Cross-Border M&A Wave Exacerbates Yen Depreciation
Taylor Wilson
The yen hit 163.96 per dollar — a near-40-year low. Foreign acquisitions of Japanese firms were supposed to support the currency; instead, profit repatriation is accelerating yen selling.
Foreign money is flooding in — so why is the yen falling?
FDI into Japan reached ¥3.43 trillion (~$20.9 bn) in January–May, more than double the year-ago figure.
The old logic: buying a Japanese company means buying yen first, so FDI should lift the currency. ANZ's Hiroyuki Machida says that narrative "can no longer be taken for granted."
This means → capital enters Japan at the front door, but even more leaves through the back as profits are converted to dollars and sent home.
How big is the profit outflow?
Preliminary 2025 data: foreign firms reinvested about ¥1.8 trillion in Japan but repatriated roughly ¥3.2 trillion — nearly twice the reinvested amount.
In plain terms = most of the money foreign owners earn in Japan gets converted to dollars and taken offshore; what stays behind is the smaller share.
Mizuho's Naoki Hattori cites two drivers: strong demand for dollars as high-liquidity investment capital, and an expectation that the yen will keep weakening — prompting capital to actively shift out of the currency.
Are Japanese companies also selling yen?
Japanese firms spent roughly ¥8.9 trillion on overseas acquisitions in the first half, down from ¥9.9 trillion a year earlier but still elevated.
Recof's Tamotsu Majima notes many Japanese companies are expanding into Asia and the U.S. rather than investing at home, where the population keeps shrinking.
This means → outbound M&A requires selling yen and buying foreign currency, creating a second stream of selling pressure alongside foreign profit repatriation.
No intervention in sight — are companies panicking?
A bank FX trader in Tokyo says many Japanese firms had been waiting for authorities to intervene and push the yen up before converting funds. The yen broke 160 — and still no intervention came.
In plain terms = companies ran out of time. With funding deadlines approaching, they are now "rushing to sell yen and buy dollars."
This reflects fading confidence in Tokyo's willingness to step in — and the forced conversions push the yen lower still, creating a self-reinforcing depreciation loop.
Will Japan's own FDI target make things worse?
The government's goal: raise the FDI stock from ¥53.3 trillion (end-2024) to ¥120 trillion by 2030, and ¥150 trillion as early as possible in the 2030s.
This means → if the profit-repatriation ratio stays the same, more FDI = more yen sold in the future.
Whether new capital inflows can offset the selling pressure from profit outflows is the key variable that will determine this policy's net effect on the exchange rate.
Content is for reference only, not financial advice.