Japan’s Yen at 34-year low, How does it impact India?

Japan’s Yen: Japan’s economy is wading through turbulent times, firstly, the bold decision to hike the interest rate after a gap of 17 years, and now the official currency Yen hitting a 34-year low, the lowest level since 1990, sending shockwaves through global markets. Following a meeting of Japan's leading monetary authorities, concerns over the steep depreciation of the currency have been magnified, prompting hints of imminent action if deemed necessary.

Impact on India
The recent sharp drop in the value of the Japanese yen has got experts talking, especially about how it might affect different industries in India. The automobile industry seems likely to benefit because many Indian companies work closely with Japanese counterparts. With the yen now weaker, it means Indian firms can import stuff from Japan at a lower cost, which could make them more competitive and innovative.
Maruti Suzuki India Limited (MSIL), the country’s biggest carmaker, could be one of the big winners from this. Also, stocks of companies linked to Japan, like Motherson Sumi, and Sharp, are getting more attention from investors who think they might do well because of the yen's drop.

This also means that Indian businesses importing goods from Japan, like electronics or auto parts, might see costs going down, which could boost their businesses.
The change in currency values could also shake up the trade relationship between Japan and India. Even though Japan has been exporting more to India, the yen getting weaker might lead to India importing more from Japan in the future. To steady the situation, the Bank of Japan has started buying Japanese government bonds, aiming to stop the yen from falling too fast and to keep the market calm.

In this uncertain time, businesses need to keep a close eye on what's happening and be ready to adjust their plans accordingly. The yen's big drop is going to affect different industries in different ways, so it's important to be prepared for whatever might come next.

Japanese authorities on Yen

Japanese Finance Minister Shunichi Suzuki has said that the government's vigilance in the face of the yen's recent nosedive, signalling readiness to take action against excessive exchange-rate volatility. Suzuki emphasised that authorities are closely monitoring not just the dollar/yen levels, which breached 152 yen per dollar, but also scrutinising the underlying factors driving these fluctuations with a sense of urgency.
While acknowledging the merits of a weaker yen, Suzuki expressed concerns about its potential impact on prices, stressing the importance of stable currency movements aligned with economic fundamentals. His remarks come in the wake of the yen's descent to its lowest point since 1990, spurred by robust U.S. inflation data that propelled the dollar to 152.90 yen in Asian markets on Thursday.

Market observers have been on high alert for signs of intervention from Japanese authorities, reminiscent of their actions in 2022 when they stepped in twice to support the yen amid a similar depreciation. Despite acknowledging the rapidity of recent yen movements, both Suzuki and top currency diplomat Masato Kanda refrained from categorising them as excessive, opting instead for a cautious stance on potential intervention.