Prime Minister Naoto Kan's "economic tone deafness," demonstrated by his failure to take countermeasures against the steady appreciation of the Japanese yen, may result in "hellish unemployment" for Japan, warns evening tabloid Nikkan Gendai (Aug 19).
Last week, Aoyama Gakuin University professor Eisuke Sakakibara, a former bureaucrat at the Ministry of Finance, remarked there was a "strong possibility" that by around late September, the yen would surpass its previous postwar peak of 79.75 to one U.S. dollar, posted in April 1995.
Sakakibara also warned that the world economy was facing the possibility of a full-blown global depression from this year through 2011.
"Considering adjustments for inflation, the rate of 79.75 yen to one dollar today would be equivalent to about 60 yen to the dollar," business reporter Yoshiki Kobayashi is quoted as saying. "Various countries are in agreement that the current rate of around 85 yen to the dollar is too low."
In addition to making Japan's exports more costly, further appreciation of the yen may worsen unemployment. The Ministry of Internal Affairs and Communications announced on Tuesday that in the April-June quarter, 3.49 million workers in Japan were categorized as completely unemployed. Those who had been without work for one year or longer rose by 210,000 to reach 1.18 million -- the second-highest number ever.
Exchange rate differentials, particularly for labor costs, are making it increasingly expedient for Japan's manufacturers to shift more production offshore.
"Around 1995, companies began moving production of general-purpose components overseas," says Teikoku Data Bank's Takakazu Nakamori. "But now we're seeing a shift in production of core components to foreign plants. Nissan Motor Co has announced it would produce its popular March compact in Thailand. Lower labor costs in Thailand coupled with the higher purchasing power of the Japanese yen at home have generated a 'March shock.' If companies eventually transfer their key functions overseas, then it won't just be factory workers who lose their jobs, but elite staff as well."
Shukan Shincho (Aug 28) has its own take on this "hyper yen-daka," muttering that the government's non-interventionist position toward foreign exchange has led, as professor Kazutaka Kirishima of Josai University puts it -- dusting off a political term from 1940 here -- to Japan's financial "encirclement" by the U.S., Europe and China.
Fumiyuki Nakanishi, strategist at SMBC Friend Securities, tells the magazine that the yen upswing is just at the beginning of a 40- to 45-week cycle and that appreciation will probably continue until the U.S. unemployment rate, currently at 9.5%, declines to the 8% level.
Kaoru Yokoyama, a financial journalist, nevertheless points out that the US dollar at 80 yen is a "bargain" and likely to prove a good investment in the long run. Economist Takashi Kadokura, meanwhile, sees potential in gold, which is still enjoying high demand, particularly among affluent Chinese, rising by as much as 1.5-fold over the next two to three years.
But one doesn't need an astute grasp of forex or commodities trading to profit from the high yen. An unnamed journalist noted that a woman's Burberry trench coat can be purchased from the UK's net-a-porter.com site for 796 pounds (roughly 107,000 yen). On Japan's Rakuten Ichiba shopping site, the same coat was selling for 183,000 yen -- realizing a handy profit even after outlays for shipping and import duty.
Similar bargains, such as antique Japanese film cameras in high demand by local collectors, can be found at U.S. auction sites like eBay or Yahoo! at astonishingly low prices.
Finding the best deals is often a matter of timing. Prices for overseas package tours, for example, take three months to reflect the latest exchange rates, so December through February will be the best time to plan a trip to the UK or France, journalist Hiroko Hagiwara is predicting.© Japan Today