Federal Reserve, which last month approved its first rate increase in three years, has said it will raise interest rates as many as six more times this year. While most other countries around the world are raising interest rates to counter inflation, the overriding concern of Japan’s central bank remains deflation. “In this context, there is no advantage if the value of a country’s currency weakens.”Ī December survey of nearly 7,000 companies by Tokyo Shoko Research found that almost 30% of companies said a weak yen was a negative for their business, while just 5% said it was a positive. A recent Reuters poll found that more than three-quarters of Japanese firms believe the yen has declined to point of being detrimental to their business.Īnalysts attribute the yen’s decline to a global mismatch in monetary policy. “Japan is engaged in the business of importing raw materials from all over the world, processing them, adding value to them, and selling them,” Yanai said. “ There is absolutely no merit to a weak yen,” Yanai told reporters in an April 14 appearance during which he announced that Fast Retailing, buoyed by strong sales growth in North America and Europe, posted record profits in the six months ending in March. It’s no longer that simple,” Tokura said.Įven Fast Retailing CEO Tadashi Yanai, whose company operates more Uniqlo apparel shops overseas than in Japan, has bemoaned the yen’s decline. “In the past when the yen weakened, trade balance, current account, and the economy were all good. Masakazu Tokura, chairman of Keidanren, Japan’s largest employers’ federation, echoed that lament. “In a situation like now when companies have yet to sufficiently raise prices and wages, a weak yen isn’t desirable,” Suzuki said. On Tuesday, he issued his most explicit warning yet about the dangers of the currency’s slump, declaring that the damage inflicted on Japan’s economy by a weakening yen would far outweigh any benefits-not least because Japanese companies won’t be able to pass the rising costs of oil and other imports on to domestic consumers. Over the past two weeks, as the yen’s slide accelerated, Japanese Finance Minister Shunichi Suzuki has ramped up his expressions of alarm. For now, none of those parties seems inclined to pitch in. With an important legislative election looming, Kishida is coming under intense pressure from business leaders and political allies within his Liberal Democratic Party to do something to halt the currency’s fall.Īnd yet analysts say there’s not much Kishida can do without the cooperation of Japan’s trading partners, especially the U.S., as well as that of Japan’s own central bank. They say the yen is falling too fast, and complain that the currency’s weakness is driving up the cost of imports, including oil, raw materials, and food. But Japan’s government and business leaders seem spooked by the yen’s recent decline. In theory, a decline in the yen relative to the dollar increases the competitiveness of Japanese exporters in overseas markets and boosts the value of their profits when that money is repatriated back home. Historically, Japan’s political leaders have welcomed a weaker yen as a boon for the world’s third-largest economy.
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