Prime Minister Shinzo Abe's weakening of the yen through stimulus measures may be in danger of becoming too much of a good thing, according to Fukoku Capital Management Inc.
"There's the potential for a bad kind of yen depreciation if the Bank of Japan buys too much government debt, without any benefit to the real economy," Yuuki Sakurai, president of Fukoku Capital, which manages ¥1.8 trillion, said in a recent interview in Tokyo. "If the yen keeps weakening, it's not good for the current account," he said without giving a specific currency level.
Fukoku's Sakurai joins Kokusai Asset Management Co., which manages Japan's biggest bond fund, in warning further depreciation could hinder rather than help the recovery. The yen tumbled 18 percent versus the dollar last year, boosting exporters' earnings and fueling a 51 percent stock rally. The nation also recorded a record trade deficit as energy imports swelled while nuclear reactors remained idle from the Fukushima meltdowns in March 2011.
"In the past, a weaker yen would make the Japanese economy as a whole more profitable," Masataka Horii, who runs the ¥1.3 trillion Global Sovereign Open Fund at Kokusai, said in a recent interview in Tokyo.
"But now that the amount of imports is bigger, the weaker yen is problematic."