Japan¡¯s top currency diplomat Masato Kanda said a weak yen brings both merits and demerits to the economy due to the country¡¯s changing export patterns and increasing reliance on imports.
The boost a weak yen gives to Japan¡¯s export volumes has declined compared with the past, as manufacturers target shipments of high-end, state-of-the-art products overseas rather than compete with price cuts, said Kanda, the country¡¯s vice finance minister for international affairs.
A weak yen, however, still inflates the yen-denominated profits Japanese companies earn overseas, he said.
¡°The demerit of a weak yen is that it pushes up the import cost of energy and food, thereby increasing household burdens,¡± he said, acknowledging growing domestic concerns about the potential side-effects of a weak currency.
Kanda¡¯s remarks underscore how a weak yen is becoming a tricky political issue for the Finance Ministry, which has historically focused on preventing a strong currency from hurting the country¡¯s export sector.
¡°There are both positive and negative effects (on the economy) from a weak yen. It¡¯s hard to say which is bigger, because the pros and cons of a weak yen differ for each entity,¡± Kanda said in an interview Monday.
Imports play an increasingly important role in Japan¡¯s economy, making up 16% of gross domestic product now, compared with just 9% two decades ago, he said.
¡°We need to guide policy based on the understanding that the mechanism in which exchange-rate moves affect the economy has changed,¡± he said.
But Kanda stressed that global energy and commodity inflation, rather than the weak yen, was mostly to blame for pushing up the cost of living for households.
¡°At least for now, the rise in imported goods prices is due largely to rising energy costs and global inflation,¡± he said.
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