Japan Inc. Turns to Currency Hedging Amid Yen's Prolonged Weakness

Japanese businesses are turning to currency hedging and longer-term supplier agreements as the yen's prolonged weakness drives up import costs. The yen has lost over 30% against the dollar in the past five years, making it the weakest-performing G10 currency over that period.

The weakening yen has made imports expensive for Japanese companies, prompting them to seek protection from further losses. Bankers told Reuters that more Japanese firms are now using forwards, futures, and options to hedge their currency exposure.

Some Japanese companies are seeking to lock in exchange rates for as long as five to 10 years, compared with the shorter hedging periods used previously. The shift reflects growing concern that the yen may not recover quickly from its current levels.