The deterioration of Japan's exports will be the driving force behind weakness in the yen, according to Alan Ruskin, global head of Group of 10 foreign-exchange strategy at Deutsche Bank AG in New York.
"There is a structural story that's going on, and I think that's more important than anything — the loss of export competitiveness in Japan," Ruskin said in a radio interview. "Japan has some very serious problems and they need to dig themselves out of this."
The nation is suffering its worst year for exports since 2009, with shipments totaling ¥53.5 trillion for January through October, down 2.3 percent from the same period in 2011, according to data compiled by Bloomberg from Finance Ministry figures released Nov. 21.
The yen typically strengthens in times of political, financial and economic turmoil because Japan's historical trade surplus means the nation doesn't have to rely on overseas lenders. The trade deficit for 2012 so far is a record ¥5.3 trillion.
Japan's currency has fallen 8.8 percent this year, the most among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The euro is the second-worst performer, losing 2.4 percent, followed by the dollar's 1.9 percent decline.
The yen rose 0.4 percent to 81.86 per dollar at 1:07 p.m. in New York.
The currency's losses have accelerated since the Diet was dissolved Nov. 16. Investors are anticipating a victory by the Liberal Democratic Party, which favors more monetary easing, in the Dec. 16 election.
Targeting a weaker yen may be difficult for the Bank of Japan because other major central banks, including the Federal Reserve, are also purchasing bonds in a bid to stimulate their domestic economies, according to Ruskin.
"The problem for Japan is the timing is wrong," he said. "They would have the U.S. on their side normally, but the Fed is in there buying bonds."