The Japanese Yen's Record Slump

 

The Japanese Yen's Record Slump: A Double-Edged Sword

The Japanese yen has been on a downward spiral, hitting its weakest level since 1990 against the US dollar. While a weak yen has its benefits, such as boosting exports and attracting tourists, it's also causing significant pain for Japanese citizens and businesses.

For Hiroko Ishikawa, a second-generation fruit importer, the declining yen has been a major challenge. Her company, Japan Fraise, specializes in supplying strawberries, including imports from the US. However, the falling yen has made imported strawberries much more expensive, forcing her to raise prices and absorb some of the cost herself.

Ishikawa's clients are trying to reduce costs by using smaller or lower-grade fruit, but it's not enough. The rising cost of imports has contributed to inflation, which hit a 41-year high of 3.1% last year. The cost of other ingredients, such as flour, butter, milk, and eggs, has also increased, making it difficult for businesses like Japan Fraise to stay competitive.

The weak yen has also affected Japanese consumers, who are finding it difficult to afford foreign travel. The number of Japanese people traveling abroad last year was less than half of the pre-pandemic level, according to the National Tourism Organization.

Sato Hitomi, a 66-year-old former nurse, is feeling the pinch. She's traveling to Hawaii with her family, but it's likely to be their last overseas vacation due to the high cost. "I've been patient and held off on doing all of the things I wanted to do while also taking care of my parents," she said. "But this is the first and probably the last overseas vacation for us."

On the other hand, a weak yen has its benefits. It's made Japan a cheaper destination for tourists, particularly Chinese tourists, who are expected to visit in large numbers during the Labor Day holiday. Luxury companies like LVMH have also seen a boost in sales in Japan, thanks to Chinese tourists shopping there.

The weak yen has also helped boost Japan's stock market to levels not seen since the 1980s and improve its attractiveness as an investment destination. However, the downsides of a soft currency are growing, and Japanese consumers are feeling the pain.

As the yen continues to slide, it's clear that the benefits of a weak currency are not evenly distributed. While some businesses and tourists may benefit, many Japanese citizens and small businesses like Japan Fraise are struggling to cope with the rising costs and reduced purchasing power.