The view has been expressed that the weaker yen should not be feared excessively under fiscal expansion by the Takaichi administration, and that it may support improved profitability for exporters and increased domestic investment.
First, companies that produce in Japan and sell overseas are expected to see their yen-denominated sales rise as the yen weakens, making it easier to maintain price competitiveness in overseas markets. The weaker yen is also viewed as a buffer that can mitigate the decline in profits when responding to higher tariffs.
Second, incentives to promote domestic production and investment are expected to strengthen. While a weaker yen raises the cost of building overseas plants and acquiring businesses overseas, it may improve the profitability of production and exports in Japan, leading to a broader range of investment options.
In addition, the Takaichi administration has set a target of increasing domestic private-sector capital investment to ¥250 trillion in fiscal 2040. Reports say the aim is to support the growth strategy by channeling the profits from yen depreciation and the benefits of domestic production into investment. Some views expressed through charts and data suggest that the relationship between past yen depreciation or appreciation and the investment ratio is moving toward “normalization.”
It has been argued that moving too quickly toward yen appreciation could stifle the seeds of growth, and that the Bank of Japan should make its decisions within limits that do not hinder an economic recovery over the medium to long term. Against the backdrop of an economic policy approach known as the dual mandate, the argument is that stable price increases and strong economic growth should be pursued together.
Because it takes time for the effects of investment to emerge, fiscal policy that supports households is also considered important. A policy of seeking to implement a consumption tax cut from fiscal 2027 onward has been positioned as one option, and a combination of policies to achieve both stable domestic consumption and stronger national economic capacity has been proposed.