According to news from the Nikkei Chinese website on the 25th, the purchasing power of the yen is declining. The real effective exchange rate, which reflects the comprehensive external purchasing power of the yen, fell to the lowest level in history after Japan changed to a floating exchange rate system, and the wave of price increases expanded from energy-related fields to imported products from Europe.
It is reported that commodity prices have risen one after another due to the depreciation of the yen, resulting in the decline in purchasing power. The central banks of various countries and regions continued to tighten monetary policies, while the Bank of Japan maintained its loose policy, and the yen continued to depreciate. At present, the exchange rate of the yen against the U.S. dollar has fallen to the range of 143.5 to 143.9 yen to the U.S. dollar, setting a level of depreciation of the yen and appreciation of the U.S. dollar since November 2022.
According to the report, in addition to the decline in the value of the yen against the US dollar, it is also depreciating against European currencies such as the euro and the Swiss franc, and its purchasing power has declined.
It is understood that the indicator showing the comprehensive purchasing power of the yen against multiple currencies is the real effective exchange rate. The lower the real effective exchange rate, the heavier the yen burden when purchasing foreign products and services.
According to the Bank for International Settlements (BIS), the real effective exchange rate of the yen in May (based on 100 in 2020) was 76.2. It was down 2% from the previous month. According to calculations by the Bank of Japan, this is the lowest level since the transition to a floating exchange rate system in 1973.
Japan’s Tokan Research surveyed the changes in real effective exchange rates and real growth rates over the past 10 years for developed countries with a population of more than 1 million. The results show that Japan’s real effective exchange rate fell the most, while its growth rate was the second worst. “This shows that the negative impact of the depreciation of the yen on consumers is greater,” said Kato Izumi, president of Tokan Research.
(Article source: Sino-Singapore Jingwei)
Article source: Sino-Singapore Jingwei
Foreign media: Yen’s foreign purchasing power falls to lowest level in nearly 50 years
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