Shoppers back home scourged by mighty yen: Businesses, consumers and politicians are worried about the strength of the currency

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The Independent Online
CALIFORNIAN grapefruits were on sale in my local supermarket at the 'reduced' price of pounds 1.66 each yesterday. An ordinary can of Portuguese sardines was going for a mere pounds 2.30. And a 100g jar of Nescafe was just pounds 5.30. Unbeatable prices] Nowhere else in the world could you find such price tags] How do they do it?

These 'unbelievable' prices have been thrown into even starker relief by the recent rise of the Japanese yen: if Japan's currency is getting stronger, imported goods should be getting cheaper. That, however, is too logical for retailers and importers. They prefer to look at the rising yen as an opportunity to boost profits that have been damaged by the country's lingering recession. The consumer somehow drops out of the equation.

'What is the meaning of the endaka (high yen)?' said a housewife, looking at cheap imported beef from Australia that cost a mere pounds 15 a pound (Japanese beef was pounds 21 a pound). 'Do you pay this much in your country?' I had to tell her no.

The precipitous rise of the yen against the dollar and major European currencies is finally persuading the man on the train to Yokohama - or the woman at the supermarket meat counter - what they have long suspected, and foreigners have long alleged: that Japan's economy is structurally biased against consumers in favour of producers, and promotes exports while restricting imports. In other words, the man on the train has been systematically ripped off to bolster Japan's current-account surplus.

The yen has risen 18 per cent against the US dollar this year, and is on the verge of breaking the 100 yen to the dollar mark. Yesterday morning in Tokyo it reached 100.40, before retreating to below the 101 level. The yen's value has been the top item in television news bulletins and on the front page of newspapers for the last week. But neither businessmen, consumers nor the government are proud of their currency's surging strength.

Businessmen complain that a high yen makes Japanese exports uncompetitive, hindering the country's economic recovery. The government fears that continuing recession will prompt calls from other industrialised countries for more stimulus measures to the economy, which could force the issuance of deficit-covering bonds, anathema to the Finance Ministry. And the consumer is getting tired of paying high prices for imported goods, even though a stronger yen should make prices cheaper.

As in Europe, there have been some voices in Japan calling for intervention in the exchange market to stop the yen's rise. Last week the Prime Minister, Morihiro Hosokawa, even said he wanted international co-operation to stop the currency's appreciation. But the government has realised any attempt to push down the yen's value would be too expensive, and would not have the support of the US and European countries which all have large trade deficits with Japan.

Mr Hosokawa now plans to hold an emergency cabinet meeting tomorrow to discuss more long-term measures to rein in the rising yen, including liberalising Japan's economy to allow in more imports and thus narrow the trade surplus. It is the country's mammoth surplus, expected to reach dollars 150bn ( pounds 101bn) this year, that has been the main stimulus for the rise in the Japanese currency.

But consumers are growling about the fact that foreign exchange gains have not been passed on to them. The Ministry of International Trade and Industry has been resisting a reduction of electricity prices, even though imported fuel for generators has become cheaper. And the Ministry of Agriculture recently issued 'administrative guidance' to importers to reduce the amount of foreign beef they bring in, since it is starting to undermine domestic beef producers whose costs are much higher. 'And they charge us consumer tax too,' said the woman in the supermarket, referring to the 3 per cent tax imposed on all goods since 1988.

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