[The Yen at an All-Time Low of 163 to the Dollar] Three Key Points Japanese People Absolutely Must Understand in This Historic Situation—the First in 40 Years

In 2026, Japan’s foreign exchange market is reaching a major historical turning point.
The dollar-yen exchange rate temporarily broke through the 163-yen-per-dollar mark, reaching a level of extreme yen weakness not seen in about 40 years.
This sharp depreciation of the yen is not just a story in the news.
It is an extremely serious issue that directly affects our daily lives, wealth building, and future planning.

In this article, based on a popular video explanation, we’ll clearly explain “three key points we absolutely must understand in this era of extreme yen weakness.”

1. Why People with Few Assets Should Start “Optimizing Their Spending” Right Away

A Weak Yen Directly Leads to “Rising Prices”

Since 2022, prices in Japan have continued to rise rapidly.
According to data from the Ministry of Internal Affairs and Communications, prices have risen by approximately 13.5% compared to 2020.
This means that “to maintain a lifestyle that used to cost 200,000 yen per month, you now need about 227,000 yen.”
Since Japan relies heavily on imports for food and energy, a weakening yen causes the following costs to skyrocket directly:

• Price increases for food and condiments
• Rising energy prices, such as electricity and gas
• Price adjustments for daily necessities and consumables
• Price increases for dining out and various services

In other words, “a weaker yen = a direct increase in our cost of living.”

Practical Ways to “Optimize Your Spending” Right Away

It’s not easy to increase your income overnight.
That’s why “optimizing your spending”—something you can do right now—is the top priority when it comes to protecting your finances.

• Cut back on eating out and make home-cooked meals the norm
• Reevaluate unnecessary stockpiling and overeating (beneficial for both your health and your household budget)
• Actively take advantage of private-label (PB) products
• When making “hometown tax” donations, focus on selecting “daily necessities” and “rice and other essentials”
• Buy only what you “really need,” not just what you “want”

Private-label (PB) products, in particular, are often manufactured by major companies, allowing consumers to significantly reduce their food expenses while maintaining quality.

The Impact of a Weak Yen Varies Greatly Depending on Whether You Have Assets

People with sufficient assets won’t see their livelihoods disrupted even if prices rise.
However, those without assets are the ones who feel the direct impact of rising prices the most.
Recognizing the fact that “having no assets means being in a position that is extremely
vulnerable to a weak yen and inflation” is the first step—and the next step is to cut expenses to create “surplus funds” that can be redirected toward investing and saving.

2. Why You Should Stubbornly Stick to “Index Investing” Without Worrying About Exchange Rate Fluctuations

“Stopping investing because the yen is weak” is a classic recipe for failure

As the yen weakens, comments like the following become more common, particularly among beginner investors.

“The yen is weak right now, so I might lose money; I’ll buy when it strengthens again.”

“I’ll pause my regular investments for now and wait to see how things go.”

“I’ll sell while the yen is weak and buy back when it strengthens.”

To put it simply, this kind of “trading based on timing currency fluctuations” is a gamble with a high probability of failure.

In long-term investing, the impact of exchange rates is merely a “margin of error.”

Index investing (in global stocks, U.S. stocks, etc.) is intended to achieve an annual return of about 5–7% over a long-term investment horizon of 10 to 20 years or more.
The long-term growth rate of the global economy far exceeds short-term exchange rate fluctuations.
Let’s take a look at the actual risk calculations.

• Start investing at 165 yen per dollar
• Assuming an annual return of 5%
  • 1 year later: Even if the yen appreciates to 157 yen, the profit and loss will be zero
  • 5 years later: The break-even point will drop to “129 yen”
  • 20 years later: The break-even point will drop to “61 yen”
  • 10 years later: The break-even point will drop to “100 yen”

In other words, the longer the investment period, the more the power of compound interest comes into play, so short-term exchange rate fluctuations become negligible.

Don’t Let Yourself Be Swayed by Exchange Rates—Even Professionals Can’t Predict Them

If it were possible to accurately predict exchange rate movements, anyone could become a millionaire through leveraged FX trading.
However, even professional analysts around the world cannot consistently predict exchange rates.
That is precisely why the correct approach to index investing boils down to “completely ignoring exchange rate movements and calmly continuing to buy a fixed amount every month.”

3. The “Worst-Case Scenario” Awaiting Ordinary People Who Neglect to Prepare for Yen Weakness

The “Three Devastating Effects” of Yen Weakness

The ongoing weakening of the yen is a veritable triple punch for ordinary people without assets.

1. A decline in the value of assets held in Japanese yen (a loss of purchasing power on a global scale)
2. A decline in the value of one’s own labor (wages are becoming lower by global standards)
3. A decline in real purchasing power (fewer things can be purchased)

In particular, workers at small and medium-sized enterprises—which make up the vast majority of the workforce—receive virtually no benefit from a weak yen (such as increased profits for exporters).
The system is structured in such a way that they bear the brunt of rising prices directly.

Holding “Foreign-Currency-Denominated Assets” Is the Only Defense

The essential strategy for surviving these times is simple.

“Hold ‘foreign-currency-denominated assets’ that hold value in currencies other than the Japanese yen.”

If you hold index funds such as global equity (All-Country) or U.S. equity (S&P 500) funds, the yen-denominated value of your assets will rise even as the yen weakens, allowing you to protect your assets from the wave of inflation.
Conversely, “people who hold all their assets in Japanese yen (exclusively in savings and deposits)” will see their assets continue to decline in real terms due to yen weakness and inflation, increasing the risk of financial hardship.

Why can’t the government simply stop “yen depreciation”?

There is a very important point to consider regarding the structure of foreign exchange markets.

• Stopping the yen’s appreciation: In theory, this can be achieved by issuing Japanese government bonds or the yen and intervening in the market indefinitely.
• Stopping the yen’s depreciation: There are limits to this because it requires selling the country’s holdings of “dollars (foreign exchange reserves).”

In other words, even the government and the Bank of Japan have their limits when it comes to completely halting the structural depreciation of the yen.
Rather than expecting “the government to sort things out,” we need to take matters into our own hands by holding foreign-currency-denominated assets at the individual level.

Summary: “Three Golden Rules” for Surviving the Era of Extreme Yen Weakness

To survive this era of historically extreme yen weakness, the actions we should take right now can be summarized in the following three points.

1. Optimize Expenses
   First, cut unnecessary spending to build a household budget structure that can withstand rising prices, while also securing funds to allocate toward investments.
2. Continue Index Investing Without Worrying About Exchange Rates
   Don’t be swayed by short-term fluctuations in the yen’s value; simply continue making regular contributions to global and U.S. stock index funds.
3. Move Away from Over-Reliance on the Japanese Yen and Hold Foreign-Currency Assets
   Stop holding all your assets in Japanese yen and diversify into global assets to protect your purchasing power.

While a weak yen has both advantages and disadvantages for the Japanese economy as a whole, for ordinary consumers, it’s a harsh reality: “If we don’t take action, our daily lives will become more difficult.”

However, for those who “understand the situation correctly and take the right actions,” it also presents an opportunity to grow their assets by riding the wave of global growth.

Let’s start taking the steps we can right now, before it’s too late.