Japanese Corporate Leaders Warn: Yen Depreciation and Volatility Intensify Import Cost Pressures

The Japanese business community is expressing growing alarm over the yen's persistent weakness and sharp fluctuations, which underpinned last week's joint U.S.-Japan intervention to stabilize the exchange rate. Although exporters usually benefit from a weak yen, the current exchange rate environment is imposing a heavy burden on Japan's economy, which is highly reliant on imports.

In July this year, the yen hit a nearly 40-year low against the U.S. dollar, reaching close to 164, before intervention triggered a rebound of about 5%. Yoshihiro Shimazu, CFO of Mitsubishi Electric, stated bluntly: "A weak yen does not mean everything is going well."

He pointed out that rising costs for energy, raw materials, and food are suppressing domestic demand and threatening Japan's slow recovery from decades of deflation.

Norihiko Ishiguro, Chairman of the Japan External Trade Organization (JETRO), also noted that since Japanese companies rely almost entirely on imported raw materials, once the exchange rate falls below a certain level, even exporters cease to be winners.

To address these challenges, Fast Retailing, the parent company of Uniqlo, plans to raise prices on some autumn and winter items in Japan by about 4% to offset the yen's decline. Meanwhile, Muji is attempting to maintain profitability not only through price hikes but also by strengthening internal production.

Moreover, extreme exchange rate volatility is disrupting multinational corporations' profit forecasts and investment decisions. Both Mitsui & Co. and Mitsubishi Corporation emphasize that high market volatility is significantly impacting operations, forcing companies to continually revise their exchange rate assumptions.

According to surveys, while about 20% of Japanese firms consider the 120 to 124 yen range as ideal, industry sentiment remains pessimistic, believing that without improvement in Japan's fundamentals and a recovery in its trade balance, it will be difficult to return to the 120 to 130 yen range again.