What happened to currencies this cheap?
Key points
- The last time the yen was this cheap was the ¥360 era of the 1960s. Over the next 25 years its real value rose 2.6-fold. From its cheapest months (bottom fifth), it was +22% higher five years later on average, and up from every one of them.
- Other countries saw the same. Besides Japan, currencies fell 30%+ below their own average in Australia (2001), Korea (1998), Mexico (1983). Korea's won, after its currency crisis, regained +51% in five years. Across 26 countries, currencies 30%+ below average were +31% higher five years later; 20–30% below, +17%.
- Recovery is not only through the exchange rate. Of the +16% real recovery after being 20%+ cheap, +9% came from the exchange rate and the rest from prices (inflation running faster at home). The nominal rate rose in 74% of cases.
- Japan today is 39% below its own average — the furthest of the 26. There are few precedents this extreme, so past averages may not carry over.
Japan: five years after being cheap
Comparing the five years after months when the yen's real value was low versus high: the cheaper it was, the more it tended to rise.
Show the numbers
| From 1964 | From 1973 (floating) | |
|---|---|---|
| Cheapest fifth | +22% | +19% |
| Cheap | +14% | +4% |
| Middle | +3% | +3% |
| Dear | -4% | -8% |
| Dearest fifth | -11% | -11% |
| Yen that month | 5 years on | Share up | Months |
|---|---|---|---|
| Cheapest fifth57〜79 | +22% | 100% | 101 |
| Cheap79〜97 | +14% | 82% | 140 |
| Middle97〜112 | +3% | 49% | 150 |
| Dear112〜130 | -4% | 39% | 150 |
| Dearest fifth130〜180 | -11% | 11% | 150 |
26 countries: distance from average, and five years later
Japan alone offers few cases, so we looked at the 26 economies with BIS real effective rates since 1964: how far below their own average they were, and what followed over five years.
Show the numbers
| vs average since 1964 | vs the trailing 20-year average | |
|---|---|---|
| Below -30% | +31% | +49% |
| -30%〜-20% | +17% | +15% |
| -20%〜-10% | +9% | +6% |
| -10%〜10% | 0% | 0% |
| 10%〜20% | -6% | -3% |
| Above +20% | -12% | -8% |
| vs average | 5 years on | Share up | Countries |
|---|---|---|---|
| Below -30% | +31% | 99% | 4 |
| -30%〜-20% | +17% | 85% | 17 |
| -20%〜-10% | +9% | 75% | 24 |
| -10%〜10% | 0% | 51% | 26 |
| 10%〜20% | -6% | 21% | 26 |
| Above +20% | -12% | 14% | 16 |
Currencies ever 30%+ below average: Australia, Japan, Korea, Mexico.
Back through the exchange rate, or through prices?
A currency’s real value combines its exchange rate (nominal) and relative prices. A cheap currency can recover through the exchange rate itself, or through its prices rising faster than its partners’. In 661 cases (country-months) 20%+ below average, the five-year real recovery of +16% split into +9% from the exchange rate and +6% from prices.
What does “recovering through prices” mean? Think of a burger
Today
The same burger costs ¥500 in Japan and $5 in the US (= ¥787). Japan is 36% cheaper — that is what “a cheap yen” means.
Route A: through the exchange rate
The dollar falls to ¥100. The US $5 becomes ¥500 and prices match.
→ Dollar assets such as US stocks lose 36% in yen.
Route B: through prices
The dollar stays at ¥157. Japan's burger rises to ¥787 (and wages rise too), so prices match.
→ Dollar assets keep their yen value. Instead, yen savings buy less.
In practice A and B happen together. Across 26 countries, roughly half the recovery came through the exchange rate and the rest through prices. Which route it takes decides how holders of foreign assets fare.
For a Japanese holder of foreign assets it is the exchange rate that matters. If “the yen comes back” through rising Japanese prices, foreign assets do not lose value in yen. Japan’s past turning points show both.
| Period | Event | Real | Nominal |
|---|---|---|---|
| Jan 1971〜Jan 1976 | End of the fixed rate (from ¥360) | +28% | +15% |
| Jan 1985〜Jan 1990 | After the Plaza Accord | +22% | +39% |
| Jan 1990〜Apr 1995 | From the bubble's collapse to the super-strong yen | +51% | +68% |
| Oct 2012〜Jun 2015 | The Abenomics weak yen | -31% | -32% |
| Dec 2020〜Jul 2026 | The post-Covid weak yen | -36% | -32% |
Both are the yen against 27 currencies (BIS effective rates). Up means a stronger yen.
How far each currency is from its own average today
Show the numbers
| vs average | |
|---|---|
| Japan | -39% |
| Sweden | -29% |
| Korea | -19% |
| Canada | -18% |
| Norway | -13% |
| France | -12% |
| UK | -7% |
| Finland | -7% |
| Italy | -4% |
| Taiwan | -4% |
| Germany | -2% |
| Denmark | +1% |
| Ireland | +1% |
| Greece | +2% |
| Hong Kong | +3% |
| Belgium | +6% |
| Mexico | +7% |
| New Zealand | +8% |
| Australia | +9% |
| Portugal | +9% |
| Netherlands | +11% |
| Spain | +12% |
| US | +14% |
| Austria | +16% |
| Singapore | +17% |
| Switzerland | +19% |
Research on purchasing power parity finds real exchange-rate gaps close by about half in three to five years (Rogoff (1996), The Purchasing Power Parity Puzzle, Journal of Economic Literature 34(2)). This site’s numbers are in that range — but timing is unpredictable, and some gaps kept widening.
Updated 29 Sep 2026 12:04 JST · real effective rate to Jul 2026 · balance of payments to Jul 2026