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  • By The Financial District

China's COVID Policy, Yuan's Rise vs Yen Hobble Japan's Economy

Japan's economy, which has already been facing downward pressure against a backdrop of the Ukraine crisis and the yen's depreciation, may also be plagued by China's radical "zero COVID" policy and the yuan's rising trend, Kyodo News reported.

Photo Insert: Japan may experience "bad inflation" -- a combination of an economic downturn and higher costs.

With energy and commodity prices increasing globally in the wake of the full-fledged attack on Ukraine by Russia, a major oil and gas producer and exporter, resource-poor Japan might experience "bad inflation" -- a combination of an economic downturn and higher costs.

The yen is certain to extend losses against other key counterparts including the US dollar and the euro as the Bank of Japan has kept up its ultraloose monetary easing, probably driving up import prices and accelerating inflation at home, Mainichi Japan also reported.

Under such circumstances, China's business environment, often swayed by the Communist-led government's anti-epidemic restrictions, and the strength of the yuan known as the renminbi, are expected to deal a further blow to Japan's economy, the world's third largest.

Even following the end of the 2022 Beijing Winter Olympics and Paralympics, China has pledged to continue taking drastic steps to tackle the novel coronavirus spread, such as imposing lockdowns on cities when outbreaks occur and quarantine on travelers from abroad.

All the news: Business man in suit and tie smiling and reading a newspaper near the financial district.

In late March, Chinese authorities decided to lock down Shanghai, which has a population of about 25 million, with each half of the city shut down in turns for nine days through next Tuesday.

Speculation has also been rife that China, Japan's biggest trading partner, would shy away from implementing actions to push down the yuan to curb a surge in domestic prices, as the prolonged pandemic has severely undermined consumer and corporate sentiment.

Market & economy: Market economist in suit and tie reading reports and analysing charts in the office located in the financial district.

The yuan spiked 6.4 percent from the beginning of this year to 19.26 yen as of Thursday, while the dollar soared 6.0 percent to 122.41 yen during the same period, according to Mizuho Bank, the main banking arm of Mizuho Financial Group Inc.

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