TOKYO, July 6 — For Indian IT firms and auto component makers watching the yen, the currency’s slide past 162 against the dollar is a double-edged sword that cuts differently across Asia. The yen’s fall to that level has mixed effects on Japan’s economy, according to officials and analysts tracking the region’s trade flows.
Exporters benefit from a cheaper yen making their goods more competitive abroad. That is good news for Japanese automakers and electronics giants that compete directly with South Korean and Chinese rivals. But the flip side is sharp: importers and consumers face higher costs for foreign goods, energy, and raw materials. For India, which imports Japanese machinery and precision tools, the weaker yen could mean cheaper capital equipment—but also more competitive Japanese exports in third markets like Southeast Asia and Africa.
The phenomenon of ‘Cheap Japan’ is attracting foreign tourists and investors. Hotel bookings in Tokyo and Osaka have surged, and foreign buyers are snapping up Japanese real estate and stocks. But this same dynamic is straining domestic purchasing power. Japanese households, already grappling with stagnant wages, are seeing their yen buy less at the grocery store and the petrol pump.
This era mirrors the 1986 period in some ways, the ministry noted. Back then, the yen was weak and Japan’s export machine was roaring. But the current environment lacks the bubble-economy growth of that period. Japan’s economy today is older, more indebted, and less dynamic. The Bank of Japan faces a tough balancing act: raising rates to support the yen could choke off the fragile recovery, while keeping rates low risks further depreciation and imported inflation.
For Asian markets, the yen’s trajectory is a key signal. A weaker yen tends to drag down the Korean won, the Taiwanese dollar, and the Chinese yuan, as exporters in those countries lose pricing power. Indian IT firms, which earn in dollars and pay costs in rupees, benefit from a strong dollar against the yen only if their Japanese clients don’t cut spending. Analysts note that the coming months will test whether ‘Cheap Japan’ can sustain its allure without reigniting the inflationary pressures that plagued the economy last year.
What to watch next: the Bank of Japan’s July policy meeting and any intervention by the finance ministry to stem the yen’s slide. For now, Tokyo is letting the market find its level—but the pain at home is growing louder.
