Japan’s top council warns of yen’s toll on economy

Japan’s top economic council issued a strong warning on Monday about the detrimental effects of the yen’s recent weakness on consumer spending, urging both the government and the Bank of Japan (BOJ) to monitor the situation closely.

The top economic council emphasised the importance of boosting consumption to drive economic recovery in the near term.

The council’s statement, outlining guidelines for the upcoming fiscal year’s budget, highlighted the pressing challenges posed by the weak yen and rising prices on household purchasing power.

The yen’s decline to a 38-year low of 161.96 against the dollar in July prompted authorities to intervene, although the currency has partially recovered to 154.09.

To mitigate the impact of rising costs, the government pledged to increase the minimum wage and implement measures such as financial assistance for low-income households and temporary subsidies to alleviate the burden of utility bills.

Consumption remains a weak point in Japan’s delicate recovery, contributing to the economy’s contraction in the first quarter.

The government’s July economic report indicates a slowdown in consumption, contrasting with the BOJ’s view of consumption as “resilient.”

Attribution: Reuters