By Tetsushi Kajimoto

TOKYO (Reuters – Nearly 60% of Japanese firms want the central bank’s policy of huge monetary easing to be ended this fiscal year. This was due to economic pain caused by the weak yen. Reuters surveys show that roughly 25% of respondents are asking for immediate action.

Japan Inc enthusiastically supported the Bank of Japan’s policies less than one year ago. However, this year’s sharp slide in the Japanese yen at a two-decade low has driven up fuel prices and raw material imports. This not only means higher corporate costs, but it also impacts household spending.

In this month’s latest low, the yen was at 131.34 USD. This is a decrease of 14% from the beginning of the year.

One manager from a chemical manufacturer wrote that any weakening of yen exceeding 125 against the dollar was excessive. He suggested this to the monthly Reuters Corporate Survey.

Two-fourths of respondents believed that the central banks should cease large-scale stimulus to monetary policy now. However, 23% of those surveyed said it would by the second half of September.

Overall, 64% would like large-scale stimulative measures to be implemented by March’s fiscal year end. This number increases to 84% in April as BOJ Governor Haruhiko Kuroda finishes his term.

Kuroda said that while the yen has moved quickly, he claims that an overall weak yen is good for the economy. Kuroda also stated that the central bank would continue with monetary strong easing due to the effects of the pandemic, and the tepid inflation. This is in stark contrast to the shifts in interest rates elsewhere around the globe.

The majority of respondents want to see changes in BOJ policies. 35% would prefer interest rates to be increased, while 58% wanted negative rates to be scrapped. 25% desire to see the bank lower its target inflation rate to 2%. For this question, you can provide multiple responses.

Results of the poll, conducted between April 26 and May 13, among 500 non-financial large and medium-sized firms in the United States, saw 230 respondents. This is a significant change from July, when similar questions were asked about monetary policies.

72% saw an improvement in Japanese businesses’ performance from BOJ’s policy. A majority of them believed that ultra-low rates should be maintained for the next 3-4 years.

However, the sharp decline of the currency is more severe than the usual benefits associated with weaker yens. These include the inflation of overseas profits and the longer-term ability to export at a lower price. Japanese exporters also continue to shift their production away from Japan.

A retailer manager stated, “The impact of higher raw materials prices and other imports from the weaker Japanese yen on the economy is greater than the increase in profits for exporters.”

Survey respondents respond on the condition that they remain anonymous.

BOJ SLAMED

Some BOJ managers weren’t tolerant in their critiques of BOJ policies, and they expressed concerns that Japan’s weak yen might eventually harm its economic strength.

One manager of a service firm stated that the easing policy had been “only a stupid plan that weakens nation power.”

Survey results also revealed that many firms are wary about increasing capital expenditure due to rising input costs and the effect of weakening yen. Half of respondents plan to maintain business investment at a flat level this year and 14% predict it to fall.

Survey results also revealed that nearly two thirds of Japanese companies have been affected by China’s anti COVID measures, including the lockdown in Shanghai. Ten percent stated that they had suffered a “big effect” on their business.

A manager at the chemicals manufacturer wrote, “Imports to China-produced automobile parts have stopped. This has placed downward pressure upon car output.”

($1 = 129.02 yen)