Stronger Yen Helps Japanese at Home

The yen’s sharp rise against the U.S. dollar since late 1985 may have hurt Japanese exports, but it also helped spur the domestic economy by keeping down commodity prices and boosting personal spending, the Bank of Japan said Tuesday.

The central bank said that in late fiscal 1986, which ended March 31 this year, the nation’s economic growth had slowed because of the strong yen.

But in fiscal 1987, it gradually became clear that the nation’s economy, led by domestic demand, was recovering from the business slump as low prices spurred personal spending and low interest rates helped non-manufacturing sectors, the bank said.

It said low prices resulted from the lower costs, in yen terms, for imported raw materials. In late 1985, 1,000 yen would buy $4.13 worth of foreign goods. On Tuesday, it would buy $7.48 worth.

The central bank’s comments followed a survey based on the fiscal 1986 securities reports submitted by 619 major firms capitalized at $7.4 million or more.

The bank’s survey said that in fiscal 1986, pretax profits of major Japanese firms in both the manufacturing and non-manufacturing sectors declined by an average 11.4% from a year earlier.

For the non-manufacturing sector alone, pretax profits rose by 6.4% from fiscal 1985, the survey said. Excluded were electric power firms, which were the main beneficiaries of cheaper energy prices because of the yen’s rise against the dollar, it said.

In the manufacturing sector, excluding oil refiners, pretax profits declined by 28.0% from a year earlier, the worst decline since the 1973 oil shock, the bank added.