Japan\u2019s yen is resembling a slow-motion train wreck as it remains stuck near 40-year lows, and there could be even more downside ahead.<\/p>\n
On Monday, the yen was down 0.58% at 162.30 per dollar. It\u2019s fallen 3.6% so far in 2026 and nearly 11% from a year ago.<\/p>\n
Some of the more recent triggers include fears that Japan is lagging on efforts to fight inflation after the oil shock from the Iran war. While the Bank of Japan has hiked rates, more aggressive tightening may be necessary.<\/p>\n
At the same time, other central banks are poised to get tougher, such as the Federal Reserve, making Japan\u2019s policy and currency weaker by comparison.<\/p>\n
Prime Minister Sanae Takaichi\u2019s plans for more deficit spending, which would stoke inflation further, are adding to downward pressure on the yen.<\/p>\n
But Robin Brooks, senior fellow at the Brookings Institution and former\u00a0chief economist at the Institute of International Finance, has been sounding the alarm on the yen for a while and points to Japan\u2019s massive debt, which has ballooned to 240% of GDP.<\/p>\n
In his view, the Bank of Japan is suppressing bond yields to prevent interest costs on the debt pile from becoming unmanageable. In the process, it also obscures the debt-crisis risk that would otherwise be manifested in higher yields. <\/p>\n