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POLITICS

Further depreciation of the yen would boost exports and burden household budgets

  • 2015-12-18 15:00:00
  • , Asahi
  • Translation

(Asahi: December 18, 2015 – p. 3)

 

 By Daisuke Ikuta

 

 Interpretations of the impact of the Fed’s interest rate hike vary in Japan. On the morning of Dec. 17, Economic Revitalization Minister Akira Amari said, “Markets are responding positively. It will also be a plus for the Japanese economy over the medium term if our neighboring economies become more robust.”

 

 If moves to sell yen and buy U.S. dollars continue because of the interest rate hike, it will be a boost to large export-centered companies as their profits will increase with the depreciation of the yen. According to provisional calculations by the Mizuho Research Institute, if the yen depreciates 1%, it will push up Japanese companies’ ordinary profits by a total of about 200 or 300 billion yen.

 

 In terms of food items that depend on the import of ingredients and materials, yen depreciation will lead to an increase in prices. A greater burden on household budgets might encourage consumers to tighten their purse strings. Costs will also increase for companies that import raw materials from overseas. On Dec. 17, Akio Mimura, chairman of the Japan Chamber of Commerce and Industry, said, “Households and small and medium-sized enterprises are ‘disadvantaged in the case of yen depreciation’ because they have no business overseas. It would not be desirable for the yen to depreciate rapidly.”

 

 Moreover, if emerging nations enter a slowdown, there will also be the risk that local production and exports from Japan will also decrease. However, Fumihiko Ike, chairman of the Japan Automobile Manufacturers Association and chairman of Honda Motor, told the press on Dec. 17, “I don’t think there will be any immediate withdrawal (of funds) from emerging nations,” thus indicating that the interest rate hike will have a limited impact for the time being.

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