Exclusive-Three-quarters of Japan firms bemoan current yen weakness as bad for business

The results of the Reuters Corporate Survey are one of the clearest signs yet that much of Japan Inc is struggling with higher costs and worsening consumer demand caused by the yen’s weakness.

The survey also showed almost 60% think the government should move quickly to restart nuclear reactors, evidence that higher energy costs – driven in part by the currency’s slide – may be changing opinion on nuclear policy.

The currency fell to its lowest against the dollar in about 20 years on Wednesday, slumping past 126 yen. It has pared some losses and was trading at 125.6 yen on Thursday.

While yen weakness is often a boon for Japan’s export-driven economy, at these levels companies are more worried about how it inflates fuel and raw material imports, which are already soaring due to the war in Ukraine. A decades-long shift to producing more goods overseas has also muted a weak yen’s benefits.

“We see the surging energy and commodity costs that come with the weakening currency as a negative,” one manager at a ceramics maker wrote on condition of anonymity.

“We are concerned that could lead to constraints on consumption and capital spending.”

Forty-five percent of companies said they find it hard to cope with the currency weakening beyond 120 yen, while 31% described 125 yen as their pain threshold.

This month’s survey was conducted between March 30 and April 8, when the yen moved between 122 and 124 to the dollar. It polled about 500 large and midsize Japanese non-financial firms, of which around half responded.


Non-manufacturers, which tend to be more focused on the domestic economy, were more sensitive to the weak yen than manufacturers, but only by a thin margin, the survey showed.

Food processing companies were the most sensitive overall, with 73% of respondents putting their threshold at 120 yen. They were followed by retailers, 64% of which had the same threshold.

“The ongoing weakening in the yen has come on top of higher raw materials costs and dealt a double blow to our business,” a manager at a food processor said.

Overall, 48% of firms expect the currency’s weakness to hit earnings, with 36% saying it would hurt profits “somewhat” and 12% saying the impact would be “considerable”.

Some 23% said it would be a boost to profits, while 30% said it would have no impact.

Many food processors and retailers expect a hit to earnings, as do many in fibre, paper and pulp manufacturing, steelmaking as well as automaking and auto parts.

Fifty-seven percent of firms said the government should move quickly to restart nuclear reactors to address energy security, showing how the Ukraine crisis and higher energy costs have put the issue in sharp relief.

“Surging electricity bills are hurting our business,” said one manager at a wholesaler, who was in favour of a restart.

Nuclear power remains a difficult issue in Japan, where a decade after the Fukushima nuclear meltdown only a handful of the country’s 30-odd power plants are operating.

A public opinion poll by the Nikkei newspaper last month showed 53% of voters believe the government should proceed with restarting nuclear reactors. That compared to 44% in a previous survey in September.

“Nuclear power is a necessary evil,” wrote a manager at a machinery maker.

“It would greatly contribute to the reduction of CO2 emissions and it should be carefully considered as an alternative to the energy sources we are currently depending on Russia for.”

(Reporting by Tetsushi Kajimoto; Editing by David Dolan and Edwina Gibbs)

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