Aim higher, reach further.

Is a Weaker Yen in Japan’s Interest?

Prime Minister Shinzo Abe's policies have favored a weaker yen, and he has pointed to a rising stock market, improved corporate profits and a revival in manufacturing as marks of success.

Some aren't persuaded, and Japan Real Time spoke with one opposition lawmaker who is particularly concerned about Japan's standing among the world's economic powers.

"The value of a country's currency normally reflects its national power," said Motohisa Furukawa, a former economics minister who is a member of the Democratic Party of Japan. "The yen's further slide would do more harm than good" because Japan relies on imports for much of its energy and food, he added.

Since Mr. Abe returned to power in December 2012, the dollar has risen more than 50% against the yen. The Japanese currency strengthened a bit as a safe haven during the Greek debt crisis and China's stock-market fall, but on Wednesday, it was back trading between 123 and 124 to the dollar--close to the weakest point since Mr. Abe took power.

As Mr. Furukawa observes, one result of a weak yen is to reduce Japan's gross domestic product and per capita income when measured in dollars. Japan's GDP in 2014 was $4.6 trillion, measured by the average yen-dollar exchange rate that year, representing 6.0% of global GDP. Back in 2010, when the yen was stronger, Japan accounted for 8.4% of global GDP.

China's GDP overtook Japan's in 2009 and now is twice as big when measured in dollars. While Mr. Abe has talked about putting Japan at the center of the global economy,  "the truth is that Japan is turning out to be a peripheral country," Mr. Furukawa said.

Likewise, Japan's per capita GDP hasn't changed much in yen terms, but in dollar terms it is sharply down: $36,000 in 2014 compared to $46,000 in 2011.

Mr. Furukawa said the currency shifts make it harder for Japan to make its presence felt globally through official development aid, which is normally disbursed in dollars.

China has been spearheading a new regional development bank. In May, Mr. Abe unveiled a plan to offer about $110 billion in financing for infrastructure projects in Asia, in an apparent bid by Tokyo to counter Beijing.

What about the effect on average Japanese? Travelers abroad certainly feel poorer, since the yen they take with them don't buy as much at a New York restaurant or Hong Kong boutique.

On the other hand, foreigners taking advantage of a weaker yen are flooding to Japan to bargain-hunt for a wide range of goods and properties. And the weak yen boosts profits at companies, which in turn have begun to pass on some of those profits to workers. That has eased the deflationary mindset that was once deeply rooted in the economy.

Mr. Furukawa's party pointed to the downsides of a weak yen in elections for parliament's lower house last December, but it made only small gains against Mr. Abe's ruling party. Voters will have another choice to render a verdict on Abenomics and the weak yen a year from now in upper house elections.


Popular on WSJ