Yen depreciation for the first time in 24 years
The yen has depreciated for the first time in 24 years. Actually, I have a vivid memory of the last time the yen depreciated in 1998. From June to August, the dollar remained in the 140 yen range. At that time, I was assigned to the city of Kupachino, California, USA, and lived with five family members. The exchange rate was 105 yen to the dollar in January 1996, and 115 yen to the dollar in January 1997. As for salary, Japanese salary is converted into dollars and transferred once a month, but when the yen depreciated in 1998, the transfer amount was about 3/4 of the amount when I was assigned to the United States. Most of the local rent was paid by the company, but I remember that my life was quite difficult because I had to repay my mortgage in Japan. Shopping at Japanese supermarkets, which are a little expensive, has dropped sharply. Also, when I took a short trip, I withdrew my Japanese deposit and had it sent to the United States. In the end, I got an allowance called COLA (cost-of-living adjustment). The allowance for adjusting living expenses was not given to my predecessor who had been assigned from Japan until then, but it was given because my salary would be difficult due to the depreciation of the yen. I think that COLA allowances were rarely given to transferees from developed countries. Going back, from April to July 1995, one dollar was in the 80 yen range, so if the person who was assigned at that time had the same salary as me on a yen basis, the salary transfer would be about 70% more on a dollar basis. It means that he was enjoying it.
Will the yen continue to depreciate?
It is clear that the cause of the yen’s depreciation this time is the difference in interest rates between Japan and the United States. Inflation is a top priority in the United States, and interest rates are likely to rise at an even faster pace. Meanwhile, the Bank of Japan’s Governor Kuroda stated at a press conference after the monetary policy meeting on July 21 that he will continue monetary easing measures. It is unlikely that the BOJ’s monetary policy will change in a short period of time, and as a result, the interest rate differential between Japan and the United States is likely to widen. Such a situation is likely to induce dollar-buying and yen-selling transactions, and the yen is likely to continue to depreciate for some time. However, this ambiguous period of “for a while” is unpredictable. Looking back 24 years ago, the dollar was 140 yen in July, but it was 115 yen at the end of the year. Also, one year later, at the end of 1999, the price was 102 yen. You can see that it is changing dynamically in half a year or a year.
Is the depreciation of the yen good or bad?
There is a debate as to whether the depreciation of the yen is good or bad. Generally, the disadvantage is the burden on the household. Wheat prices, electricity, and gas prices will rise immediately due to the depreciation of the yen. On the other hand, the merit is that the export industry will become more active. It is not easy to determine which of the advantages and disadvantages is greater, but it is said that the advantages are greater at the current level of yen depreciation. However, the impact on households varies depending on the income group, and I feel that it is difficult to judge by the total amount. Also, I think it is meaningful that Japan’s energy policy and food policy are discussed at this time, but the perspective of medium- to long-term industrial policy is important for these examinations, and the exchange rate is yen. I don’t think it makes sense to proceed in such a way that the discussion calms down if it swings in a high direction.
Yen depreciation also affects business-to-business transactions
Earlier, the demerit of the depreciation of the yen raised the burden on households, but in reality, it also has a significant impact on business-to-business transactions. The corporate goods price index in April this year grew by about 10.0% year-on-year. Behind this is the high growth in import prices of 44.6%. At the stage of progressing to intermediate goods, final goods, and consumer prices, the growth of sales administration costs and operating income is suppressed, so the final growth of consumer prices is only about 2%. In our business as well, product costs will rise due to the impact of the depreciation of the yen. Product costs have already been on the rise due to the shortage of semiconductors since last year, but the yen is depreciating and there is, even more, cost pressure. Price revisions for some products were implemented this spring, but there is no doubt that the price revisions of importing companies are affecting the inter-company price index.
Stratus Technologies in the next chapter
I was paying attention to the above-mentioned depreciation of the yen and the impact of each industry in order to refer to the business plan for the second half of September, but at the end of June, news from a completely different perspective came in. The news is that US-listed company SGH (Smart Global Holdings) has agreed with shareholders to acquire Stratus Technologies. The acquisition is based on the premise that Stratus Technologies’ products and roadmap will be maintained and the level of service will remain the same. SGH also has a division that develops and manufactures equipment used in HPC (High-Performance Computing) and AI, and it seems that future synergies are expected. An application has been filed with US authorities, and it seems that they are aiming to complete the acquisition by the end of the second half of this year’s calendar. We would like to update it later when we can share the details with you.