However there are some downsides associated with this phenomenon too such as reduced liquidity as fewer foreign companies may be willing to invest in Japan due to higher costs associated with borrowing money in yen compared with other currencies (Tsubota & Ueda, 2017). Additionally, if investors suddenly rush out en masse then this sudden decline in demand could cause drop in prices leading inflationary pressures and weakening domestic consumer spending power over time (Tsubota & Ueda 2017).
The Japanese economy benefits from being perceived as a “safe-haven” currency, including increased exports. However, there can be risks if the investor’s sentiment suddenly changes without any warning. This could lead to falling prices and a lack of foreign investment.