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How does a weak yen affect families in Japan?

By on July 15, 2022

The US dollar shot up above 139 yen today, the highest it’s been since September 1998.

Generally,  Japanese companies have maintained stable prices for years and avoided a price increase in order not to scare customers away. With a weak Japanese yen, that’s about to change.  In a recent Reuters poll, 4 out of 5  big companies in Japan said they will be “passing on higher commodity costs to customers or intend to do so.”

How the weak yen will impact your family, industry in a positive or negative way depends where you are in it.

Here are ways it will affect you.

Food

A weak Japanese yen makes the cost of food imports more expensive. That means you might have to curb your appetite for cranberries or adjust by substituting Canadian bacon for something else. If families continue to pay more for imported foods, it will likely lead to inflation that could affect the quality of your life over time.

Education

Many international schools are now struggling to hire teachers from foreign countries because of the weak yen. As salaries of expat teachers are based on USD,  their margins are thus, affected. To stay afloat, some schools might have to increase tuition or reduce the number or quality of expat teachers.

Overseas Trips

When the Japanese yen is weak, it isn’t generally a good time to travel because you get less value for your money.

You could travel though to countries with currencies resilient to the US dollar like China, where the Yuan has remained relatively resilient compared to most currencies.

Investment in Foreign Stocks

When the U.S. economy is doing well, investors are more likely to invest in U.S. stocks. There’s an advantage to gain through exchange rates if you already own foreign stocks. Investing will be very expensive for those with savings in the Japanese currency.

Recently though, the weak yen is working to Japan’s advantage. Last week, the Tokyo Stock Exchange reported that foreign investors have been buying Japanese stocks for the first time in four weeks. Their buying excess came to 430,783 million yen, against 367,306 million yen in net selling the previous week.

Fuel

Oil supply contracts are made in U.S. dollars. When the dollar rises in value against the Japanese yen, the import price of fuel naturally rises too, as a result.

Japan has done makeshift measures to curb the rise of gasoline prices, and lessen the impact of inflation through a subsidy scheme that ends in September. The government sets the subsidy amount every week based on the estimated change in weekly retail gasoline prices that reflects moves in the global oil market.

If the Ukraine war is prolonged and the subsidy ends, there could be more fuel price increase on the horizon.

 

The Bright Spot – Jobs

At the onset of the pandemic in 2020, Japan’s unemployment rate was at 3.1%, but has slightly fallen to 2.60 % since (May 2022).

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