Key facts
- Japanese executives are expressing growing concern over the economic risks posed by currency swings and a weak yen.
- The yen recently hit a 40-year low against the dollar, prompting a joint Japan-U.S. currency intervention.
- While a weaker yen benefits exporters, it increases import costs for raw materials and energy, impacting domestic demand.
- Companies are finding it difficult to forecast earnings and make investment decisions due to high currency volatility.
- A JETRO survey indicated that a rate of 120-124 yen to the dollar is the most desirable exchange rate for Japanese companies.
Japanese executives are increasingly voicing concerns that currency fluctuations and a persistently weak yen pose risks to the economy, highlighting issues that triggered a joint Japan-U.S. intervention to support the currency. The yen recently hit a 40-year low against the dollar, prompting intervention that led to a 5% appreciation.
Executives noted that while a weaker yen has advantages for exports, Japanese companies import nearly all their raw materials, leading to increased costs for energy, materials, and food. This weighs on domestic demand and threatens Japan's gradual emergence from deflation. Sharp currency moves also complicate earnings forecasts and investment decisions for companies with global operations.
Companies are calling for market stabilization and reduced volatility. A survey by the Japan External Trade Organization (JETRO) found that a rate of 120-124 yen to the dollar was the most desirable exchange rate range for nearly a fifth of companies, with only 11% preferring a rate above 150 yen to the dollar. However, some executives expressed doubt that the yen would strengthen to previous levels due to Japan's fundamentals and trade balance.