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The yen sinks and sinks, no end in sight. For a resource-poor nation as heavily dependent on imports as Japan, it’s potentially disastrous. The exchange rate as of this writing approaches 130 yen to the dollar – down from an average 106 in 2020. What if it falls to 150? asks Shukan Gendai (April 23).
It could happen, freelance foreign exchange specialist Yasunori Takano tells the magazine. Almost anything could, it seems, in a geopolitical, economic, demographic and meteorological climate in which almost everything has and is. The salient events are Russia’s invasion of Ukraine, COVID-19, global warming, and – generally in all developed countries but most extremely in Japan – demographic aging.
The yen is at its lowest in 20 years – which is not the worst of it, says Shukan Gendai. In real terms, taking past and present costs of living and other factors into account, we’re actually going back not 20 years but 50, to the living standards of the 1970s.
There seems no stopping the yen’s dive. Even the ruble, battered by sanctions, has recovered somewhat. Not the yen. This is extraordinary. The yen over the past few decades has been the safe currency, the one traders turned to when the dollar and others destabilized.
What’s different now?
Two things in particular, Shukan Gendai explains. First, the U.S. Federal Reserve Board is fighting rampant U.S. inflation with higher interest rates. Japan’s rates remain close to zero. No wonder traders are selling yen for dollars.
Second, Japan’s economic health is clearly at risk. War and pandemic in tandem have generated soaring prices for the energy, food and raw material imports on which resource-poor Japan depends. For eight straight months Japan’s trade has been in deficit – import costs exceeding export earnings. The Lehman Shock of 2008 and the 2011 Tohoku earthquake and nuclear meltdown were catastrophic – but the yen held steady. Not now.
The 1970s was not a bad decade. World War II was a generation past, the new postwar economy had taken flight, prosperity was rising and spreading beyond anything the nation had known in its long and mostly poor history. In some ways it was better then than now. The middle class, now shriveling, was then expanding.
Still, for what’s left of today’s middle class, going back to 1970s standards would mark a decline. Back then, Shukan Gendai recalls, only celebrity entertainers and athletes could afford to travel abroad. It seems hard to imagine today.
That’s picturesque but relatively trivial. Foreign travel is not indispensable. Closer to the bone is the rising price of food, gasoline, energy generally. The 1970s were different in so many ways. Few married women worked then; now most do. The population then was young and growing; now it’s elderly and sinking. Then, full-time jobs were the rule; now, 40 percent of the labor force is part-time and poorly paid. Then, wages rose faster than inflation; now, they stagnate.
High energy costs have long bedeviled the Japanese economy. Only government subsidies are keeping gas prices at the pump down to around 170 yen a liter. Without the subsidies, Shukan Gendai calculates, we’d be paying 250; figuring 150 yen to the dollar, even subsidies wouldn’t get it down much from that.
Liquid natural gas, thanks to the war, is back in demand, the switch from fossil fuels to cleaner energy yielding temporarily to more urgent priorities. But prime among producers is Russia, currently under sanctions. Furthermore, producers worldwide had before the war cut back production, seeing no future in it. Stocks are limited. How high will prices rise? That depends largely on the Ukraine War. How and when will it end?
There’s no more predicting the one than the other.
© Japan Today
35 Comments
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snowymountainhell
*“Turning into…” *? - Over 15% of the population are already living in poverty, the minimum wage is abysmally low compared to other modernized countries, the national government is infamously slow to act on any important domestic issues of public concern,
and frequently acting only in the interests of big business and the one major, controlling political party
while overtaxing ALL of the citizens on even essential daily necessities and food.
“*Turning into…” *?
PerformingMonkey
I think I need to start getting some freelance work that pays in dollars, not Japanese funny money.
Chico3
Actually, it did in 1998. I should know because I visited Japan on my first trip at that time. I couldn't believe how inexpensive Japan was at that time. I had a great 3 weeks with a lot of money left-over from that trip.
Sven Asai
It’s by far not specific to Japan. They intentionally strangle their economies and especially the key industries as cash cows in all Western countries, because the new agendas following those climate gurus demand that and nothing else. The two years of pandemic and the new bigger Ukraine plus global cold war are only additional triggers and accelerators. There is of course always an alternative left, although it is highly improbable that it is considered. In this case here, Japan should temporarily quit listening to all those external gurus and follow a way fitting to own circumstances. Print money for all, not only for a few of the already richest. Create a new bubble economy , many new businesses with many new innovations that can be sold on local markets and exported, push the whole thing up to the upper limits like in the 80’s and early 90’s, and yes fully including CO2 , combustion motors and nuclear plants and all the ‘oh so bad’ things. Then, after having reached that top again, one can lean back and very easily and generously realize all those projects and wishful phantasies, but not if all countries becoming poor and de-industrialized.
Eastman
well Japan is poor country already and its just interesting to see that narrative that "turning into".
to be real just look around you,say Korea,say Taiwan,say China,Malaysia and list goes on...compare these countries life standard and economy say 20 years ago and now and now put at other hand Japan.
if you will still not get it well than i may understand that narrative...
Japan lives in past in many ways.reality when 1usd will reach 150jpy is not that faraway anyway.
Namorada
Japan’s media needs to start reporting about the diminishing returns of a weak yen. The nikkei did an excellent article about this and I have yet to see others reporting on it. The benefits of a weak yen to export companies were higher 10 years ago than they are now. Better minds with the time to sift through the data should be doing this and asking is the BOJ’s one-track focus on raising inflation doing more damage than good.
snowymountainhell
“Japan is the third-largest economy.” … on paper.
“That won't change soon.” … just keep printing money.
Aurora
So should I buy yen for my next trip now?
gaijintraveller
I think many people would be happy with a return to 70s economic standards. University students used to expect a career with lifetime employment. English teachers were paid more then than now. Everyone seemed to have plenty of money left over for fun after they had paid the bills.
Psyops
Loving it, I get paid in dollars since I work for a US company's Japanese branch. I'm getting so much more for my 9k a month. My 4 day weekend in Osaka stayed under 1k dollars. Keep dropping yen :D
kaimycahl
The sky is falling, relax this will be short lived!
antifun
Actually, it might not be long before Germany overtakes Japan in nominal GDP.
FizzBit
Anyone else notice double trailer trucks in the last year? The highway I regularly use is getting pot holes all over. Has the government changed the weight rules? I dunno but they’re gonna wanna raise taxes to fix the roads that have never been this bad before to my knowledge.
Adam Hawkins
It seems that opening the country up would relieve a lot of economic pressure and hopefully keep the yen from tanking.
The tourism sector raked in ¥5.1 trillion during 2019. This would go a fair way to stabilising the currency, not to mention creating more jobs and putting more money in Japanese pockets, which is never a bad thing.
Abenomics worked for a while but the stubbornness of the LDP to continue with it and BOJ keeping interest rates so low has become detrimental to the wider economy.
As anyone who has spent time in Japan can attest, change won't come anytime soon.
Steve
The wages have only gone down in Japan! It’s pretty scary!!
kohakuebisu
Tabloids like Shukan Gendai love the ol' hyperbole. Yes, prices are going up in Japan and yes it does hurt, but are they actually "soaring"?
If they are, why is the tv still showing us celebs eating 10000 yen steaks and 2000 yen desserts on a loop? Isn't that why Marie Antoinette got her head chopped off?
Mr Kipling
When I arrived here 35 years ago from the UK, Japan was the land of sticker shock. Now this is reversed, on trips back to the home country there is nothing I want to buy that is cheaper than getting it in Japan. I can also go out to bars in 2022 and spend the same or even less than I did when I first landed. This is just as well as I see that some employers are still paying the same salaries as 35 years ago. Some (probably not allowed to mention them on here) are paying less. Sorry, but for the average citizen, Japan is only going one way and that is down....
dan
Pay is down and fuel and food is up...
Innovation and change non existent.
Japan is truly backward.
Mocheake
Tim Sullivan
You can turn this situation to your advantage by buying gold and commodity-linked currencies. But most people here will still keep their hard-earned savings in their Mizuho account and get no benefit. It's sad.
Lepyon
Need to come up with a new currency..how about the
bit-yen. Say it real fast 3 times. Yeah you got it!
Pacificpilot
Japan is paying the price for its past irrational policies in bowing to Business pressure to allow the proliferation of part time workers, misogynist business practices of limiting female vertical mobility and gender based unequal pay for equal work. In addition, Japan needs to increase its skilled worker immigration policy by tenfold to rejuvenate its stale economy. This will surely shore up the international strength of the yen and rehabilitate the domestic consumer economy
smithinjapan
Now Kuroda and the BOJ are starting to realize what their ultra-loose policy of weakening the yen has succeeded in bringing about, and they are starting to panic. They wanted to take Japan back in time, they did -- but not to a time when it as booming through exports; Kuroda is going to take us back to a time when Japanese started moving overseas for better wages and a better life, as they did when masses moved to Brazil 100 years ago. We are well on the road to losing the middle class. Japan will still have some of the richest people in the world, but the majority of us will be poor, and to try and keep Japan's social services afloat with no population growth and the elderly and retired at 50% in a decade? It is looking bleak. Well done, guys!
Paul
Why is it that I know more bout how to control value of a currency than BOJ?
Septim Dynasty
Japan is already a poor country. My fellow Japanese commenters on this below site agree with the fact.
https://news.yahoo.co.jp/articles/34d3506b3d823fd3e120acb025fd3e6ebbc77b68
kennyG
It depends on how you define and where you draw the line for being poor. Japan is not a rich country no more,
that is a known fact for long time regardless of the size of GDP.
By the way didn't know you are a Japanese
Septim Dynasty
Typo error. I am not Japanese, of course.
kennyG
Thanks for re-confirming it
umbrella
I have heard of foreigners in Japan demanding their companies pay salaries in dollars or they quit. What a shameful thing for Japan how far and how quickly their collapse has been.