While Prime Minister Takaichi advocates continuing Abenomics and the yen's undervaluation is being discussed in general terms, views on the merits and background of the yen's current weakness have been compiled.
Whether the yen is currently undervalued depends on the benchmark used. From the perspective of purchasing power parity and other measures, the yen's weakness may be viewed as undervaluation. However, Prime Minister Takaichi prefaced her remarks by referring to the issue as a matter of general principle, so it is unclear whether she regards the yen's undervaluation as a problem, and readers are urged to bear this point in mind.
The article points to the relationship between continuing Abenomics and yen weakness. The policy stance, centered on bold monetary easing by the Bank of Japan and fiscal stimulus, tolerated yen weakness and drove the yen from the ¥80 range in December 2012 to the ¥120 range in 2015.
Compared with the 5-year moving average, the deviation expanded to 30% or more when the yen weakened beyond ¥120. It is pointed out that no intervention was carried out to halt the yen's decline at this level. This is why the move is viewed as the "Abenomics yen decline."
A basic view is that Abenomics' achievement of its goal of ending deflation was difficult in terms of timing and was realized only after the global inflationary period had begun. Against this backdrop, questions are being raised as to whether it is appropriate for Takaichi inflation, under which Prime Minister Takaichi continues Abenomics, to progress.