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Hideo Tamura

【#1385】Current Yen Weakness Provides Opportunity for Investment in Growth

Hideo Tamura ／ 2026.07.08 (Wed)


July 6, 2026

　
The current weakness of the yen should be viewed as a strong tailwind for Japan’s economic restructuring. Japan does not have to be swayed by greedy currency speculators who are striving to sell the yen.

17 strategic areas for enhancing national power

The yen’s depreciation makes production in Japan more favorable and encourages Japan’s industry to reverse overseas investment. The Sanae Takaichi administration is promoting integrated public-private investment in 17 strategic areas including artificial intelligence, advanced semiconductors, datacenters, quantum computing, high-speed communication networks, defense equipment, aerospace equipment, shipbuilding, and permanent magnets. Without domestic investment, production, or supply, they cannot contribute to advancing national power, and such neglect may well lead to national power’s decline. Moreover, Japan has been exposed to China’s relentless coercion and dumping offensive.

As the Japanese government has pledged $550 billion in investment in the United States over three years, Japan should combine the U.S.-bound investment with domestic investment to introduce AI and other excellent U.S. technologies to produce synergy effects and counter China’s threats.

Japan could revive as a semiconductor kingdom

To understand how changes in the yen’s value against other currencies have influenced the fate of Japan’s industry, we should recall that Japan’s semiconductor and shipbuilding sectors declined due to the yen’s appreciation after dominating the world. Amid the yen’s rapid appreciation following the Plaza Accord in September 1985, automobile and other key Japanese industrial sectors retained their competitiveness through overseas production. However, the shipbuilding sector that depends on domestic production could not remain competitive.

Japan’s semiconductor memory sector was pushed into an overwhelmingly disadvantageous position in competition with South Korea and Taiwan, following the yen’s repeated excessive appreciation. The semiconductor sector requires massive upfront domestic capital investment and research-and-development investment. Once it drastically reduces its global market share, investment dries up and recovery becomes difficult. The only survivor in Japan’s semiconductor memory sector is KIOXIA Corp., formerly Toshiba Memory Corp. It has taken advantage of its unique technology developed during its Toshiba era to survive the yen’s excessive appreciation.

The Japanese government has provided massive subsidies for domestic advanced semiconductor production by Taiwan Semiconductor Manufacturing Co. (TSMC), the world’s leading contract semiconductor manufacturer, by Micron Technology Inc. of the United States, and by Rapidus Corp., which is leveraging technology developed with IBM. Japan could revive as a semiconductor kingdom by taking advantage of the yen’s current weakness to improve conditions for competitiveness.

Conditions created for flexible fiscal mobilization

The Takaichi administration’s investment strategy is underpinned by what it calls a “responsible and proactive fiscal policy.” In late June, the administration compiled a draft basic policy on economic and fiscal management and structural reforms, which effectively abolishes a target year for achieving a primary budget surplus by limiting policy spending to tax revenues. As tax revenues continue increasing, conditions have been created for flexible fiscal mobilization that is key to investment in growth. Industry is urgently required to revive active domestic investment to align with government spending.

Hideo Tamura is a Planning Committee member at the Japan Institute for National Fundamentals and a columnist for the Sankei Shimbun newspaper.