The yen has become stuck around a 34-year low against the dollar after months of declines, increasing concern the currency is becoming a liability for Japan’s economy and stocks.
Japan’s depreciating currency has helped the country’s shares climb to records, as many of the biggest companies are manufacturers whose income earned abroad rises in yen terms. In the broad Topix index, transport equipment firms including automakers and electrical machinery companies represent more than 25% of the weighting.
But the yen’s slide has pushed up import bills in Japan, keeping domestic consumer spending tepid since the currency began weakening in 2022. That’s weighed on companies that rely on the home market for profits. Firms including retailers and railway operators underperformed the broader market despite a record number of tourists visiting from abroad. Earnings announcements by most Japanese companies in coming weeks will likely highlight the rising divergence between strong and weak companies.