The Japanese yen slid to its weakest level since 1986, hitting a 40-year low against the dollar Tuesday as tourists find bargain shopping opportunities in Tokyo. A dollar bought roughly 162 yen, making foreign visitors like New Yorker John Caramichael eager to spend while they can. His 120,000 yen Seiko watch costs about $740 locally versus $1,000 back home.

The currency's dramatic fall has foreign-exchange traders on high alert for potential intervention by Japanese authorities to buy the yen. The yen is down 3.5% against the dollar this year and has slipped more than 11% over the past three years, according to Tullett Prebon data. The weakness creates a tricky dilemma for policymakers balancing tourist spending against import costs.

While visitors flock to Japan's department stores and boutiques in districts like Ginza, the sustained yen weakness signals deeper economic pressures. Exporters benefit from cheaper overseas costs, but import-dependent sectors face rising expenses. The currency drop underscores Japan's ongoing struggle with inflation and the challenges of managing a globally competitive exchange rate.