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5 Jul 2022

Econ Digest

Sharp drop in Yen to more than 20-year low has little impact on Thailand’s overall exports to Japan

คะแนนเฉลี่ย

        Japan's Yen has quickly weakened and hit a new low in more than 20 years at Yen134.19 per USD (as of 10 June 2022), a year-to-date decrease of more than 16.5 percent, as Japan's economy faces pressure from rising commodity prices, as well as the rising cost of living caused by the Russian-Ukrainian crisis, which aggravated the COVID-19 crisis, and coupled with a stronger dollar in anticipation that the U.S. Federal Reserve may have to adopt more aggressive policies to stabilize inflation. Meanwhile, analysts in financial markets believe that the Yen will continue to fluctuate and depreciate, and if it falls below the key support point at Yen135 per USD, the Yen could depreciate further to Yen140 per USD or even Yen150 per USD.

        Not only did the Yen depreciate against the US dollar, but it has also weakened against other currencies, including the Thai Baht. Since Japan is one of Thailand's major trading partners, the continued depreciation of the Yen may affect the trend of Japan-Thailand trade, especially Thai exports to Japan. However, at the initial stage, when considering the depreciation of the Yen against several currencies, KResearch views that the impact of a weaker Yen on Thailand’s overall exports to Japan is likely to be minimal, because the depreciation of the Yen against the Thai Baht remains at a moderate level as compared to other currencies, and the situation is still likely to remain unchanged in the future.

        For the impact of the weakening Yen on Thailand’s major export products that are highly dependent on the Japanese market, KResearch views that the highly-impacted product group includes goods that are non-essential for living such as furniture, mattresses, lamps, cushions, chairs, toys, sports equipment, textiles and clothing; the moderately-impacted product group includes agricultural products (rubber and tapioca starch), food (meat and animal feed), essential oils, fragrance products and cosmetics; and the product group with limited impact includes electronics, electrical appliances and automobiles.

        For Thailand’s import of capital goods, raw materials and intermediate goods from Japan, this could be a good time for Thai entrepreneurs to expand production capacity or improve operating efficiency in industries such as iron, steel, steel products, chemicals and plastics, etc., in which Thailand has a high proportion of dependence on imports from Japan. In addition, businesses related to Thais traveling to Japan will begin to see a better recovery as Japan gradually reopens.

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