Hong Kong/Tokyo
CNN
—
From food to travel, it’s hard to find an aspect of life in Japan that hasn’t been affected by its sinking currency.
The yen has been on the skids for years and hit its weakest level since 1990 against the US dollar earlier this week, pressured by expectations of that the US Federal Reserve will have to keep interest rates higher for longer to tame American inflation.
For Hiroko Ishikawa, a second-generation fruit importer in Tokyo, the declining yen has delivered a big hit to her business, which was set up by her father in 1966.
Her company, Japan Fraise, specializes in supplying strawberries, including imports of large berries from the United States. Local farmers also produce strawberries, but not enough to keep up with voracious demand for Japanese-style shortcakes: airy, creamy tiered treats that are considered must-haves at birthdays, holidays and other celebrations.
Ishikawa sells berries to 400 customers, mostly bakeries and confectionaries, across the country. The falling yen has made imported strawberries much more expensive.
Ishikawa estimates she has raised her wholesale prices for imported fruit by 20% over the past two years. To stay competitive, she hasn’t fully passed the cost of the currency swings to her customers, opting to absorb some of the pain herself.
After hovering around the 100 level against the greenback for years, the yen started its relentless decline in early 2021. That’s largely because the Bank of Japan (BOJ), the central bank, has maintained extremely low interest rates while the Fed and other central banks have raised borrowing costs to fight inflation.
Higher interest rates in the United States and other countries mean investors can make bigger returns on investments there than they can in Japan. This encourages carry trades, in which investors borrow money in yen to invest it in higher-yielding assets priced in other currencies. That weakens the Japanese currency.
On Monday, the yen briefly briefly weakened to 160 to the US dollar for the first time since 1990, before recovering some ground as the BOJ reportedly spent as much as $59 billion buying the Japanese currency.
“The effectiveness of such interventions is always subject to debate, as they often yield only temporary relief and may fail to address the underlying factors driving currency movements,” Nigel Green, CEO of deVere Group, a financial advisory and asset management firm said shortly after the market gyrations.
There are some benefits …
The yen has lost 10% of its value against the greenback so far this year, after sliding 8% in 2023, according to Refinitiv data. It’s the worst performing currency among the Group of 10 leading industrialized nations in 2024.
A pedestrian walks past the Bank of Japan building in Tokyo.
“It’s been a really challenging couple of years,” Ishikawa told CNN. “It’s tough times, and we’re not anticipating any miracles for the next few months. We’re just trying to manage.”
She says her clients are trying to reduce their costs by using smaller or lower-grades of the fruit. Inevitably, some have raised prices, especially since the cost of other ingredients — flour, butter, milk and eggs — have also gone up. The rising cost of imports helped push inflation to 3.1% last year, a 41-year high, according to Nikkei.
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