Japan’s diplomat about yen and its effect on the economy

Masato Kanda, Japan’s top currency diplomat, said that a weak yen has advantages and disadvantages for the economy. It affected the country’s changing export patterns and rising reliance on imports.

The remark highlights how a weak yen became a tricky political problem for Japan’s finance ministry. It has historically focused on preventing a stable currency from hurting its export sector.

On recent yen changes against the dollar, he said the currency pair lacked a clear sense of direction. At the same time, it rose steadily last year.

He told Reuters in an interview conducted on Monday that the yen’s fall last year appeared to be driven by broadening U.S.-Japanese interest rate differentials. The dollar was increasing against most other currencies on the back of strengthening U.S. inflation expectations.

He said that the situation somehow had changed this year.

Diplomat’s overview of the yen

The country’s vice finance minister for international affairs, Kanda, said a weak yen gives a minor boost to Japan’s export volumes. He said that it is now smaller than it used to be.

However, he said that a weak yen still boosts Japanese companies’ yen-denominated profits overseas.

He also said that the demerits of a weak yen push up the import cost of energy and food. It increases household burdens.

Hinda said that a weak yen has positive and negative effects on the economy. It’s difficult to say which is more extensive because the pros and cons of it differ for each entity.

Economic security

Kanda’s comments emphasize a shift in Tokyo’s perception of currency moves.

Haruhiko Kuroda, a Bank of Japan Governor, has also said the impact to households from a weak yen might become more extensive due to Japan’s increasing reliance on raw material imports.

Kanda mentioned that imports play an increasingly important role in Japan’s economy. It makes up 17% of gross domestic product (GDP) now, compared with just 9.1% two decades ago.