Key Takeaways
- Japanese business leaders are increasingly advocating for a stronger yen, citing escalating import costs that are burdening both companies and households.
- Major business groups, including Keidanren and the Japan Chamber of Commerce and Industry, have urged government intervention to address the currency's prolonged weakness.
- The yen's depreciation, which saw it end 2025 at approximately 157 per dollar, has significantly raised raw material costs for small and medium-sized enterprises (SMEs) and eroded household purchasing power.
- While a weaker yen traditionally benefits exporters, its sustained decline has created planning difficulties for all firms, with some major exporters like Canon (CAJ) noting less obvious advantages than in the past.
Japanese business chiefs are expressing a growing desire for a stronger yen, as the prolonged weakness of the currency continues to push up import costs across the nation. This sentiment marks a notable shift from traditional views, where a weaker yen was often lauded for boosting exporter profits. However, major business lobbies, including Keidanren and the Japan Chamber of Commerce and Industry, are now urging the government to take action to counter the yen's depreciation, highlighting its detrimental impact on households and companies.
The yen concluded 2025 at around 157 per U.S. dollar, a level that previously prompted official warnings about currency weakness. This sustained depreciation has led to a significant increase in raw material costs, particularly affecting small and medium-sized businesses that rely heavily on imported goods. For instance, the weak yen has contributed to rising wholesale prices, with Japan's wholesale inflation hitting a 13-year high in 2021, and continuing to put upward pressure on costs.
The rising import costs are directly impacting Japanese households by eroding their purchasing power, as the prices of essential goods like food and energy climb. The Japanese government itself revised its economic growth forecast for the fiscal year ending March 2025 downwards, attributing the change to these rising import costs driven by the weak yen, which negatively affected consumption. Members of Japan's top economic council have voiced concerns about the yen's effect on household purchasing power, advocating for policies to address these issues.
Even for large, export-oriented companies, the benefits of a weaker yen are becoming less clear. Canon (CAJ), which generates a substantial portion of its revenue overseas, noted that the advantages of a depreciated yen are "less obvious than in the past," describing the situation as "extremely rare." The currency's volatility and sustained decline have made long-term business planning increasingly difficult for all firms.
There is growing pressure on the Bank of Japan (BOJ) to consider further monetary policy adjustments, with market observers watching for potential interest rate hikes to support the yen. While the BOJ did raise interest rates twice in 2025, uncertainty surrounding future hikes has limited the yen's recovery. Japanese Economy Minister Minoru Kiuchi has also acknowledged that a weak yen can push up the Consumer Price Index (CPI) through increased import costs. The prevailing sentiment among business leaders suggests a consensus that a more stable or stronger yen is crucial for Japan's long-term economic stability and the well-being of its businesses and consumers.
Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications.