Japanese importers and exporters are extending their currency hedges from months to years as the yen's decline drags on despite repeated intervention. Bankers say demand for long-dated hedges is climbing even as some firms now weigh insuring against a stronger yen instead.
The yen has weakened despite currency intervention in 2022, 2024 and 2026, and the exchange rate remains under pressure even after rare joint U.S.-Japan buying in August and July. Japanese companies are no longer waiting for a rebound — they are locking in protection for the long run.
Supermarkets lock in longer contracts
Taku Ueno, chief executive of Takara MC, which operates 43 supermarkets, has pushed for direct, longer-term contracts with overseas suppliers that lock in prices and exchange rates for up to a year, helping him avoid raising prices too quickly. According to Reuters, Ueno now renegotiates U.S. beef contracts every three months instead of monthly, saying: "This means we don't have to raise prices for three months at least."
The yen is the worst-performing G10 currency, having lost more than 30% against the dollar over the past five years, and Ueno said he is routinely outbid on beef deals by buyers from China or Thailand.
Near a 40-year low
Meanwhile, the yen hit a near 40-year low in July, just shy of 164 per dollar, before authorities intervened, and it last traded around 159 to the dollar.
Nitori Holdings, Japan's largest furniture chain, estimates that each one-yen rise in the dollar-yen rate hits its profit by around 2 billion yen ($12.5 million). It doesn't hedge that exposure now but would consider currency forwards if extreme yen weakness continues long-term, a company spokesperson said.
Banks report a hedging boom
Daiwa Securities said it has seen hedging demand boom, and Bank of America said it boosted headcount on its Japan FX team over the past two years to meet demand. Companies used to hedge through banks for a few months to a year; now, said Daiwa's Akira Hirayama, some customers want to lock in rates for as long as five to 10 years.
Options market stays split
Short-term options pricing has jumped since the joint intervention and a hawkish shift in Japan's rate outlook, reflecting rising demand to insure against a stronger yen, though the one-year tenor hasn't budged much. J.P. Morgan's Daiki Hayashi said most investors, including offshore accounts, remain skeptical the trend has turned, while Bank of America's Namato Nagahama said exporters are now also weighing hedges against a stronger yen to lock in overseas profits.
Source: Reuters
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