Japan business lobby: more yen declines undesirable for small firms

[TOKYO] Further declines in the yen are undesirable for small firms, an influential Japanese business lobby said on Friday according to the Nikkei Quick news service, pointing to growing concern that rising import costs could squeeze profits.

The yen, which slipped to a 12-1/2 low versus the dollar earlier this week, is not in line with Japan's economic fundamentals, the Japan Chamber of Commerce and Industry's Chairman Akio Mimura said, according to Nikkei Quick.

The yen has been falling versus the dollar since early 2013 when the Bank of Japan began massive government debt purchases to lower long-term interest rates and eliminate the risk of a return to deflation.

The yen's declines could accelerate later this year due to signs that the US. Federal Reserve will start raising interest rates, which would increase the appeal of dollar-denominated assets relative to yen-denominated assets.

A weak yen is generally considered a boon for Japan because it increases earnings for major exporters.

However, some economists and business executives have expressed concern that an excessively weak yen could hurt profit margins at small companies and hurt household spending by pushing up import costs.

REUTERS