Yen Weakness Drives Japanese Firms to Seek New Hedging Strategies

Japan's businesses are seeking new ways to hedge against the yen's prolonged weakness, which has made imports more expensive. Taku Ueno, CEO of Takara MC, a supermarket chain in Tokyo, is buying beef and other products from overseas with longer-term contracts to lock in prices and exchange rates.

Others are turning to futures, forwards, and options to hedge against further yen weakness. Smaller firms have historically avoided using these instruments, but cost pressures are now too great not to take action.

The yen has weakened despite currency intervention in 2022, 2024, and 2026, and the exchange rate is still under pressure, even after joint U.S.-Japan buying in August and July. The yen hit a near 40-year low in July, just shy of 164 per dollar.

Exporters are also considering hedging against a stronger yen to lock in overseas profits. Even so, most investors remain sceptical about the yen's prospects, with some arguing that it has not yet reached its peak.