By Kiyoshi Takenaka
TOKYO (Reuters) – Nearly half of Japanese companies say the yen’s fall above 155 against the dollar is hurting their business, roughly double the share of those who view the currency’s weakness as a positive consider, a Reuters investigation showed on Thursday.
The yen fell to a 34-year low of 160.245 yen per dollar late last month, pressured by a wide spread between interest rates in the United States and Japan. But it has since recovered somewhat to around 156.36, following suspected rounds of intervention by Japanese authorities.
More than a third of Japanese companies want the Bank of Japan to raise interest rates further in response to the yen’s softer trend, the survey also showed. This indicates that they are willing to bear higher financing costs to support the currency.
The yen has lost about 10% against the dollar so far this year, despite the BOJ’s decision in March to end eight years of negative interest rates.
The poll found that 16% of respondents saw the yen’s decline above 155 per dollar as very negative for their business and 32% saw it as somewhat negative, while a combined 25% said it would be strongly or somewhat positive .
“I deeply fear that the Japanese consumer market could contract (due to a weak yen), and we will get used to it,” wrote a food company executive.
The weak yen has become a headache for policymakers as consumption cools. While it is a boon for exporters and inbound tourism, it increases import costs, increases inflationary pressures and puts pressure on households.
The survey found that 37% of respondents wanted the central bank to raise interest rates again to counter the yen’s weakness, while 34% wanted the government to intervene in the foreign exchange market to counter the currency’s decline. to go.
Thirty percent of companies surveyed by Reuters said a range of 140-149 yen against the dollar is desirable for them and 28% said the range of 130-139 yen is ideal, while no company below 160 yen against the dollar was considered favorable. .
To protect themselves from the yen’s depreciation, nearly two-thirds of respondents are considering raising the prices of their products, while 16% are considering switching to domestic sourcing of parts and raw materials, the poll showed.
The survey of 493 companies was conducted for Reuters by Research from May 8 to 17, with companies responding on condition of anonymity. A total of 229 companies responded.
When asked whether Japan has emerged from deflation once and for all, 27% of respondents say it has, and a third say it has not, while the remaining 40% say it is difficult to say is.
“First we need to determine whether Japanese inflation is caused by higher costs or growing demand,” said a manager at a wholesaler.
Prime Minister Fumio Kishida is counting on the high wage growth of recent years to put a decisive end to more than two decades of deflation.
