Nearly half of Japanese firms think the government should start defending the yen at this month’s dollar high of 110, a Reuters survey shows, underscoring the threat that rising fuel and other import costs pose to a fragile economy.
Over the past two years, Prime Minister Shinzo Abe has sought to boost the economy and cure deflation with bold monetary stimulus that has successfully wrought a much weaker yen.
But the yen’s descent against the greenback to a six-year low of 110.09 on Oct. 1 – a rapid 8 percent decline over three months – has prompted a chorus of complaints from companies that Abe’s medicine could become poison.
While the yen has since regained some ground to around 106 on expectations that the Federal Reserve may put off raising U.S. interest rates, the potential for further weakness is a major concern for many firms, the Reuters Corporate Survey showed.
“If the yen is guided too weak, raw material costs jump and firms that can’t pass on those costs become exhausted and find it hard to survive,” wrote an executive at a paper company, one of the industries most affected by yen weakness.
The survey, conducted from Sept. 30 to Oct. 14, found 45 percent of companies want the government to start talking up the yen or defend it with market intervention at around 110 to the dollar. That suggests that this level could become a key point at which corporate pressure on the government to do something about yen weakness intensifies.
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