In Japan, the fall of the yen invites itself into the electoral campaign

Inaudible and divided for years, the Japanese opposition has discovered a new campaign argument to try to regain some seats from the conservative majority, led by the Liberal Democratic Party, during the senatorial elections on July 10. She now accuses Japanese Prime Minister Fumio Kishida of being partly responsible for the surge in inflation aggravated by the rapid collapse of the yen. This Wednesday, the Japanese currency, which has lost 18% of its value against the dollar since the beginning of the year, is moving to its lowest level in 24 years. A greenback can now buy 136.70 yen.

On Tuesday, during the first televised debates marking the opening of the electoral campaign, Kenta Izumi, the leader of the main opposition party, the Constitutional Democratic Party of Japan, accused the government of having ignored this fall in the yen and thus fed the “Kishida inflation”. “Of course, it is difficult to stop the rise in gasoline prices but the real question is to face the weakness of the yen”, launched the elected official, before pleading for a rapid revision of the monetary policy of the Bank of Japan.

An isolated Bank of Japan

Considering that the inflation observed in the archipelago (2.1%) is only temporary and imported, the central bank categorically refuses to follow the global movement of raising rates, for fear of penalizing an already convalescent Japanese economy. Because of this difference in strategies, major investors are turning away from Japanese bonds in yen, whose yields remain close to zero, to acquire more profitable securities, particularly in the United States, where the Fed is continuing to increase rates .

While the BoJ’s strategy protects Japanese companies and individuals from soaring borrowing costs, it has accelerated the depreciation of the yen and the surge in the prices of many everyday products. The price of a tube of mayonnaise has thus swelled by 30% over one year. That of cooking oil has gained 50% when producers of chips, instant noodles and cookies also waltz their labels or reduce their portion sizes. On Tuesday, a study by the “Nikkei” showed that three-quarters of the country’s major restaurant chains were preparing price increases to offset the surge in their own bills.

The government resists

Challenged, Fumio Kishida continues to defend the ultra-accommodating policy of the Bank of Japan and refuses to fight against the depreciation of the yen which is likely to accelerate in the coming weeks. He recognizes that the rapid rise in the price of foodstuffs is becoming problematic, but promises to respond to it with subsidy programs or consumer vouchers. Assurances that seem to satisfy public opinion for the moment.

All the polls show that the Liberal Democratic Party should retain, with its right-wing allies, a large majority in the Upper House, of which only half of the 248 seats will be up for grabs on July 10.

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