Weaker Yen A "Double-Edged Sword"?

Above, Tokyo Station.  Photo by Armand Vaquer.

The yen finally touched 100 yen/dollar.  This is good news for foreign tourists and Japan's exporters.

The Week.com posted:

The dollar just rose above ¥100 for the first time since April 2009, thanks to Japan's efforts — dubbed "Abenomics" for new Prime Minister Shinzo Abe — to combat deflation.

That means "one Japanese yen is now worth less than a penny," says Business Insider's Matthew Boesler. "That's a key psychological level for" a government that has taken an aggressive approach to help its sagging economy, including doubling the supply of yen by effectively printing more money. The goal has been "to weaken the currency in hopes that a lower yen will help the country lift itself out of a deflationary state," says Boesler.

In other words, while a weaker yen might sound like a bad thing, it's exactly what Japan has wanted.

There is some worry that the weaker yen will drive up costs on imported goods and raw materials:

But the yen's fall may have a downside, too, says Eleanor Warnock at The Wall Street Journal. As the currency weakens, "prices of imported goods and raw materials have risen quickly." Even products such as toilet paper and tissues have jumped by 10-15 percent.

This shouldn't be a problem as the yen/dollar exchange rate (prior to the last three years) was much higher in the dollar's favor (I got around ¥116 per dollar in 2007) and Japan did okay.

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