Japanese companies are increasingly turning to long-term foreign-exchange hedging, with more considering or implementing measures to lock in exchange rates for 5 to 10 years. As yen depreciation persists, long-term contracts aimed at stabilizing import costs are becoming more common.
Japanese companies are increasingly seeking and adopting long-term rate-fixing arrangements of 5 to 10 years, extending the tenor of foreign-exchange hedges that had traditionally covered several months to around one year. As yen depreciation drives up import costs, more companies are seeking to stabilize costs through long-term contracts.
Demand for long-term hedging is also spreading among financial institutions. Daiwa Securities has confirmed a sharp increase in demand, while Bank of America is adding staff at its Japanese entity to respond. Small and midsize companies had traditionally avoided derivatives, but more are now considering long-term hedging as cost pressures intensify.
Nitori Holdings has a large exposure and estimates that a ¥1 move in the dollar-yen exchange rate would reduce profit by approximately ¥2 billion. It has not implemented hedging at this point, but has indicated that it may consider currency forwards if yen depreciation persists over the long term.