Yen Will Weaken Further in the Long Run: Roubini

The yen should be much weaker against the U.S. dollar in the long run based on fundamentals, Nouriel Roubini, Chairman & Co-Founder Roubini Global Economics told CNBC on Tuesday.

"Japan is going to need significant depreciation of the yen to increase its net exports because domestic demand is going to be anemic for a while. Therefore on a fundamental basis, the yen is going to be much weaker rather than stronger because you need improvement of external balance given the shock to the domestic economy," he said.

Another factor that would pressure the yen, according to Roubini, would be Japan's need to undertake a massive reconstruction effort. That in turn would further increase the country's fiscal deficit.

"The BOJ will have to decide whether they want to monetize this additional fiscal deficit...I think if there's going to be a much larger fiscal deficit, the BOJ might be induced to potentially buy more long term bonds," said Roubini.

Japan's budget deficit currently stands at around 10 percent of GDP and its debt burden is around 200 percent, the highest in the industrialized world.

Roubini said authorities in Japan needed to be fully transparent in order to stem uncertainty and panic. And while there was still a lot of uncertainty, this crisis could present Japan with the opportunity to undergo a radical shake-up.

"Sometimes in a moment of crisis ...the economic and political system reacts to the shock by actually having a radical change in its own economic policies, that might be the time for that to happen," he concluded.