the u.s. dollar<u+2019>s recent surge against most global currencies ought to be good news for the big manufacturing nations of asia, as it makes their exports cheaper. but japanese billionaire tadashi yanai, who runs uniqlo operator fast retailing co. , asia<u+2019>s biggest clothing manufacturer, isn<u+2019>t applauding. <u+201c>it<u+2019>s a strong yen that<u+2026>improves the living conditions of ordinary japanese,<u+201d> he said in a recent interview. <u+201c>when the yen weakens, that<u+2019>s the worst.<u+201d> the warning from mr. yanai, whose company makes most of its clothing outside of japan, is a reminder of the increasingly complex relationship between currencies, trade and economic health<u+2014>a subject that has come into sharp focus since donald trump won the u.s. presidential election in part by accusing trading partners like china and japan of weakening their currencies to promote domestic industry. the japanese yen has fallen 8.2% against the dollar since mr. trump<u+2019>s election, boosting profits for companies<u+2014>like toyota motor corp. <u+2014>that rack up big sales overseas. but economists and businesses warn that the speed of the fall could throw off the plans of even the most enthusiastic exporters, while pummeling importers and consumers with rising costs for products from gas and bananas to uniqlo t-shirts. many economists say the virtues of a weak yen for japanese companies and consumers start to peter out at around <u+00a5>115<u+2014>it is now trading at around <u+00a5>112.68<u+2014>while around 60% of businesses in a june survey by the japan chamber of commerce and industry indicated they prefer a yen stronger than <u+00a5>110 to the dollar. even for countries like china and south korea<u+2014>which also rely heavily on exports<u+2014>the recent depreciation against the dollar has a downside. <u+201c>export volumes have been lackluster in recent years because of weak overseas demand, and a depreciating won in itself doesn<u+2019>t help to address this,<u+201d> said frederic neumann, co-head of asian economic research at hsbc in hong kong. <u+00a0><u+201c>if the exchange rate depreciates rapidly, this can accelerate capital outflows and push up interest rates in korea.<u+2019><u+2019> many asian exporters say they are reluctant to adjust their business plans, given the market volatility<u+2014>the dollar<u+2019>s fast rise could be followed by a fallback as markets adjust their expectations of what a trump administration can achieve. <u+201c>no company wants to be an fx trader trying to predict movements in currencies,<u+201d> said a spokesman for japanese auto maker nissan , which says it is sticking to its projection for 2016 of around <u+00a5>105 to the dollar. <u+201c>a lot of these decisions are made on long-term considerations.<u+201d> japanese policy makers have long hoped that improved profits from a cheaper currency would give companies the confidence to raise wages, in turn boosting consumer spending and lifting the country out of its long period of low inflation . but for now, companies seem unwilling to pass on any such benefits. <u+201c>in the case of large volatility in the fx market, it becomes harder for companies to take longer-term views of where the currency is headed,<u+201d> said daiju aoki, japan economist at ubs in tokyo. ubs says most japanese manufacturers are comfortable with a range of <u+00a5>105 to <u+00a5>110 to the dollar, but that a sharper depreciation of the currency makes it hard for companies to adjust their budgets. if the weaker yen doesn<u+2019>t lead to higher pay, then it may bring japanese consumers nothing but pain. <u+201c>inflation helps japanese consumers only if it translates to real income but if the current depreciation continues on in the future, maybe with a lag of half a year or so, then food prices go up and durable imported goods prices will go up, and that deteriorates the real income of japanese households,<u+201d> said takashi miwa, chief economist at nomura securities in tokyo. shifts in global trade patterns in recent years also mean that exporter nations may gain less as their currencies fall. many major japanese exporting companies have shifted production to elsewhere in asia or to the u.s. to supply overseas markets . so while a <u+00a5>10 depreciation versus the dollar might have increased annual gdp growth by 0.3 to 0.4 percentage point in the 1990s, the impact now is more like 0.1 to 0.2 point, says kiichi murashima, chief economist at citigroup in tokyo. in china<u+2019>s southeastern town of yiwu, a bustling consumer-goods wholesale hub, business owners so far have gained little from the recent sharp depreciation of the yuan said chen tiejun, head of the exports department at yiwu municipal bureau of commerce. <u+201c>most local enterprises in textile industry still face the pressure from rising raw materials and labor costs, which cuts into profit margins, as well as sluggish demand globally,<u+201d> said ms. chen. <u+2014>phred dvorak, sean mclain, yifan xie and kwanwoo jun contributed to this article.
for japan, a weak yen may be overvalued - wsj
suryatapa bhattacharya