper when converted from stronger currencies, especially the US dollar. This gives travelers more freedom to enjoy experiences that might have previously felt out of reach. You can stay in higher-quality hotels, eat at better restaurants, or explore more regions of the country.

The savings can be even more dramatic for some visitors. For travellers from the United States, certain purchases can feel up to 50% cheaper compared to prices back home. This is especially true for luxury fashion and high-end accessories. Many luxury shops in areas like Ginza, Shinsaibashi, and Omotesando have seen a rise in American customers who visit specifically because it is now cheaper to buy premium brands in Japan than in the U.S. 

The weak currency has effectively turned Japan into a destination for value-focused luxury shopping. Shopping has also become more appealing for tourists, whether you’re hunting for cosmetics, electronics, or traditional crafts. Travellers may also find attractive hotel deals or tour packages designed to attract international visitors during periods of low demand.

However, these benefits often come with more crowded tourist spots, as many visitors take advantage of the favourable exchange rate. In places like Kyoto, concerns about overtourism have grown, with some residents feeling that popular neighbourhoods are starting to feel like amusement parks. While there have been calls for restrictions, in my opinion, many complainers don’t realise how much local shops and businesses rely on tourist spending to survive.

How the Weak Yen Impacts Daily Life for Japanese Residents

For residents in Japan, it can feel like a double-edged sword. Everyday expenses, from groceries to fuel, are rising as import costs climb, and wages have remained largely stagnant. I have noticed that many foreign residents or expats who moved to Japan around ten years ago are now questioning whether staying is still worthwhile. The higher cost of living and limited opportunities for wage growth have made them reconsider their long-term plans.

A common saying I hear is that you can “live like a king” in Japan if you earn in US dollars while working remotely. While this is true for a few, these opportunities are rare. Many people who manage this are on spousal visas, which allow them to avoid the complexities of visa sponsorship. For the average worker earning in yen, however, the weak currency means foreign travel is costlier, imported goods are more expensive, and financial pressure is growing.

At the same time, some residents may notice advantages in specific areas, such as cheaper domestic tourism or competitive pricing for exports. Still, these benefits rarely offset the daily strain on household budgets. Overall, it poses a real challenge for residents, shaping their spending, travel, and long-term decisions about staying in Japan.

Why is it important to know about the yen devaluation?

The weak currency affects both tourists and residents in Japan. For visitors, it makes travel cheaper. Meals, hotels, shopping, and attractions are all more affordable. Luxury goods for travelers from countries like the U.S. can be up to 50% cheaper, making Japan a popular shopping destination. For residents, rising import costs and stagnant wages make everyday life more expensive.

Many expatriates and locals are reconsidering their long-term plans due to financial pressure. Understanding the decline helps people plan more effectively, take advantage of opportunities, and adapt to its impact on spending, travel, and business in Japan. Does the weak yen make you want to travel to Japan? Let us know in the comments below!