Car importers eye cheaper prices as Japanese yen weakens

A man looks at a share price board in Tokyo on Monday. Japanese shares opened 1.66 per cent higher Monday following a jump in the US dollar against the yen. AFP 

By GEOFFREY IRUNGU

In Summary

• An economic shift by Japan has seen its currency weaken by nearly a fifth to about 100 units to the dollar.
• The depreciation of the yen is expected to translate into significant cost savings for importers of Japanese goods.

Recent weakening of the Japanese yen has opened an opportunity for importers of goods from the Asian country to spend less money.

An economic shift by the Japanese government intended to spur growth of the economy by printing more cash has seen its currency weaken by nearly a fifth to about 100 units to the dollar.

Kenya is a major importer of Japanese goods such as second-hand cars and spare parts, and the depreciation of the yen is expected to translate into significant cost savings.

“We expect to see cheaper cars entering the market from June or July, the impact of the currency changes will be felt in a few months,” said Kenya Autobazaar Association chairman Charles Munyori.

Those who buy spare parts, electronics and other machinery from Japan will also spend less for the same goods as the shilling can exchange for more yen.

At the beginning of the year, 100 Japanese yen was being bought at nearly Sh100, but is now averaging around Sh84 — meaning it is cheaper to get the yen than previously.

Mr Munyori said the amount of cash saved as a result of the cheaper imports would depend on the dollar cost of a unit. “People can save Sh15,000 for the smaller units of up to $10,000 (Sh840,000) and even up to Sh120,000 for the bigger vehicles costing $30,000 (Sh2.5 million) and above,” he said.

The Japanese yen has depreciated rapidly since the Bank of Japan on April 4 announced an unprecedented monetary expansion programme which would see it inject $1.4 trillion in less than two years.

The central bank of the world’s third biggest economy intends to double the country’s monetary base to jumpstart growth. The move is intended to break the cycle of economic stagnation that Japan has experienced for two decades.

Reuters reported Monday that the yen was approaching 100 units against the dollar and further depreciation was expected. “Although the yen hasn’t seen 100 against the dollar yet, the market’s expectation for further depreciation is high,” Reuters quoted Investrust chief executive Hiroyuki Fukunaga as saying.

The weakening of the yen is seen as a boon to major exporters in Japan, which in turn should help lift GDP as it increases demand for Japanese goods.

Export-oriented firms are expected to benefit. However, the monetary expansion by the Japanese central bank has rattled major western countries.





They see the depreciation of the yen as putting Japanese goods at a competitive advantage relative to their own.

The US and major western European nations have been on a monetary expansion cycle since the global financial crisis set in late 2008.