From Our Bureau
NEW DELHI: The yen has hit a 20-year low against the dollar, a dizzying drop of more than 18 percent since last September that has unnerved Japanese businesses.
At the same time, while overall inflation remains moderate, food and energy costs are rising rapidly — not as a result of increasing demand, but from market turmoil related to Covid-19 and Russia’s invasion of Ukraine.
The twin forces are weighing on Japan’s economy, the world’s third largest, while the nation trails others in its recovery from the pandemic. For resource-poor Japan, which is highly reliant on imported fuel and food, the drop in the yen has raised prices and spooked consumers who are used to decades of stability.
Context: Japan has long pursued stronger inflation and a weaker yen, an effort to boost its chronically weak economic growth. Now it has gotten what economists wished for — just not in the way they had hoped.
What’s next: Prime Minister Fumio Kishida has brushed off suggestions that the Bank of Japan should raise interest rates. Instead, he has sought to combat rising prices with more stimulus.
