The Japanese yen dropped to its weakest level relative to the U.S. dollar in 34 years Wednesday morning. It’s more a currency situation than a currency crisis — Japanese finance officials are keeping a close eye.
The root cause of the currency situation: Until very recently, Japan’s central bank has kept interest rates low to spur growth. Meanwhile, American interest rates have shot up, which means Japanese investors want more U.S. dollars to get those higher rates.
When the third-largest economy in the world sees its currency decline, it’s going to have ripple effects on the American economy too.
When the yen falls relative to the dollar, Japanese exports become cheaper for American consumers — at least that’s the theory.
But if you’re waiting for those 2025 Toyota Camrys to come down from that $28,000 price tag, Brad Setser at…
