Japanese Yen Hits Lowest Level Since July 2024 Amid Political Uncertainty

The Japanese yen dropped to its lowest level since July 2024 against the US dollar, according to Bloomberg, as rumors of early parliamentary elections triggered renewed pressure on the currency.

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Japan

Market volatility intensified after speculation emerged that Japanese Prime Minister Sanae Takaichi may soon announce snap elections. As a result, the yen weakened by 0.5 percent on Tuesday, January 13, sliding to 158.91 yen per dollar.

Political uncertainty weighs on the yen

Currency traders reacted sharply to the prospect of political instability, which could complicate Japan's already fragile economic outlook. Analysts noted that unexpected elections often raise concerns about fiscal policy direction and delay structural reforms.

According to Bloomberg, the yen has delivered the weakest performance among G10 currencies in 2025 so far, gaining only 0.3 percent against the dollar. This underperformance reflects persistent interest rate differentials between Japan and the United States, as well as doubts over the pace of monetary normalization by the Bank of Japan.

Forecasts point to further depreciation

Some market analysts warn that the current decline may not be the end of the trend. Several forecasts suggest the yen could weaken further to 160 per dollar or beyond by the end of 2026 if monetary and political pressures persist.

"Political uncertainty adds another layer of risk to an already vulnerable currency,” analysts said, pointing to Japan's loose monetary stance and rising global yields.

Inflation risks add to concerns

In December 2025, the yen also sank to record lows against the offshore Chinese yuan. Some economists interpreted this move as an early signal that Japan could soon face a wave of imported inflation, driven by higher costs for energy, food, and industrial goods.

A weaker currency increases the price of imports, placing additional pressure on households and businesses, particularly at a time when real wage growth remains limited.

As political speculation continues and global financial conditions remain tight, the yen's trajectory is likely to remain a key focus for investors and policymakers alike.