Following the yen's 40-year low, an analysis suggests that yen depreciation will begin to return to normal around the second quarter of next year. The won-yen exchange rate has now plunged to 862 won per ¥100.
LS Securities Research Center forecasts that the yen, which has hit a 40-year low, will begin returning from yen depreciation to normal levels in the early to mid-second quarter of next year. It also pointed to the possibility that the pace of the shift could slow thereafter.
The Japanese government's decision to expand fiscal spending is cited as a factor behind the yen's weakness, with the increased scale of government bond issuance also said to have had an impact. At the end of June, the Basic Policy on Economic and Fiscal Management and Reform was announced, putting growth and investment at the forefront while removing references to fiscal consolidation.
Rising long-term interest rates are exacerbating the yen's weakness, while a cut in the consumption tax rate and concerns over tax revenues are cited as potential factors that could drive further yen depreciation. The Japanese government has decided to cut the consumption tax rate on food products from 8% to 1% for 2 years starting in April 2027.
However, the yen could also turn higher if the Bank of Japan accelerates interest rate hikes. Researcher Woo Hye-young (ウ・ヘヨン) said that if the hikes are implemented, they could become a factor contributing to yen appreciation.