Japan’s yen remains pinned near multi-decade lows even as Tokyo’s core inflation reached the Bank of Japan’s 2% target, highlighting a policy dilemma that analysts at Nordea illustrated with an unusual gauge: the price of a burger.
Tokyo’s consumer price index excluding fresh food rose 2.0% year-on-year, according to government data released Friday. The reading was the highest in decades and was driven by higher energy costs and broad increases in goods prices. Yet the yen continued to trade around 115.5 per dollar, not far from its weakest level in years, because investors see little reason to hold the currency while U.S. and European yields climb.
Nordea noted that the yen’s depreciation has made imported goods more expensive for Japanese households, while making Japanese products and services—including food items such as burgers—cheaper in dollar terms for foreign visitors. The firm invoked the “Big Mac Index,” a lighthearted purchasing-power-parity gauge that shows a Big Mac costs notably less in Japan than in the United States, reflecting the yen’s undervaluation.
The Bank of Japan has signaled it will maintain ultra-loose monetary policy. Governor Haruhiko Kuroda has stressed that the current inflation is largely cost-push and that sustained wage growth is needed before any normalization. That stance keeps Japan an outlier among major central banks, especially as the Federal Reserve is expected to raise interest rates aggressively, widening the yield gap that drives yen weakness.
The result is a split economy: exporters and tourism benefit from a cheaper yen, while households and small businesses face higher import costs for energy, food and raw materials. Japanese authorities have warned against rapid currency moves but have stopped short of intervention. Unless the BOJ signals a concrete policy shift, analysts expect the yen’s decline may continue, leaving investors and policymakers watching global monetary trends beyond Japan’s control.
