Yen's Wild Ride Shows Foreign Currency Risk is Business Risk

The recent actions of the US government regarding the Japanese Yen have highlighted an important issue for businesses around the world: foreign currency risk. On July 31, 2026, the United States bought Japanese Yen to prop up the currency, a move that has significant implications for importers and exporters.

For small business owners who rely on globally sourced goods, monitoring foreign currency exchange rates is crucial to maintaining profitability. A change in currency valuation can shift margins, forcing businesses to adjust prices or risk losing money. The strength of the dollar against the weak Yen served as a subsidy for US importers of Japanese goods, but even a few points of change in the yen's strength can make the difference between profitability and tight margins.

A 4-5% change in the yen's value can have a significant impact on businesses with narrow profit margins. For example, a small business with a 12% gross margin and 20% landed costs may feel a margin squeeze even if the Yen only moves modestly. This is particularly true for service-based businesses or manufacturers who rely heavily on imports.

To mitigate this risk, businesses should run quarterly pricing analyses to monitor fluctuations that could affect their costs over the next 90 days. They should also call distributors quarterly to confirm current pricing and explore options for reclaiming margins on materials that have increased in price due to a stronger Yen or other currency.