The joint statement issued last weekend by the Group of Seven finance ministers and central bank governors did not directly refer to the Japanese yen. But criticism of the currency's weakness appears likely to mount. After the G7 meeting, the yen briefly hit a record low against the euro and a four-year low against the U.S. dollar. Last year the yen fluctuated against the dollar in a range roughly between 110 yen and 120 yen. In the past year, the yen has fallen 4 percent against the dollar and 11 percent against the euro.
In real terms — where factors like price levels and trade volumes are taken into account — the yen has fallen to its lowest levels against major currencies since the Plaza Accord in September 1985, which led to the devaluation of the U.S. dollar against other major currencies such as the yen and the deutsche mark.
The weaker yen has helped Japanese exporters and thus contributed to Japan's longest postwar economic recovery. But if the current situation continues, trade friction with other countries may arise. Such a development would dampen Japan's economic recovery.