The nation’s biggest business lobby is urging large companies to pass on the benefits of a weaker yen to their suppliers as the Abe administration seeks to relieve pressure on small firms.
“We are calling for their cooperation and spreading the word across the country,” Takeshi Hamada, a spokesman at Keidanren, said Thursday in Tokyo. “We have to wait to see how big companies will react. I think our actions will have some effect.”
Hamada’s comments come after deputy economy minister Yasutoshi Nishimura reinforced the government’s determination to help suppliers that have been hurt by higher costs of imported raw materials.
“While the weak yen has been good for the Japanese economy overall, there has also been a negative side to that,” Nishimura, 52, said in an interview Tuesday at Bloomberg headquarters in New York.
The effort reflects angst in some quarters of the Japanese economy about a policy of reflation and monetary expansion that has sent the yen to its weakest against the dollar in eight years. While large exporters have seen profits swell — firing up the nation’s stock market — they have been reluctant to boost domestic investment or increase wages much more than the pace of inflation.
Prime Minister Shinzo Abe has repeatedly called on the country’s large corporations to step up their contributions to his campaign to end two decades of stagnation. Finance Minister Taro Aso has suggested a levy on retained earnings should be examined.
Nishimura said that midsize and small companies were hurt by the weakening of the yen. He said the government had compiled a supplementary budget to support these companies and will try to convince big exporters to raise the prices they pay suppliers.
Keidanren has been calling on companies at meetings and through bulletins to allow their suppliers to raise prices to pass on increased costs, Hamada said. He pointed to Toyota Motor Corp. as an example of one company that appeared to be moving in that direction.
As Toyota raised its fiscal-year profit forecast in February to a record ¥2.13 trillion, the manufacturing giant said it may ease up on its usual practice of squeezing suppliers to lower prices of auto parts.
The deputy economy minister is helping spearhead the government’s reform plans as the right-hand man to economy minister Akira Amari, a key architect of “Abenomics.” Six years ago, when Abe’s Liberal Democratic Party was out of office, Nishimura ran for the party leadership, losing out to Sadakazu Tanigaki. He was elected to the Diet in 2003 after a career in the civil service.
The 29 percent decline in the yen against the dollar since Abe took office in December 2012 has helped exporters including Toyota and propelled the Nikkei 225 stock average through the 20,000 line in April for the first time in 15 years.
Even so, the reluctance of companies to increase investment is hobbling a recovery from the recession that followed last year’s sales tax hike. Capital expenditure fell for a third straight quarter in the quarter through December, capping economic growth at an annualized 1.5 percent after two quarters of contraction.
Twenty years of a deflationary mindset makes it difficult to change attitudes, said Nishimura, a law graduate from the University of Tokyo who later went on to the Graduate School of Public Policy at University of Maryland.
The yen’s depreciation has drawn scrutiny from South Korea, Japan’s main export competitor, as companies including Hyundai Motor Co. and Samsung Electronics Co. say the strongest Korean won against the yen in seven years has hurt earnings.
“We’re not targeting any levels” for the currency, said Nishimura, a native of Akashi, near Kobe. “Each country has different fundamentals and exchange rates will reflect that.”
The issue of higher costs for importers and smaller companies is drawing concern in Abe’s ruling Liberal Democratic Party. Policy chief Tomomi Inada said in an interview that Japan needs to address the negative impact on both small companies and regional parts of the economy.
The number of Japanese bankruptcies linked to the weak yen surged to 345 last year, about 2.7 times that of 2013, even as the total number of failures declined 11 percent, according to Teikoku Databank Ltd.
Analysts anticipate the yen will continue to weaken as the central bank maintains its unprecedented campaign to push inflation to 2 percent by enlarging the monetary base.