A Weak Yen Turns Energy Bills Into a Poverty Question in Japan

Japanese specialists are pressing the government to recognise energy poverty as a distinct policy problem. The Japan Times reports that experts consider acknowledging the issue the necessary first step, as global instability and a weak currency raise the cost of the imported fuel on which the country's power system runs. Japan buys almost all of its oil and liquefied natural gas abroad and pays for it in dollars, so the exchange rate passes directly into household bills.

The currency has stayed weak. The yen traded around 159.2 per dollar in late August, within a narrow range as investors weighed the Bank of Japan's next move, with markets pricing a high probability of a rate increase to 1.25% in September. Former Bank of Japan board member Seiji Adachi has argued that leaving rates unchanged risks another selloff in the currency and faster import-driven inflation. This is the result of a decade of yield-curve control. The central bank holds rates down to support debt service, the currency weakens, imported energy costs rise, and the cost falls on households rather than on the budget.

Labour policy is moving in the same direction. Japan will soon stop asking companies to cap employee overtime at 45 hours a month, and The Japan Times reports the change has prompted questions about whether the government is retreating from its work-style reforms. Employers facing a shrinking workforce want more hours from the workers they have.

Taken together, the two stories describe the same adjustment. Real incomes are being squeezed by a currency the state cannot strengthen without raising rates, and the response so far shifts the cost onto households, in the form of higher bills and longer working hours.