Japan Firms Seek New Currency Hedges as Yen Weakness Raises Import Costs

Taku Ueno buys beef from the United States, olive oil from Spain and tomatoes from Italy to stock his supermarkets south of Tokyo. Those imports have become increasingly expensive as the yen continues to weaken, Anton Bridge and Miho Uranaka reported for Reuters.

Japanese businesses are seeking new ways to hedge against yen weakness as imported food and other goods become more expensive.

Ueno, chief executive of Takara MC, which operates 43 supermarkets, and other Japanese business leaders are looking for ways to protect themselves against further yen weakness.

Ueno has pushed for direct, longer-term contracts with overseas suppliers that lock in prices and exchange rates for as long as a year.

The arrangements help the company avoid raising prices too quickly and potentially losing customers.

Other businesses, bankers say, are turning to futures, forwards and options to hedge against further yen depreciation as authorities search for ways to stabilize the currency.

While smaller companies have historically avoided such financial instruments and instead absorbed moderate increases in import costs, mounting pressures are forcing more businesses to act.

“For US beef, we used to negotiate every month, but the exchange rate is changing so quickly we now negotiate every three months,” Ueno said. “This means we don’t have to raise prices for three months at least.”