Yen Hits Record Low Against Yuan, Heightening Inflation Concerns in Japan
December 11, 2025 — By John Cheng, Bloomberg
The Japanese yen has fallen to a record low against the offshore Chinese yuan this week, sparking growing concerns over rising imported inflation in Japan. This development comes amid Japan’s cautious approach to policy normalization by the Bank of Japan.
The yen’s decline is not only against the offshore yuan, which was introduced in 2010 to facilitate foreign currency trading, but also against China’s tightly controlled onshore yuan. The exchange rate between the yen and the onshore yuan is nearing its lowest level since 1992, underscoring the yen’s persistent weakness.
This depreciation of the yen could have significant consequences for Japan’s economy. As the Japanese yen weakens relative to the yuan, the costs of imports from China and other trading partners rise, which may drive up inflation within Japan. This adds pressure on Japanese consumers and businesses already grappling with global economic uncertainties.
Japan’s central bank has maintained a gradual approach to policy normalization, continuing to support the economy with accommodative monetary measures. However, the increasing risk of imported inflation, propelled by the yen’s decline, presents a potential challenge to the Bank of Japan’s policy stance moving forward.
Market watchers are closely monitoring the yen’s movements and their implications for Japan’s inflation trajectory and broader economic outlook. The interaction between currency fluctuations and inflation pressures remains a key theme for investors and policymakers alike in the region.
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