TOKYO – The yen's sudden drop over the last week or so is delivering a glimmer of hope to Japan's big exporters, whose earnings have been battered by both plunging demand and the strong yen.
The yen's drop lifted the dollar to 97.87 yen Thursday afternoon in Tokyo - its highest since mid-November - jumping 9 percent from 90 yen two weeks ago.
That's welcome news for Toyota, Sony and other exporters because a weaker yen inflates their foreign income when repatriated to Japan.
"The yen's rise has been abnormal, and so it is good it's starting to be corrected," said Toyota Motor Corp. spokesman Hideaki Homma. "What we want the most is a stable foreign exchange rate."
A major reason behind the yen's retreat is growing pessimism about the world's second-biggest economy, which contracted at the fastest pace in 35 years in the fourth quarter. Political uncertainty, with the prime minister's approval ratings in the single digits, has also rattled investors.
While the yen's retreat will bring some relief to exporters, it likely won't deliver a quick fix to Japan's deep economic woes, said Yuji Kameoka, senior economist with Daiwa Institute of Research in Tokyo.
"It's certain the weakening yen is going to work as a plus for the Japanese economy. But the strong yen isn't the only reason for the economic contraction," Kameoka said.
When the financial crisis erupted last fall, Japan appeared to be in a relatively strong position since its banks had limited exposure to the toxic mortgage-related assets that have poisoned so many U.S. and European financial institutions.
But the drop-off in consumer demand from around the world has hammered Japan's export-dependent economy, and with no sign of a global recovery soon, the outlook for Japan remains grim.
With exports falling at an alarming rate - down by nearly half in January - many of the nation's biggest corporations have been slashing production, jobs and earnings forecasts.
