This chapter examines the impact of exchange rates on the Japanese economy. Exchange rates influence the economy through several channels. The most representative channels are exports and imports. However, the expansion of overseas production bases and the globalization of supply chains, driven by increased foreign direct investment aimed at mitigating losses from yen appreciation, have led to changes in the industrial and employment structures surrounding the manufacturing industry. Additionally, the experience of the bubble economy, a period of rapid economic expansion followed by a severe economic downturn, has also contributed to these structural changes. Understanding these changes is not just important but crucial for identifying the causes of Japan’s long-term economic stagnation.