The weaker yen is driving up import costs for Japan’s economy, heightening companies’ concerns about foreign-exchange risk. The impact of coordinated intervention by Japan and the United States has also been reported.
As the yen’s weakness persists, Japan’s import-dependent companies are being affected by rising costs and exchange-rate volatility. Exporters are benefiting from the weaker yen, but overall pressure on domestic demand is increasing.
In July, the yen reached around ¥164 to the dollar, its weakest level in 40 years, and Japan and the United States conducted coordinated intervention in the foreign-exchange market. The yen rose by approximately 5% after the intervention.
Market participants say exchange-rate stability is essential to the recovery of domestic demand and the end of deflation. Some also believe that companies’ assumed exchange-rate range of the low ¥120s to around ¥130 is unrealistic under current conditions.
Analysts say the sharpness of exchange-rate fluctuations is unsettling companies’ earnings forecasts, and that a stable foreign-exchange environment is important for investment decisions.