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Weak yen morphs into new threat to Japan with surging energy costs

45 Comments
By Noriyuki Suzuki

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45 Comments
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120, 110, 100, 130, it really doesn't matter.

-11 ( +7 / -18 )

Another layer to this story.

Trading Economics see the yen near this three-year low, which it then attributes to "ultra-loose monetary policies and external pressures from rising energy prices." They cite a BOJ board member that said last week that the central bank will not reduce accommodative monetary policies for the time being as the country has yet to achieve its 2% inflation stability target. They then cite traders who pointed to the global surge in energy prices as "a bane to the currency as oil-dependent Japan and its importers are forced to sell increasing quantities of yen to purchase oil and gas."

TE forcasts the yen to trade at 114.72 by the end of this fiscal quarter, according to global macro models and analysts expectations, with forward looking to trade at 116.14 in 12 months time.

Last time I looked it was at 114.01.

3 ( +5 / -2 )

That's why Nuclear Energy should be on the table when dealing with climate change and a surge in energy prices which Japan has none and has to import everything so we can burn it to keep the lights on.

3 ( +16 / -13 )

Allow the USA dollar to become stronger and open up Japan to international tourism again.

There has to be a better solution to boosting the economy than forcing Japanese citizens and residents to pay more for everything

10 ( +13 / -3 )

A weak yen typically serves as a boon to the export-driven Japanese economy.

And a millstone around the neck of the average Japanese worker. Thanks LDP!

13 ( +17 / -4 )

the japanese just LOVE to complain

the yen is too strong the yen is too weak

too many foreigners in Japan-the flyjin are leaving us!

Make up your damn minds already!

11 ( +21 / -10 )

That's going to be a bad +ve feedback loop.

0 ( +1 / -1 )

In their pursuit of profit Japan Inc. has always turned the yen into monopoly money the majority of Japanese can use to buy "cake".

2 ( +7 / -5 )

if the trickle-down effect was working," Kobayashi said in reference to growth in corporate profits translating into higher wages for workers.

Since when did anyone ever think that was a thing?

If you got a pay raise (hypothetical, but bear with me), would you this go to the supermarket and pay more for your groceries?

No, of course not.

You would only pay more when the market price for those things had gone up and you were prepared to pay the higher price.

With the labour market, just making more money alone likewise couldn’t be expected to translate to higher wages for workers. That is fantasy thinking, there is no logic to it. (At least for a free market economy.)

What makes wages rise is when there is a scarcity of labour, and companies need to pay more to secure labour.

But in Japan’s labour market, stability is favoured, and workers are often content to stay with the same company. So if people don’t switch jobs for higher wages, those pressures aren’t there.

So what are the factors that make Japan’s labour market illiquid and what is going to be done about it?

2 ( +6 / -4 )

the japanese just LOVE to complain

the yen is too strong the yen is too weak

too many foreigners in Japan-the flyjin are leaving us!

Make up your damn minds already!

Its really normal.

Most countries have a sweet spot when it comes to the exchange rate.

In Aus, they never want to see the AUD go past 0.75AUD/1USD, because it hurts exports and tourism. Not that it probably matters right now with commodity demand as strong as it is. They never want to see it go below 0.70AUD/1USD because imports become too expensive and that hurts consumption.

Its well known that 0.75 is a sweet spot for the AUD, so the government would be happy right now. Im sure Japan also has a sweet spot for the yen that they would constantly benchmark against.

1 ( +6 / -5 )

Japan Inc. has always turned the yen into monopoly money...

Feel free give me your "monopoly money." I've done pretty well over the years earning, investing and spending it.

-7 ( +3 / -10 )

Its really normal.

its not normal to complain as much as they do

Most countries have a sweet spot when it comes to the exchange rate.

In Aus, they never want to see the AUD go past 0.75AUD/1USD, because it hurts exports and tourism. Not that it probably matters right now with commodity demand as strong as it is. They never want to see it go below 0.70AUD/1USD because imports become too expensive and that hurts consumption.

Its well known that 0.75 is a sweet spot for the AUD, so the government would be happy right now. Im sure Japan also has a sweet spot for the yen that they would constantly benchmark against.

again, you don't hear that mantra of inflation/deflation anywhere else

-1 ( +4 / -5 )

As a followup to my earlier comment, regarding the BOJ board member that said last week that the central bank will not reduce accommodative monetary policies for the time being as the country has yet to achieve its 2% inflation stability target, here is potentially the reason why; courtesy Trading Economics from earlier today:

Japan's consumer prices rose by 0.2% yoy in September 2021, shifting from a 0.4% drop a month earlier. This was the first increase in consumer prices following drops in the previous eleven months, as consumption rebounded. Core consumer prices, which exclude fresh food, increased by 0.1 percent, [the] most since March 2020. On a monthly basis, consumer prices went up 0.4%, swinging from a 0.2% fall in August. source: Ministry of Internal Affairs & Communications

0 ( +1 / -1 )

Time to be nice to Iran?

0 ( +4 / -4 )

Heading into the Oct. 31 House of Representatives election, Kishida was apparently alarmed by the rapid rise in crude oil prices,

Kishida appears to be "alarmed" by anything that moves recently, not because of the effect on the average Taro consumer,s pocket but because of the possible effect on LDP,s election fortunes. Once the election is out of the way , watch Kishida,s concern disappear along with his election promises of "redistributing fruits of Abenomics ".

Agree with Aly....Yen is high , government whinges because they want more inflation ( apparently stable prices are bad ) exporters complain, Yen is low , government whinges because they don,t want inflation ( apparently stable prices are not bad ), importers complain. Average Taro doesn,t figure in LDP "considerations".

6 ( +6 / -0 )

ReasonandWisdomNipponToday  06:56 am JST

That's why Nuclear Energy should be on the table....

LDP propaganda never misses a chance to push its agenda desu ne....as if the gas station prices for us plebs would magically fall with N-power restarted. No thanks.

7 ( +8 / -1 )

125 to the dollar would be fantastic.

-9 ( +1 / -10 )

After carefully reading all the comments made by Mr. Shunsuke Kobayashi, chief economist at Mizuho Securities Co.

I gave up hope on humanity.

Your govt made Tourism the top priority to boost economy, kept yen on check. Hotels and roadways were constructed exponentially. While budget on research, science and development were cut down. Ever wonder why Japan was unable to produce its own vaccine? 90% of mask, medicine available in market are foreign made. Those days are gone when there use to be a mark "made in Japan". Except bunch of car and heavy industry companies Japan is hollowed out from inside. J-gov only cared for tax. Tourist will bring money, 1000yen /head. More hotels/restaurant more part timers, more tax, more import of foods/goods more import tax. The whole thinking is a mess.

Now the yen is at lowest but there is nothing to export. slow clap!

4 ( +6 / -2 )

The LDP is reaping what it failed to sow!

3 ( +3 / -0 )

Stagflation.

1 ( +4 / -3 )

In the time I've been here, the yen to dollar range has been anywhere from high 80s to mid 130s. Quite a difference in range. The government is usually silent on a weak yen, but when it gets "too strong" there's a lot of talk about what needs be done (last time it was "double down on the printing of new cash, and slash the interest rates to negative a la Abenomics).

The low yen is a boon to big exporters, since their products cost less in the most lucrative market in the world, and with inflation in the US, cheap means you sell a lot more Japanese imported products there.

Fuel meanwhile is rocketing up in price no matter where you look, so when compared to the nominal real price rises in this area, a 10-or 15-yen weaker than before position means less of an increase than the actual cost increases coming from producers do. (Start hording toilet paper, just in case, though! lol)

Meanwhile, Big Business' opinions are the only opinions that matter to government, in spite of all the "new politics" pap being patronizingly spoonfed the populace while trying to hook the gullible for additional votes...

-1 ( +2 / -3 )

"as if the gas station prices for us plebs would magically fall with N-power restarted. No thanks."

I hope this isn't a serious comment. You expect to power your car with...electricity? No? Petrol? Then what does nuclear power have to do with it? Apples and Oranges, Amigo...apples and oranges...

-3 ( +1 / -4 )

I hope this isn't a serious comment. You expect to power your car with...electricity? No? Petrol? Then what does nuclear power have to do with it? Apples and Oranges, Amigo...apples and oranges...

Read my post more carefully senor;)..it is a reply to another poster.

3 ( +3 / -0 )

Not an economist, but we might expect another rise in consumption tax if this kind of news keeps reappearing. If the economy is doing well and exports are rising, most people in the country never experience any benefits (not that I know off since the bubble). No matter what happens, our overlords will always find a way to make the money trickle up.

3 ( +3 / -0 )

All this and you still wanna double down on defense spending smh

2 ( +2 / -0 )

The yen's weakening raises prices of imported products such as oil

This is a deflection from what’s really going on. According to Bloomberg ... “The “Covid-19 pandemic has added $19.5 TRILLION to global debt” (Jan 2021). Other websites and financial experts have said that around 20% of all US dollars were created in 2020 alone.

https://www.cityam.com/almost-a-fifth-of-all-us-dollars-were-created-this-year/

The money printing presses worldwide have been working overtime to flood the financial system with digital currencies in order to keep it propped up. When central banks are printing like mad then it’s a race to the bottom and the loss of purchasing power is not really reflected in exchange rates. It’s not the prices of imported products like oil going up so much as it is the value of money that’s falling. Same as it ever was.

1 ( +2 / -1 )

I feel sorry for the Japanese since the majority do not have any protection against rising prices..

6 ( +6 / -0 )

new threat to Japan with surging energy costs

So why doesn't the government reduce the tax they collect on gasoline sales and save us from the new threat?

4 ( +4 / -0 )

@Paul

The answers are twofold;vested interests and a strong propensity for control

2 ( +2 / -0 )

Actually ¥150-$1.00 would be a super win for repatriated money

-3 ( +2 / -5 )

I feel sorry for the Japanese since the majority do not have any protection against rising prices.

Indeed. Higher prices at the pump for inaka people to drive their cars, and higher kero prices to heat their leaky and largely uninsulated homes. A tank of kero is nearly 500 yen more than last year.

3 ( +3 / -0 )

Isn't it a bit silly having a 2% inflation target just at a time when outsourcing to China, IoT, just-in-time, automation, etc. are making things cheaper? If a pretty big flat screen now costs 100USD to make and can be sold with profits across the supply chain for 50,000 yen in a shop, why not embrace that and not wish the price was x higher than y years ago? In times of efficiency/productivity gains, prices should fall.

As for oil and oil products and their cost in yen due to the exchange rate, this will hit lots of people, especially those in the countryside with cars to drive and big leaky homes to heat with kerosene. I read that an 18L tank of kero is about 500 yen more than last year. I used to live in a house with a 400L tank that wouldn't last a month in midwinter.

3 ( +3 / -0 )

@kohakuebisu

You are right. Many consumer products are experiencing deflation (Supply-shortage aside) and will continue to deflate as technology and manufacturing processes improve. 2% inflation is pretty aggressive as a long-term inflation rate, and I doubt they'll get there.

As for energy, Japan bet the farm on hydrogen, but things aren't looking too good for them there.

2 ( +2 / -0 )

For us tourists its less painful on the wallet, hotel, food, internal travel, souvaniers and sights are just that bit cheaper.

1 ( +1 / -0 )

prices of imported products such as oil

Japan's ruling castes have known since the 1930's (recall the IJA"s invasion of Dutch East Indies for oil) they were up against it with oil and energy, but the country's rulers have done little since then to reduce the nation's reliance on imported oil. Long, long passed time for Japan to find ways to be more self-reliant with regard to energy. Unless Japan's rulers want to remain dependent on the US, Russia, Iran, Saudi Arabia, the UAE and other nations that control the globe's fossil fuel markets.

2 ( +2 / -0 )

Brian WhewayToday 04:03 pm JST

For us tourists its less painful on the wallet, hotel, food, internal travel, souvaniers and sights are just that bit cheaper.

Interesting. How did you get here as a tourist and have you been stuck here for a year and a half? Isn't it a fabulous place?

0 ( +1 / -1 )

the country's rulers have done little since then to reduce the nation's reliance on imported oil. Long, long passed time for Japan to find ways to be more self-reliant with regard to energy.

Well, because that would involve making some you know, decisions, gulp...

1 ( +2 / -1 )

Oil is the primary fuel import. Japan is the largest importer of LNG.

2 ( +2 / -0 )

Perhaps we should all go back on to the gold standard, then you get stable currencies and politicians can’t print money to squander!

(puts up umbrella and waits for the deluge)

;)

0 ( +1 / -1 )

Good time to be a farmer (except for high fertilizer costs) and/or have solar panels. Your heating and energy costs will still be much higher than now = have a winter plan in place to help keep your costs lower. Plastic film over windows etc, maybe a thermal camera to check for heat leaking out. =Seal your home or apartment up.

1 ( +1 / -0 )

Allow the USA dollar to become stronger and open up Japan to international tourism again.

A stronger dollar means a weaker yen. That is in neither countries interest right now.

0 ( +0 / -0 )

Perhaps we should all go back on to the gold standard, then you get stable currencies and politicians can’t print money to squander!

Nope. Please read a book written by the late John Kenneth Galbraith titled "Money, Whence it Came, Where it Went". It has an excellent and easy to understand explanation of why, since the industrial revolution, attempts to peg currencies to the value of gold, silver and sometimes both, have in every case failed. The short answer is, aside from how easy it is to adulterate gold and silver coins or the fact that since both have industrial uses when their price in trade exceeds their denomination as a currency the metal is immediately melted and used for its industrial purposes, bank loans have always made specie standards useless. It is not governments that create money out of thin air, but banks. Banks have to have about 4 cents in reserve for every dollar loaned. The remaining 96 cents is literally money out of thin air. An, lo and behold, it is very much paper money. Bank loans are absolutely essential for economic activity and GDP growth. What happens over time as banks lend more paper money, the amount of gold or silver notionally backing that currency becomes a rapidly decreasing proportion of the total stock of money. There isn't enough gold or silver available to keep up with bank loans and if a nation tried to restrict bank loans to the amount of new silver and gold being produced their economic growth would be halted. That is why every post industrial revolution nation that has tried to peg its currency to any kind of specie have been forced to abandon this practice. Galbraith explains it better than I have so please read his book. It falls apart a bit at the very end written as it was during the Nixon administration when the world was facing stagflation and didn't know how to get out of it. But his account of the worlds economies through the 1960s is excellent as is his explanation of gold and silver used as money.

0 ( +1 / -1 )

In times of efficiency/productivity gains, prices should fall.

Deflation is an economic death sentence. That is why central banks and economists all around the world advocate for a 2% inflation rate. With low but predictable inflation businesses and households can plan for the future and borrow knowing they will make enough money to repay their loans. That sort of certainty is essential for an economy to grow and, most importantly, for its citizens to be prosperous.

When prices fall, generally wages fall with them. That is deflation. You say, so what? My wages fell but so did prices, why is this so bad? Do you have any outstanding loans? How about your employer? Do they have loans outstanding? They probably do. As wages and prices fall, personal incomes and business revenues fall in kind. What does not fall are outstanding loan balances and those loan payments. If deflation is allowed to develop fully with falling wages and prices, two things happen. One, consumers put off buying knowing that if they wait a bit, prices will fall and they will pay less. That dynamic immediately cuts business revenues and possibly also wages further as firms see orders fall and lay people off. The deflation train accelerates. But there comes a point where the second bigger danger hits the economy. Wages and business incomes fall to the point that they can't make their loan payments. The outcome is mass defaults, mass unemployment and human misery rivaled only by war or a big famine. No economist alive really knows where the bottom is in a fully developed deflationary death spiral and no one wants to go there and find out. The world actually came perilously close in 2009-2010 and economists were loathe to say the D word for fear that deflationary expectations would overwhelm any policy tools they had to counteract deflation. We were all very lucky that time. Central banks did the right things even as too many legislative bodied did exactly the wrong things.

-1 ( +0 / -1 )

Raise salary of Japanese people so that Japanese economy moves, stop immigration permanently. That is the only way. Also stop brain drain due to low salary.

-1 ( +1 / -2 )

The President Biden should ask Saudi to increase output Oil.

0 ( +0 / -0 )

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