Japan Inc Turns to Futures and Options as Yen Weakness Persists
Taku Ueno, CEO of Takara MC, has been importing beef from America and olive oil from Spain for his supermarkets in Japan. However, the falling yen has made these imports increasingly expensive, forcing him to negotiate with suppliers more frequently.
Ueno is not alone in seeking ways to hedge against further yen weakness. Other Japanese firms are turning to futures, forwards, and options to protect themselves from currency losses.
The yen's decline is attributed to Japan's low interest rates and the central bank's slow pace of hikes, as well as investors' concerns over Japan's debt load. Despite efforts by authorities to intervene in 2022, 2024, and 2026, the yen remains under pressure, with the exchange rate last trading around 159 to the US dollar.
Nitori Holdings, Japan's largest furniture chain, is also feeling the impact of the falling yen. The company estimates that each rise in the dollar-yen exchange rate of one yen hits its profit by around two billion yen (S$15.9 million).