Strong YEN, Weak Economy

27 Nov

Today Japanese Yen hit strongest againt USD for the first time in 14 years. Yesterday’s big news was that 1USD was exchanged at 86 yen for the first time in 14 years, but today it broke the record.

Strong Yen is damage to Japanese economy, as it relies on exporting business. It’s said that we have to strengthen domestic consumption more and try not too much to be dependent on foreign demand.

Then what’s going on among domestic business?
I have to say it’s in the middle of deflation, unfortunately, which we can feel everyday even before we heard the statement from our government some time ago.

We’ve been soaked in deflation for a decade, and I cannot even remember what it was like to be inflation. (I’d say I don’t know inflation, because in the 1980s I was only a kid who didn’t know how adults enjoyed our bubble economy. Our economy has been bad since I started to work and nothing’s changed in a good way. Things are rather getting worse! ) In the past 10 years up until now, our salary is less likely to be raised, bonus is highly cut off, lay-off or bankruptcy is always, almost 0% of interests for the bank savings, and low prices are the only valid reason to attract customers.

g.u flyer

*Disclaimer: The photo is quoted from g.u.’s PDF flyer from here.

Especially low prices, I’m afraid this trend is accelerating. Do you know that we can buy a pair of jeans for only 990 yen at g.u. (g.u. is cheaper version of Uniqlo) or for 880 yen at super market such as Aeon or Daiei, and even for 690 yen at Don Quijote today? As far as what I hear, the good thing about that is not “You get what you pay for.” I’ve never tried these things, but people say they are mostly satisfied with the price and what they can get. Thus, they get more than what they paid for.

I miss old days when people said “Everything is expensive in Japan” as now it’s apparently wrong today. When I am inside the deflation economy, my perception or judgment is based on Tokyo pricing. With such observing point, there’s no wonder I felt that eating out in Australia or Europe required too much money when I travelled last summer. But now I know that they are normal, as their economy is growing with healthy inflation. It’s not that they are charging too much, it was our problem. Our economy situation was very weird and something insane. ๐Ÿ˜ฆ

Everyone is happy about low prices, including me. On the other hand though, I am so worried about what’s going on in our country. I feel sorry for the situation of our economy that allows extraordinarily cheap things like under 1000 yen jeans. How do you see this?

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28 Responses to “Strong YEN, Weak Economy”

  1. Jacky November 27, 2009 at 3:45 pm #

    I am from Hong Kong and travel to Japan many times. All I can say is that Japan has to recognise that things are now always "expensive". Since most of the items are made in China, India, or other 3rd world countries, the production cost is getting cheaper and cheaper. Do you think they can still earn much money while selling 1000 yen jeans? I mean do you know why can clothes sell at that price levels? This is because for those clothes with brand names they sell at much higher price than the production cost. Imagine the brand "Burberry Blue label", "Jill Stuart", "Rebecca Taylor" and others, they sell clothes with incredibly high price but if you look at the quality, most of those are polyester and it's cheap material, and all of those are made in China. You know most of the money the company spend on marketing and advertising, but not on the quality. Most of those want you to buy their clothes every season, or even every week!

    Therefore, Japanese have to wake up and think what they buy and the clothes inside their wardrobes – are they worth the pricing?

    • kirin November 28, 2009 at 12:06 pm #

      Do you mean jeans can be manufactured for under 1000 yen, still leaving enough profit to the maker? I don't buy high brand jeans because they are just too expensive!

  2. walter November 27, 2009 at 11:58 pm #

    I have always had a problem with understanding why a strong coin hurts the economy. It also means you can buy things you need to import more cheaply , no ?
    If your yen is stronger, can't you lower the price of your goods ?
    For all of my life , I've known inflation, with prices going up, the value of my money in the bank dropping , while the interest I get from the bank is not even half of the inflation.
    Now we're in a year of deflation and Oh the Horror : everybody is crying on TV about an economic disaster ,because we NEED INFLATION for a healthy economy.
    Interest has dropped to almost 0 . Even looking at my bank manager costs a fee ( well not really, but almost. ๐Ÿ™‚ )
    So My money has now stopped dropping in value ( I haven't seen prices come down though ) , so I can buy the same amount of stuff for the same amount of money and that is a bad thing ? Why do we need inflation ?

    • kirin November 28, 2009 at 12:11 pm #

      Low prices don't sound bad. But when living in a situation with no pay rise for over 10 years but with high risk of being laid off, it's natural we long for healthy inflation. (I'm so sorry many Japanese people kill themselves because they cannot continue life with no money…) That's going to make prices higher, but the air at working places should be much better.

    • Blue Shoe November 28, 2009 at 12:30 pm #

      We don't NEED inflation, but it is often a sign of a growing or heating economy. Likewise a lack of inflation can be a sign of a stagnant economy.

  3. Blue Shoe November 28, 2009 at 1:51 am #

    You're right that the strong yen is becoming a problem, but the outlook that things are cheaper is relative. If you can buy a pair of jeans for 1000 yen or less somewhere, it means that your yen are worth more now, not the the jeans are necessarily worth less. Until the yen starts to devalue in terms of the dollar and euro, the best thing to do right now is spend money abroad (either by taking vacations or by importing stuff from countries where your yen will go farther now).

    • kirin November 28, 2009 at 12:24 pm #

      Yeah, when I thought about foreign currency, now is the bargain time! ^ ^

  4. Cath November 28, 2009 at 9:12 am #

    Strong yen meant less tourists? I dunno… do people know that prices are falling? If they do, I think more and more people will purchase Japanese products. Japanese products are well known for the excellent quality.

    • Blue Shoe November 28, 2009 at 12:28 pm #

      Well, the way global economics work, a stronger currency means it's more expensive for people from other countries to buy your stuff. That's why China does so well at exporting – they have low production costs and very cheap currency. So right now Japanese exports are suffering.

    • kirin November 28, 2009 at 12:30 pm #

      I saw foreign tourists complaining on TV, but no one can expect things like this when he plans his trip. :p

  5. Keila Abiorana November 28, 2009 at 5:01 pm #

    Hey, konnichiwa!

    I saw your last post when you wrote about how where your thoughts about yourself when you where younger, and a special thing called my attention, when you said you'd like to hear more o f God, from someone who knows a lot about him (If thats whatt you really meant). So, I can help you with that. I already put my msn ID, so you can add me if you got one too, but if you dont, you can get in touch by my other e-mail: keilavirtual@yahoo.com.br
    I have many interesting things to tell you about God, no matter the religion which you belong to, so please, get in touch and dont forget about it, I am quite sure that will be important to your life!

    see ya!
    ~Keila-chan ^^

    • kirin November 30, 2009 at 12:33 am #

      Thanks, but maybe my way of writing was not correct. (I'm sorry my English is not very perfect.)
      I'm not that interested in specific God, but I'm interested in something like lessons from life experiences.

  6. Tom November 29, 2009 at 2:37 am #

    I'm going home on vacation at the right time.

    • kirin November 30, 2009 at 12:38 am #

      Good for you! You get paid in JPY and convert it into more USD! ๐Ÿ™‚ While my adsense payment in USD turned to be small Yen. (T_T)

  7. Lisa November 30, 2009 at 8:24 pm #

    Hmm, it's really a double-edged sword, isn't it? Both good and bad things…
    I hope the yen weakens by March when I plan to go to Japan for my internship though – it means I can exchange and get a lot more, which means more shopping, food…yay! ^^

    By the way I heard back from the company I first applied with, and they would like me to do my internship with them! I'm ecstatic! It's not 100% sure though, since it depends on if they move to new offices or not. (They're expanding) Fingers crossed though!

    • kirin December 1, 2009 at 11:19 pm #

      Good for you, Lisa!! I was wondering how things going on with this…but let's hope you can make it. ๐Ÿ™‚ Thank you for letting me know that.

      "a double-edged sword!" Do you say this in English? We have the same way of saying that means exactly the same thing. "่ซธๅˆƒใฎๅ‰ฃ(moroha no tsurugi)" I learned something new, and English way is easier to understand. When I first heard this Japanese way, I didn't get what it meant. ๐Ÿ˜€ Well, I wish you good luck for the internship!!

      • Lisa December 2, 2009 at 2:47 pm #

        Oh, interesting! I learned something new too! ^^ I had no idea the Japanese expression was the same! ๐Ÿ™‚
        I wish interesting proverbs and sayings would come up on the japanese exam I'm taking on Sunday… unfortunately most of the things we need to learn are merely necessary and not always so fun or interesting. Either way, ใŒใ‚“ใฐใ‚Šใพใ™๏ผ

      • kirin December 3, 2009 at 2:18 pm #

        I know what you mean. And that's why many of Japanese people still suffer from learning English, I guess. "This is a pen." is the first English sentence that I learned in school. I wonder why it cannot be "Hi, how are you doing?" or "How is it going?" or even "What's up?" This is a pen, which is too obvious to be told! (LOL) Whatever…good luck for your exam!! XD

  8. Eric C December 3, 2009 at 8:13 am #

    ไปŠๆ—ฅใ‚ใ€‚ Think that is right.

    I am starting to wonder… when you think about the price of currency, because the economies are so used to an old model, do you think this may affect the way that things are going?

    The reason I ask is because the value of the U.S. dollar is going down and the power of the Japanese Yen is rising. This makes me wonder if the current situation is similar, though it just strikes me as odd when you stated that the yen is increasing. I see similarities in almost no interest rate in currency in the banks as well as layoffs here. Of course I just quit my job so I could go study more, but I bet one of the reasons the market is acting that way correlates to other economies as well.

    Anyway, on another note, I am trying to learn Japanese so I may be able to understand it better. I just enjoy the culture really, so I am trying to learn more about it. It is best to read about the culture in Japanese than to read it with a translator because the translators aren't always accurate, you know?

    • kirin December 3, 2009 at 2:44 pm #

      ใ“ใ‚“ใซใกใฏใ€‚(In written way, we usually write it in this way.)
      I'm sorry I was not sure for what you meant. (Sorry my English is not perfect. My mother language is Japanese.)
      It looks like usually weak USD leads to strong Yen and high price of gold. Strong Yen hits Japanese stock exchange market because our market is supported by many of big exporting companies like Toyota. Strong Yen is a big damage to such companies and to those who work there. That's the story usually spoken on TV. But on the other hand, strong Yen allows import less expensively and so many items including foods that we import from foreign countries go cheaper, which as a result, makes our life easier.
      We've been living with 0% interest rate for over 10 years. But U.S. economy went strange only since subprime loan problem a few years ago, right?

      If you can read things in Japanese, that's the best thing. I found there are less native Japanese people who blog in English, and that was another motivation for me to do this for my audience. ๐Ÿ™‚

  9. Eric C December 3, 2009 at 8:08 pm #

    Sorry if you didn't understand what I meant. I often word things funny.

    This gave me an idea. If you wanted to, because the Japanese Yen is still strong, could you trade the yen for another currency to hold on to until the Yen's value goes down? What I mean is you could exchange it for another currency that is typically strong so later on you could exchange it back for more Yen.
    Of course, by doing that, you would have to ensure you have some money now, but it is a way of making money for the future.

    As for what you said, you are right that it costs less for you to import things. I would see that as one advantage, but it depends how you look at it.

    Either way, the site is a good way for me to see some aspects of Japanese culture. ๐Ÿ™‚

    • kirin December 5, 2009 at 1:15 am #

      I know now is good time for sending money to my bank account in the U.S or other countries. Especially AUS dollar is promising! :p

  10. cin December 4, 2009 at 7:37 am #

    Seeing it from a tourist point of view, this price drop is AWESOME! ๐Ÿ˜€
    But at the same time it is worrying for the businesses and workers over there. I know when the global economic crisis was on the high, so many people got laid-off their jobs and companies went bankrupted. I am still a student so i wouldn't understand how it feels like just yet but soon I will be in the workplace~

    • kirin December 5, 2009 at 1:22 am #

      Inside Japan you feel cheap, but if you exchange for your currency, you'd feel expensive. 1 AUS dollar recorded over 100 yen while ago, which was of course before the economic crisis in 2008, and now it's 80 yen or something. You get 20 yen less per 1 AUS dollar when you exchange your AUS dollar to JPY.

      That's one of the reasons I went to Sydney and some European countries in the summer of this year. Thanks to strong yen, I didn't have to spend as much as money that I would have had to spend in 2007 or early 2008. ๐Ÿ˜‰

  11. Troo December 8, 2009 at 4:46 pm #

    Low prices are available in most first-world countries. Supermarkets or low-quality stores (e.g. Primark, Matalan) in the UK sell pairs of jeans for just £3 (about 420ๅ††), the average price in high street stores for better quality is between £10 – £30 (about 1,400ๅ†† to 4,200ๅ††), and you can easily spend £150 (about 21,000ๅ††) on a designer pair if you so desire.

    I think it's less a sign of a weak economy and more a symptom of consumer demand. Certainly in the UK the past decade or so has led to a generation of teens and young adults who want cheap, near-disposeable clothing because they wish to be seen as fashionable. Some have even taken on board the idea that they never wish to wear the same item of clothing twice. This is wasteful and selfish to say the least, but retailers have leaped onto the low-price, low-profit margin, high-turnover bandwagon.

  12. Troo December 8, 2009 at 4:46 pm #

    This, in turn, is one of the many factors in China constantly devaluing the renminbi (yuan) – doing so keeps foreign retailers coming back to Chinese manufacturers time and again. The knock-on effect of this is that other exporters suffer because consumers want cheap goods and care little for the ethics of their production – I witnessed one interview with some teenagers shoping in Primark, and the interviewer asked them whether they minded that the clothes they'd bought were lovingly handcrafted by children in Chinese sweatshops working 12 hour days, and the flippant reply was "I don't care, just so long as I get clothes cheap".

  13. Troo December 8, 2009 at 4:46 pm #

    The Yen is also, sadly, suffering from the greed of global consumers who want to borrow, live in debt, and own more than they can afford. Because Japanese banks were extremely sensible and didn't fall into this whole sub-prime lending nonsense, they're now in very good financial health. This means the Yen is incredibly strong in spite of Japan's otherwise weak economy because the banks themselves are in plenty of credit. It also means that the Yen's currently seen as a safe, stable currency, so forex traders and investors are buying lots of it – and as we all know, when something sells like hot cakes the price goes up ๐Ÿ™‚

    I hope that helps clear things up a little.

    • kirin December 10, 2009 at 2:02 pm #

      Thank you for your long comment, Troo. And thank you for spliting your comments as the system doesn't accept long one. ๐Ÿ™‚

      I heard things were very expensive in the U.K a few years ago, before the sub-prime or the economic crisis. But 420 yen for a pair of jeans? OMG!! (*_*) Japanese banks were not very much involved in sub-prime issue, yet the world-wide economic crisis hit our stock exchange market and economy, too, and I thought strong Yen doen't mean strong economy, it's just something relatevely happening when cross-Yen currencies go weak.

      Before sub-prime, Yen carry trade was very popular in Japan, at forex. Sell JPY, buy AUS dollars, and receive difference of interests daily. But since Yen surged, due to sub-prime issue, many forex investers had to order stop-loss.

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