Heavy burden for households, perhaps good for foreign visitors
1:00 JST, June 16, 2022
Since the beginning of this year, the yen has been weakening not only against the dollar but also against other major currencies such as the euro, pound and Australian dollar. The weak yen will accelerate the rise in import prices. How companies and households should cope with the weak yen has been a problem.
Domestically, prices continue to rise for food, clothing and other familiar items. Prices of goods traded between companies have been higher than a year earlier for 15 months in a row, and those rising costs are expected to continue to be passed on to consumers.
Mizuho Research & Technologies senior chief economist Saisuke Sakai estimates that the annual burden on households will increase by about ¥1,000 for every ¥1 depreciation of the yen against the dollar on the assumption that the current price rises for raw materials would continue.
On the other hand, price levels in Japan are already lower than those seen overseas due to prolonged deflation, and the yen’s continued depreciation emphasizes the feel that Japan has been undervalued.
The price of a McDonald’s classic Big Mac hamburger is ¥390 in Tokyo, or about $3 at the current rate. According to Yomiuri Shimbun correspondents who checked the burger’s price earlier this month, the price is nearly half that of the Big Mac sold in Washington for $6.19 or New York for $5.59. It is also cheaper than in London or Bangkok, where the same burger costs between $4 and $5.
Japan resumed accepting foreign tourists from this month.
“If the restrictions on the entry of visitors to Japan are eased further, the yen’s depreciation could be a tailwind,” Daiwa Institute of Research economist Wakaba Kobayashi said.
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