How  does the fact that the yen is considered a safe-haven currency have the   potential to impact the Japanese economy?

It is a “safe-haven” currency because it appreciates in periods of market or economic uncertainty. The Japanese economy can be affected in both positive and adverse ways depending on investors’ reactions. When people buy more yen to protect their money during turbulent times, they can boost the demand for this currency, which may lead to its appreciation. The Japanese can benefit from this, since their exports are worth more when they’re sold abroad. They may be encouraged to expand production or hire additional workers. A stronger currency has deflationary impacts, which can help reduce the price levels in the country, making imports cheaper and helping businesses to cut costs through lower wages.

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.