The Japanese yen has depreciated nearly ten percent against the US dollar since early October, erasing the bulk of its early year appreciation. In addition to rate differentials favouring the greenback, the yen has trended lower following the election of Prime Minister Sanae Takaichi, the newly elected leader who is seen as a protégé of the late Prime Minister Shinzo Abe and a follower of his pro-growth Abenomics agenda to combat deflation.
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The weaker currency has served as a tailwind for Japan’s tourism industry. Over the first nine months of 2025, the country welcomed more than 32 million visitors, an 18 per cent increase compared with the same period in 2024. Despite viral social media posts fuelling rumours of a summer mega‑tsunami that was originally inspired by a comic book, more than ten million visitors arrived in Japan over the three-month window to August, marking a nine per cent jump from last year.
The Japanese yen and Macao
While visiting Japan becomes cheaper for those using the Macao pataca, where the local currency is indirectly linked to the US dollar via a peg with the Hong Kong dollar, the reverse also holds true, making Macao more expensive for those paying for their trip with Japanese yen
Japan constitutes Macao’s ninth-largest overseas market, accounting for four per cent of tourists coming from outside the Chinese mainland or Hong Kong, according to Macao News estimates. At almost 129,000 year-to-date arrivals, Japanese tourists have already surpassed the 126,000 figure recorded in 2024. More importantly, among major markets Japan is Macao’s second-fastest growing. Although numbers are still at only 40 percent of their pre-Covid levels, Japanese visitor arrivals rose 26 percent this year – outpacing the 12 percent for total international arrivals.
The political liability of import inflation
Since the end of November, the yen has strengthened a bit following comments from Japan’s central bank governor who drew concerns that a weakening currency was fanning import inflation and hindering the spending power of domestic households.
Japan’s October consumption data underscores that unease, having fallen three per cent and amounting to the sharpest decline in nearly two years, comments Eric Ritter, adjunct professor of economics at Lakeland University in Tokyo, speaking to Macao News. He notes that while a weaker yen benefits Japan‑based exporters and the tourism sector, higher consumer prices remain a political liability and a primary worry among voters.
Traders expect the yen to maintain its downward trajectory as the country’s new leadership should be able to boost spending. But should the cabinet fall short of these expectations, bouts of volatility could emerge and temporarily unwind the yen’s depreciation and strengthen the currency, explains Ritter, a former Asian equities fund manager.
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Rate differentials remain a major component of foreign‑exchange movements, with higher borrowing costs in the US relative to Japan favouring a stronger dollar tailwind over the yen. However, Ritter points out that these conditions assume that US economic data remains healthy, where a lag effect from the recent government shutdown and the absence of more frequent macro data leaves the market somewhat in the dark over the current health of the economy.
Any unexpected downward surprise in the US could prompt the Federal Reserve, the US central bank, to cut interest rates and weaken the dollar, Ritter says, which would strengthen the yen and make Christmas in Japan slightly pricier, though still cheaper when compared to earlier in the year.
