Tokyo – Taku Ueno, chief executive of Takara MC, which runs 43 supermarkets south of the capital, is leading a wave of Japanese retailers seeking longer‑term contracts and financial hedges to blunt the impact of a weak yen on everyday grocery prices. Ueno’s stores import U.S. beef, Spanish olive oil and Italian tomatoes, and the cost of those goods has risen almost daily as the yen continues to lose value against the dollar.
Direct contracts to freeze prices
Ueno says his company now negotiates price and exchange‑rate terms with overseas suppliers for up to a year at a time, rather than the month‑by‑month deals that were common before. “For U.S. beef we used to negotiate every month, but the exchange rate is changing so quickly we now negotiate every three months,” he explained. “That means we don’t have to raise prices for at least three months,” he added, hoping to keep shelves stocked without passing steep costs onto shoppers.
Financial instruments gain traction
Bankers note that smaller Japanese firms have traditionally avoided futures, forwards and options, preferring to absorb modest import‑price hikes. The current environment, however, has pushed many to adopt these tools. Daiwa Securities reports a surge in hedging demand, and Bank of America has expanded its Japan foreign‑exchange team to meet the need.
Akira Hirayama, executive director of product marketing at Daiwa, said, “Previously companies would hedge through banks just for a few months to a year. Now there are cases where customers want to lock rates in for as long as five to ten years.” This longer‑term approach reflects the belief that the yen’s decline is likely to persist.
Why the yen is under pressure
Japan’s yen has been the worst‑performing G10 currency, losing more than 30% against the dollar over the past five years. Low domestic interest rates and the Bank of Japan’s gradual rate hikes have limited the currency’s appeal. Under Prime Minister Sanae Takaichi, concerns about Japan’s large public‑debt burden have added to investor unease.
The yen briefly touched a near‑40‑year low in July, just under 164 per dollar, before authorities intervened. It now trades around 159 to the dollar.
Impact on other import‑heavy firms
Japan’s largest furniture retailer, Nitori Holdings, estimates that each one‑yen rise in the dollar‑yen rate cuts its profit by roughly 2 billion yen (about $12.5 million). While Nitori does not currently hedge, it says it would consider currency forwards if the yen’s weakness continues long term.
Exporters, too, are watching the market closely. Namato Nagahama, head of global foreign‑exchange sales at Bank of America in Tokyo, said exporters are beginning to hedge against a stronger yen to lock in overseas earnings.
Market outlook
Short‑term options pricing shows a jump in the cost of insuring against a rise in the yen, but one‑year options have remained relatively stable. Daiki Hayashi, head of Japan sales and marketing at J.P. Morgan, noted that most investors still expect the dollar‑yen pair to stay within the 155‑165 range, with little chance of dropping below 150.
Overall, Japanese businesses are moving from a reactive stance—absorbing price increases—to a proactive one, using contracts and financial instruments to secure stability for both retailers and consumers.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
