Economists say the drop can be attributed to the Bank of Japan’s decision to keep interest rates low. The differential in rates created when the United States repeatedly raised its own rate has led experts to sell off the yen as investors plunge into the dollar in search of higher returns.
The cheap yen has had some benefits for Japanese exporters, whose products are cheaper for customers abroad, as well as for other Japanese companies with large foreign revenues and investments.
But the gains seem to have been offset by pressures in domestic markets, as both businesses and consumers have had to pay more for imports, whether raw materials or finished products.
Yen weakness has led to record trade deficits for Japan. The value of imports rose nearly 45 percent in the first half of the fiscal year, between April and September, when fuel prices skyrocketed. Exports, on the other hand, increased by just under 20 percent.
Still, Stefan Angrick, a senior economist at Moody’s Analytics, described the trading side of Tuesday’s result as “counterintuitively good news.” is gaining ground now that businesses and households are starting to spend again.”
The Nikkei 225 index, Japan’s benchmark for equities, closed 0.1 percent higher in Tokyo on Tuesday.
Looking ahead, the picture is mixed. Despite the weak yen, demand from abroad could weaken due to China’s continued “zero Covid” policy and a global economic slowdown exacerbated by rate hikes by central banks trying to keep up with the Federal Reserve.
On the other hand, Japan’s continued adjustment to pandemic life, reopening to tourism in October and a sizeable government stimulus package designed to offset the effects of inflation are all likely to contribute to a modest ongoing recovery in the economy. domestic consumption, which remains well below pre-pandemic levels. levels, said Mitsubishi UFJ’s Mr. Kobayashi. Business investment also appears to be continuing to grow as Japan continues its efforts to digitize its economy.
All things considered, said Mr. Kobayashi, this means that despite the unexpected setback this quarter, “it is already certain that we will see positive growth again” in the next three months.
