The Japanese yen, back near its weakest against the greenback in over three decades, may extend its bruising decline if the central bank sticks to a policy that’s keeping interest rates low, Suntory Holdings Ltd. Chief Executive Officer Takeshi Niinami predicts.
(Bloomberg) — The Japanese yen, back near its weakest against the greenback in over three decades, may extend its bruising decline if the central bank sticks to a policy that’s keeping interest rates low, Suntory Holdings Ltd. Chief Executive Officer Takeshi Niinami predicts.
The currency could fall to 170 yen per dollar, a level last seen in 1986, he said in an interview in Tokyo on Thursday, without providing a time frame for the forecast. Higher interest rates may still be a few years away as the Bank of Japan needs to manage any risk to the economy from sudden hikes, he said.
Niinami’s prediction is even more bearish than last quarter’s top forecaster for the yen, Tohru Sasaki, JPMorgan Chase & Co.’s head of Japan markets research, who sees it weakening to 155 per dollar next year. The currency traded around 147.50 per dollar in Tokyo on Thursday, having hit a fresh 10-month low this week.
Read More: Top Forecaster JPMorgan Sees Yen Sliding as Far as 155 to Dollar
The yen’s 11% slump against the dollar this year has made it the worst performing Group-of-10 currency as the BOJ sticks with rock-bottom interest rates while its global peers hike. Despite a surprise move in July to loosen its yield curve control policy — a pillar of its effort to suppress borrowing costs — the yen has remained resolutely weak, sparking fresh speculation this month that officials could intervene as they did last year.
Read More: Japan Ramps Up Verbal Defense as Yen Sets Fresh 10-Month Low
While inflation has picked up in Japan, BOJ Governor Kazuo Ueda has repeatedly said he must see more signs of sustainable price hikes accompanied by wage growth before the bank can shift away from its massive stimulus.
Investing Abroad
The weak yen has complicated operations for many businesses, as it squeezes profit for those dependent on the import of raw materials while boosting the earnings of firms that get most of their revenue from abroad. Suntory makes about half of its revenue outside of Japan.
Firms should look to invest more overseas, and sectors like digital, health and green are areas of potential growth, Niinami said.
Back at home, wages are set to continue to increase and companies are likely going to need to offer higher salaries in the next two to three years as they grapple with a labor shortage, he said. Japanese firms offered the biggest pay hike in decades at this year’s negotiations with workers, according to Rengo, the country’s largest union federation.
“The landscape has changed from deflation to inflation,” said Niinami, who heads Japan’s Association of Corporate Executives, one of the largest business lobbying groups, as well as being a member of the country’s Council on Economic and Fiscal Policy. “Inflation means the private sector has to take a key role to invest because money is less valuable.”
Closely held Suntory is best known for its beer and whisky offerings and acquired Beam Inc. in 2014.
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