The survey underscores how yen weakness is now a bigger earnings concern for many Japanese firms than the BOJ’s tightening path itself, with more than half viewing the currency’s slide as a net negative despite the usual boost it gives exporters. That’s a notable shift given the yen’s historical role as a tailwind for Japan Inc, and points to rising import cost pressure, particularly with energy prices elevated due to the Middle East conflict. With companies split on where they’d like to see dollar/yen settle, and the BOJ’s next meeting on July 30-31, currency policy and rate guidance are likely to stay in focus for corporate Japan in the near term.
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More than half of Japanese firms say the weak yen is hurting earnings, even as the currency’s slide to a 40-year low continues to test the BOJ’s resolve.
Summary:
- Over half of Japanese firms surveyed said the weak yen is negative for earnings, versus about a third who see it as positive
- The yen slumped to a 40-year low of about 162.84 per dollar earlier this month, despite a record 11.7 trillion yen intervention by the government in spring
- Rising import costs, including for energy amid the Middle East conflict, are weighing on firms reliant on imported materials, even as a weaker yen boosts exporters’ overseas earnings
- On preferred dollar/yen levels, most respondents favoured a range of 140 to 159.99 yen, with almost none comfortable above 160
- Nearly half of firms also reported adverse effects from BOJ rate hikes, with the policy rate now at a 31-year high of 1.0%
- Views were split on the best timing for the BOJ’s next hike, with the largest shares favouring later this year or the first half of 2027, though about a quarter said no hike would be desirable at any point
More than half of Japanese firms say the weak yen is hurting their earnings, even as the currency continues to trade near multi-decade lows against the US dollar, according to a Reuters survey. The poll, conducted by Nikkei Research, found 55% of respondents viewed yen weakness as negative for their business, compared with about a third who saw it as a positive.
The yen slumped to a 40-year low of roughly 162.84 per dollar earlier this month, extending a downtrend that resumed after a brief, government-engineered rebound. Tokyo spent a record 11.7 trillion yen, or about $72 billion, intervening in currency markets from late April through early May to try to arrest the slide, but the effect proved short-lived.
While a weaker yen typically benefits exporters by boosting the value of their overseas earnings, it is also driving up the cost of imported materials and goods at a time when energy prices remain elevated due to the conflict in the Middle East. Firms reliant on imported inputs, including in the food sector, described difficulty passing higher costs on to customers. Asked what dollar/yen level would suit their business, the largest shares of respondents pointed to a range between 140 and roughly 160 yen, with almost no one comfortable with the currency weaker than that.
The currency concerns come alongside continued strain from the Bank of Japan’s rate hikes. Nearly half of firms in the survey said the BOJ’s tightening has already had some negative effect on their operations, and almost a third said it has weighed on capital investment. The BOJ raised its policy rate to a 31-year high of 1.0% last month and has signalled it is prepared to tighten further to contain inflation pressures linked to the region’s energy shock.
Opinions were divided on when the BOJ should move next, with the largest groups of respondents favouring either the final quarter of this year or the first half of 2027, while roughly a quarter said a further hike would not be desirable at any point. The central bank’s next policy meeting is scheduled for July 30-31.
This article was written by Eamonn Sheridan at investinglive.com.
