A weaker yen can boost exports and tourism profits The Japanese Yen hasn't been at these levels vs the US dollar since the late 1980s. There are two key drivers of this Yen weakness. One is the interest rate spread. The second, and probably more important longer term, is structural outflows from Japan and the biggest component of this is outward FDI (foreign direct investment) activity by Japanese corporates. The weak yen has mixed effects, boosting export competitiveness and helping tourism revenue but the softer currency also increases Japan's import bill at a time when Japan has become more reliant on them. And over time, export volumes have become less sensitive to the weaker yen, resulting in diminished benefits for the economy, especially in the short term. Still, Izumi Devalier does expect improvement in the Japanese economy in 2H24 as wage increases hit. And if the Fed cuts in December, Yen weakness should be largely contained. A further delay in Fed cuts would add additional risk.   You may also enjoy listening to the Merrill Perspectives podcast, featuring conversations on the big stories, news and trends affecting your everyday financial life.   "Bank of America" and “BofA Securities” are the marketing names for the global banking businesses and global markets businesses (which includes BofA Global Research) of Bank of America Corporation. Lending, derivatives, and other commercial banking activities are performed globally by banking affiliates of Bank of America Corporation, including Bank of America, N.A., Member FDIC. Securities, trading, research, strategic advisory, and other investment banking and markets activities are performed globally by affiliates of Bank of America Corporation, including, in the United States, BofA Securities, Inc. a registered broker-dealer and Member of FINRA and SIPC, and, in other jurisdictions, by locally registered entities. ©2024 Bank of America Corporation. All rights reserved.