Japan Inc Rushes to Hedge Against Prolonged Yen Weakness

Japan Inc is seeking new hedges to protect against the prolonged weakness of the yen. Despite currency interventions in 2022, 2024, and 2026, as well as joint U.S.-Japan buying in July and August, the exchange rate remains under pressure.

Taku Ueno, chief executive of Takara MC, which operates 43 supermarkets south of Tokyo, is experiencing rising costs due to the falling yen. He has pushed for direct and longer-term contracts with his overseas suppliers, locking in prices and exchange rates up to a year at a time.

Others are turning to futures, forwards, and options to hedge against further yen weakness. Smaller firms, which have historically avoided using these instruments, are now taking action due to the great cost pressures they face.