Japan’s energy importers are warning that the tumbling yen is exacerbating a surge in fuel costs, and may weigh on their bottom line and boost prices for consumers.
While oil prices have slipped from the highs seen earlier from Russia’s war in Ukraine, the sharp weakening in the yen is likely to keep upward pressure on imported fuel costs. The yen briefly breached the ¥125 mark against the dollar on Monday for the first time in seven years.
“The yen becoming weaker is hitting us energy importers because we must purchase fuel with dollars,” said Kazuhiro Ikebe, president of Kyushu Electric Power Co., one of Japan’s regional utilities. “It is extremely worrying.”
The depreciation of the yen will amplify soaring energy and commodity prices that are hurting both companies and consumers. Finance Minister Shunichi Suzuki highlighted the need to check if a weaker yen is harming the economy, as he indicated heightened government concern over the currency’s recent slide.
Japan’s electricity bills are already rising every month due to higher fuel costs, and the yen’s slide is making that worse, said Kyushu Electric’s Ikebe.
Although our LNG supplies are secured under long-term contracts, “it is hurt by the depreciation of the yen because it is linked to the oil price,” said Yukinori Michinaga, president of Saibu Gas Holdings Co. “It’s making us nervous.”
The price of crude oil in Japanese yen has nearly doubled over the last year, while the fuel priced to the U.S dollar has increased by about 75% over the same period.
The yen’s recent weakness has gone “too far,” Kengo Sakurada, chairman of Japan Association of Corporate Executives, said at a briefing in Tokyo on Tuesday. A slightly stronger yen would have helped companies that are suffering from higher energy costs and inflation, he added.
“There is danger that the economy itself will shrink or go in the wrong direction if fuel and raw material prices rise,” said Hitoshi Nagasawa, president of Nippon Yusen KK, which provides marine transportation services.
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