Nearly half of Japanese firms are experiencing negative business impact from the Bank of Japan’s interest rate hikes, with higher borrowing costs hurting bottom lines and discouraging capital investment, a Reuters survey showed on Thursday.

Impact on Businesses

About 5% of survey respondents said BOJ hikes have had a significant negative impact on operations and 44% said they have had a somewhat negative effect, whereas 46% said they have had no impact. The remaining 5% said higher interest rates have had a somewhat positive effect on their businesses.

A machinery maker official wrote in the survey, ‘Interest burden has already grown sharply from last year. A further increase would have a large impact on our company.’

Desirable Timing for Rate Hike

Asked about desirable timing of any subsequent rate hike, 12% chose the current July-September quarter, 27% picked October-December and 27% selected the first half of 2027, while 26% said an increase would not be desirable at any time.

A transportation company manager said, ‘We need to carry out investment for maintaining existing facilities as well as fresh capital investment. It’s not easy to ‘normalise’ our mindset that is accustomed to negative or low interest rates when we face borrowing costs for bank loans.’

The poll was conducted by Nikkei Research for Reuters from July 1-10, with 218 companies responding on condition of anonymity.

Yen Weakness

A third of respondents found the trend of yen weakness against the U.S. dollar positive for earnings, whereas 55% deemed it negative. A weaker yen provides a tailwind for exporters by boosting the yen value of overseas earnings, but it drives up the cost of imports.

A food company manager said, ‘Costs have risen as we use imported materials, and it is difficult to raise the prices of our products. We are concerned about an adverse effect on our financial performance.’

Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.