The Shock of 1 Dollar = 164 Yen: How the Weakest Yen in 40 Years Will Change Our Lives

Introduction

As of July 24, 2026 (at the time of writing), the dollar-yen exchange rate is approaching 164 yen to the dollar, marking a significant depreciation of the yen.

This is the weakest level for the yen in approximately 40 years, since 1986.

When people hear "weak yen," many may think of higher costs for overseas travel or imported goods. However, this current depreciation is an issue that affects our entire lives, including gasoline prices, electricity bills, and groceries.

Why has the value of the yen fallen this far?

In this article, we will explain in an easy-to-understand manner the mechanics of the weak yen, its main causes, its impact on daily life, and future prospects.

What exactly does "1 dollar = 164 yen" mean?

An exchange rate is the ratio used when exchanging currencies of different countries.

If 1 dollar equals 100 yen, you need 100 yen to obtain 1 dollar.

On the other hand, when 1 dollar equals 164 yen, you must pay 164 yen to obtain the same 1 dollar.

In other words, the higher the number, the lower the value of the yen against the dollar. This is a weak yen.

For example, if you purchase a 100-dollar product in the United States, it costs 10,000 yen if 1 dollar is 100 yen. However, at 1 dollar = 164 yen, it becomes 16,400 yen.

Even if the price of the product remains the same, the burden in Japanese yen increases due to the weak yen.

Why is the yen weakening?

This current depreciation of the yen is not caused by a single reason.

Multiple factors are overlapping, such as U.S. interest rates, the situation in the Middle East, crude oil prices, and concerns regarding Japan's monetary policy and fiscal situation.

1. U.S. interest rates are high, and the dollar is being bought

One of the major reasons is the interest rate gap between Japan and the United States.

Generally, investors prefer to manage their assets in currencies with higher interest rates rather than those with lower ones.

The Bank of Japan raised its policy interest rate to 1.0% in June 2026. However, U.S. interest rates remain high, and there is a significant gap between them and Japan's.

As a result, the trend of selling yen to buy dollars continues.

Furthermore, there is a view that inflation in the U.S. may persist, leading to prolonged high interest rates. If U.S. interest rates remain high, the appeal of holding assets in dollars increases, making it easier for the yen to weaken further.

2. The dollar is being bought due to rising tensions in the Middle East

The renewed intensification of the conflict between the U.S. and Iran is also a factor in the dollar's strength.

When conflicts or financial instability occur globally, investors tend to move their funds to assets considered relatively safe.

This is called "buying in times of crisis."

Previously, the yen was sometimes bought as a safe currency. However, currently, due to Japan's low interest rates and economic concerns, the dollar is more likely to be chosen over the yen.

The deterioration of the situation in the Middle East has led to dollar buying and yen selling, which is further driving the yen's depreciation.

3. High crude oil prices are a major burden on Japan

The worsening situation in the Middle East is also affecting crude oil prices.

When crude oil prices rise, it places a significant burden on the Japanese economy.

Japan imports most of its energy resources, such as crude oil and natural gas, from overseas.

Rising crude oil prices alone increase import costs. Furthermore, if the yen continues to weaken, more yen will be required to purchase the same amount of crude oil.

In other words,Japan is bearing the double burden of 'high crude oil prices' and a 'weak yen'.

If import costs increase, Japan's trade deficit is also likely to expand. The fact that companies sell yen and buy dollars to pay for imports also contributes to the weakening of the yen.

④ Anxiety over Japan's fiscal situation also leads to yen selling

In the market, anxiety regarding Japan's fiscal situation is also growing.

The Takaichi administration has presented a 'Basic Policy' that involves active fiscal spending, such as economic measures and growth investments.

It is expected that the government spending money will have the effect of supporting the economy.

On the other hand,if spending increases without sufficient funding sources being indicated, there is a possibility that the national debt will swell even further.

Therefore,in the market, there is also a sense of caution regarding whether 'Japan's fiscal situation will be okay in the future' and 'whether one can continue to hold yen and Japanese government bonds with peace of mind'emerging.

In some quarters, the term 'Takaichi weak yen' is also being used, suggesting that active fiscal policy is inviting a weaker yen.

However, the current weak yen is not caused solely by the administration's policies. Overseas factors such as U.S. interest rates, the situation in the Middle East, and crude oil prices are also having a strong influence.

How will our lives change with a weak yen?

What is easily affected by the weak yen are products imported from overseas.

Representative examples include gasoline, kerosene, electricity, gas, wheat, soybeans, edible oils, meat products, dairy products, smartphones, and clothing.

If the prices of raw materials and energy rise, companies' procurement costs also increase.

When companies can no longer absorb the increased costs, they raise the prices of their products and services.

Therefore,as the yen weakens, prices for supermarket goods, dining out, electricity, and gasoline rise, increasing the burden on household budgets.

Small and medium-sized enterprises are particularly affected.

There are many companies that cannot easily raise their selling prices even if their procurement costs rise.If profits decrease, there is a possibility that it will also affect wage increases and capital investment.

A weak yen also has its benefits

A weak yen is not bad for every company.

Export companies that sell many products overseas may see their profits increasedue to the weak yen.

For example, if you convert a profit of 1 million dollars earned overseas into Japanese yen, it would be 100 million yen at 100 yen to the dollar, but 164 million yen at 164 yen to the dollar.

Even with the same dollar-denominated profit, the amount converted into yen increases.

Also,for travelers visiting Japan from overseas, Japanese products and accommodation costs feel cheaper.

Therefore,it acts as a tailwind for hotels, department stores, restaurants, and tourist facilities.

However, even for export companies, if they import raw materials from overseas, their costs will rise.

The current weak yen is not a situation where one can simply say that export companies will benefit.

Will government currency intervention stop the weak yen?

When the yen weakens rapidly, the government may conduct currency intervention.

To curb the weak yen, the government sells dollars and buys yen in the market.This is a method of temporarily moving the yen toward a stronger value by buying large amounts of it.

The government has conducted large-scale currency interventions in the past as well.

However, even if the yen strengthens due to intervention, the effect may not last long.

This is because if the fundamental causes of the weak yen, such as the interest rate gap between Japan and the U.S. or high crude oil prices, do not change, the yen will be sold again.

Therefore,it is believed that while currency intervention can temporarily stop the trend of a weak yen, it is unlikely to be a fundamental solution.

Will the weak yen stop if the Bank of Japan raises interest rates?

One way to curb the weak yen is to raise interest rates in Japan.

If Japanese interest rates rise, the appeal of holding assets in yen increases, making it easier for the yen to be bought.

However, rapid interest rate hikes have side effects.

If mortgage interest rates rise, the repayment burden on household budgets will increase. Since corporate borrowing costs will also rise, there is a possibility that more companies will refrain from capital investment and new business ventures.

Furthermore, if interest rates rise, the costs the government pays as interest on national bonds will also increase.

Therefore, the Bank of Japan needs to proceed with interest rate hikes cautiously so as not to worsen the economy while curbing the yen's depreciation.

Possibility of further progress to 165 yen, 177 yen, and 200 yen

Looking at the chart, in the short term, the 164 yen range (orange horizontal line), which is the high price zone from November 1986, acts as a resistance line, and there is a possibility of a temporary adjustment toward a stronger yen against the backdrop of intervention vigilance.

However, since breaking above the long-term downward channel (blue channel) that had continued since 1986 in 2022, the momentum of the yen's depreciation has accelerated all at once. This is a very important movement indicating a clear trend reversal from the long-term yen appreciation trend that lasted for 35 years.

Because this is a breakout after such a long period of accumulation, it can be said that, chart-wise, the momentum is likely to continue even after breaking through 165 yen in the future. It would not be strange at all from a technical perspective if it advances to the next resistance lines of 177 yen (purple horizontal line), and even 199 yen (black horizontal line).

Fundamentally, what is particularly important is U.S. interest rates, additional interest rate hikes by the Bank of Japan, the situation in the Middle East, crude oil prices, and government foreign exchange intervention.

If U.S. interest rates continue to rise and crude oil prices remain high, the yen may depreciate further.

On the other hand, if the situation in the Middle East calms down, crude oil prices fall, or the Bank of Japan moves to raise interest rates further, there is a possibility that the yen will return to a stronger trend.

However, the foreign exchange market does not move based on just one factor.

One cannot simply think that 'if the government intervenes, the yen will immediately strengthen' or 'if the Bank of Japan raises interest rates, the yen's depreciation will end'.

Do not think of the yen's depreciation as a temporary problem

This current yen depreciation is not a story that only concerns investors.

If the value of the yen falls, energy and food products imported from overseas will become more expensive, and our cost of living will also rise.

On the other hand, there are industries that benefit from the weak yen, such as export companies and the tourism industry.

What is important is not to simply judge whether a weak yen is 'good' or 'bad,' but to look at who is affected and in what way.

This current yen depreciation is related not only to the interest rate gap between Japan and the U.S., but also to structural issues such as dependence on energy imports and assessments of Japan's fiscal health and growth potential.

There are limits to how long currency intervention alone can stop the yen from weakening.

The question is whether we can balance prices and wages, foster corporate growth, and build an economy that attracts capital from overseas to Japan.

The historic level of 164 yen to the dollar is serving as a catalyst for us to consider the current state of the Japanese economy.

*This article is based on information as of July 24, 2026. Exchange rates and crude oil prices fluctuate daily. Furthermore, this does not constitute a recommendation to buy or sell any specific financial products.