The yen is a good store of value, and one that many people use to hedge against potential currency risks, but it’s also one of the most volatile currencies in the world.
The yen has lost more than 10% of its value against the dollar since June, the most in more than two years, and investors are concerned about the currency’s ability to recover.
Read moreIt’s a sentiment that was echoed by investors as they exited the Japanese markets on Tuesday morning, when Tokyo’s Nikkei 225 fell as much as 4% to a three-week low of 8,922.62.
The Japanese stock market is already suffering from the fallout from the election of Donald Trump, whose campaign has been marred by accusations of racism and xenophobia.
“Japan is a country that will be impacted by a number of issues, but the main one for us is a negative yen,” said Hiroaki Uchida, chief strategist at Nomura Securities in Tokyo.
“We are worried that a currency devaluation could make it harder for the Japanese economy to grow, which could negatively impact its growth prospects.”
Japan’s Nikkan Sports data on Tuesday showed that the yen has plunged 10% in the last 12 months, the steepest decline since September last year, when it lost nearly 9%.
It’s also seen a sharp drop in the value of its currency against the euro, which has fallen as much at 7.4% in recent months.
In its latest report on the country’s currency, the Nikkeis data also showed that Japan’s economy contracted for the fourth consecutive quarter in the third quarter, with a 1.3% contraction in gross domestic product.