Japan's yen crisis deepens with soaring living costs

Japan's economy buckles as weak yen and rising costs squeeze households

Japan’s economy is facing growing pressure as the yen continues to weaken and living costs rise. The currency recently hit its lowest point since 2024, while households and businesses struggle with soaring prices and stagnant wages. Government efforts to stabilise the situation have so far had limited impact.

In late April, the yen dropped past 160 against the dollar, marking its weakest level in years. Despite intervention by authorities, the exchange rate remained near 159 as of recent trading. The government spent 9.8 trillion yen (around $61 billion) in late April and early May to prop up the currency, but the effects have been short-lived.

The economic strain is visible across different sectors. Corporate bankruptcies involving debts of at least 10 million yen climbed to 883 in April, a 6.6% increase from the previous year. Meanwhile, Japanese workers have seen real wages fall for four straight years, squeezing household budgets further. Everyday goods are also becoming more expensive. A kilogram of rice now costs over 800 yen, nearly double the price in 2024. Supply chain issues tied to the Middle East crisis have disrupted production, forcing companies to adapt. Snack maker Calbee announced it would switch some packaging to black and white due to material shortages, and other food producers may follow suit. Critics argue that Prime Minister Sanae Takaichi’s focus has not been on economic recovery. Instead, her policies have leaned toward militarist ambitions, leaving key financial challenges unaddressed.

The yen’s persistent weakness and rising costs are putting pressure on businesses and consumers alike. With wages declining and essential goods becoming pricier, many households face tighter budgets. The government’s interventions have yet to reverse the trend, leaving uncertainty about Japan’s economic outlook.