Preface
Since 2022, the Federal Reserve Bank of the United States (Fed) has taken a series of interest rate hikes, like a depth charge dropped in the global financial ocean, triggering a magnificent reshaping of the value of the currency.
As the world's dominant currency, the rise in the value of the US dollar is not only a response to domestic inflation, but also a demonstration of global economic influence. As the US dollar climbs on the rise, Asia's currency markets experience an unexpected "winter".
The strength of the dollar and the collapse of the yen: the game of the global economy
In particular, the yen, the currency of the East Asian economic giant, has rapidly depreciated under the pressure of the dollar. In April 2024, the yen briefly fell below 155 against the dollar, hitting a record low. This huge depreciation has not only exacerbated economic anxiety in Japan, but also sent the chill of volatility to global markets.
As the world's third-largest economy, Japan's currency weakness has not only affected the cost of domestic imports and debt burden, but also triggered a series of chain reactions in the global supply chain.
In the face of the "high-pressure policy" of the dollar, other Asian countries have also had to act. Indonesia and South Korea, for example, have tried to ease the depreciation pressure on their currencies against the US dollar by increasing their local currency supply and lowering interest rates.
Indonesia's central bank has not hesitated to use foreign exchange reserves to stabilize the value of the rupiah, while South Korea has strengthened financial regulation and market intervention to protect the stability of the won. While these measures have been effective in the short term, the challenges for Asian currencies remain serious in the long term.
This dollar-led monetary "arena" has not only reshaped the power structure of the global economy, but also exposed the fragility of Asian economies in the global financial system. In Japan, the collapse of the yen is not only an economic crisis, but also a deep social and cultural change.
The collapse of the yen: economic and social turmoil in Japan
As the yen depreciated in the international currency market, Japan's domestic economic landscape changed dramatically. Cost pressures on companies have risen sharply, and prices have begun to wreak havoc in the consumer market like wild horses.
Especially in import-dependent industries, such as automotive manufacturing and electronics, the rise in costs is almost immediate. Most of the raw materials in these industries need to be imported from overseas, and the depreciation of the yen means that you have to pay more yen to buy the same amount of raw materials.
If an electronics company needs to import rare metals from abroad, the depreciation of the yen could lead to an increase in the cost of raw materials by more than 20% compared to the previous year, which will undoubtedly push up the final retail price of the product.
This price increase is not limited to imported goods. The depreciation of the yen has also led to an increase in domestic energy prices, as Japan relies on imports for most of its energy resources, including oil and gas. Rising energy prices are driving up production and transportation costs further, creating a vicious circle.
In supermarkets, the price of almost every basic commodity, from bread to milk, from meat to vegetables, is quietly climbing. This general price rise is eventually transmitted to the dining table of every ordinary family.
For ordinary people, the rising cost of living has directly squeezed their spending power. As prices climb, many families are having to re-examine their spending habits, from lavish entertainment to daily necessities.
The celebration of the holiday season has become low-key, travel plans have been put on hold, and even the cost of children's education has to be carefully weighed. More seriously, the continued rise in prices and the increase in the cost of living could also trigger broader social problems, such as the widening gap between rich and poor and the increase in social discontent.
In the face of such economic and social shocks, the Japanese government and the central bank are on the cusp. They may intervene in the currency market to stabilize the yen, adjust monetary policy to control inflation, or introduce targeted subsidies to ease the burden on the population.
The proposal and implementation of each policy need to weigh its long-term economic impact against its short-term social effect, which is a contest that tests the wisdom and courage of policymakers.
The psychological crisis of the Jing-Japanese elements: when the sense of superiority meets the reality blow
Against the backdrop of the continuous depreciation of the yen, those who thought they embraced Japan's cultural and economic superiority suffered not only financially, but also experienced an unprecedented shock wave psychologically. This group usually sees Japan as an economic powerhouse and a cultural model, but with the sharp depreciation of the yen, this belief has been severely tested.
Many of the Japanese had their assets and investments in Japan, such as real estate and stocks, shrunk sharply by the depreciation of the currency, which not only affected their financial well-being, but also undermined their strong belief in Japan's unassailable economic status.
The economic losses translate directly into psychological blows. Many of them have proudly featured their Japanese travels, shopping, or cultural events on social media as a way to validate their life choices and cultural preferences.
With the depreciation of the yen affecting the stability of the Japanese economy and its international image, their sense of superiority has been seriously challenged. The almost blind admiration and pride that had been felt before were now violently slapped in the face by reality, forcing them to re-evaluate their idealized perception of Japan.
On social media, this psychological change triggered a complex set of reactions. Some of the Japanese began to openly express their dissatisfaction with Japan's economic policy, criticizing the Japanese government and central bank for failing to deal effectively with currency devaluation, believing that this was not only an economic failure, but also a loss of culture and values.
This criticism is not always sympathetic, but has caused heated discussions and controversies among the majority of netizens. Public perceptions of the Jing-Japanese elements are also becoming more complex, with some arguing that they should accept reality and reduce their irrational worship of Japan, while others feel that their reactions are too emotional and lack an understanding of the big picture.
This cultural and psychological conflict triggered by economic influences is not confined to individual individuals or small groups, but reflects the tension between cultural identity and economic reality in the context of globalization.
The Rise of the Renminbi: A Chinese Consumer's Overseas Shopping Spree
As the yen continues to depreciate, the purchasing power of Chinese consumers in Japan has increased significantly, which will not only change the landscape of Japan's retail market in the short term, but may also have a profound impact on its long-term economy. On the one hand, the influx of Chinese tourists has led to a significant increase in sales, especially in the two categories of luxury goods and daily necessities.
Many Japanese stores are starting to specialize in serving Chinese tourists, offering everything from language support to customized shopping experiences to make shopping more seamless and enjoyable.
This business model, which relies on a single group of consumers in a single country, also exposes the Japanese retail market to certain risks. First, the market's over-reliance on Chinese tourists may make some local consumers feel marginalized, as merchants may be more inclined to cater to the needs and preferences of foreign consumers.
Uncertainties in the global economy, including fluctuations in foreign exchange rates and changes in international political and economic relations, can have an impact on markets that rely on consumers in a particular country.
If, for some reason, there is a change in travel policy between China and Japan, or a major adjustment in the exchange rate of the renminbi against the yen, the shopping frenzy could quickly subside, dealing a big blow to the Japanese retail market.
epilogue
In the long term, Japan's retail market may need to consider how to maintain a diverse customer base and balance the needs of domestic consumers with those of international tourists. The realization of this balance is not only related to the adjustment of business strategy, but also involves the thinking of broader economic policies and market positioning.
How to maintain the vitality and competitiveness of the local market in the tide of globalization while attracting the attention of global consumers will be a major issue for the Japanese retail industry in the future.
This change in consumer behavior and its impact on the Japanese market is not only an economic issue, but also reflects the complexity of cultural exchange and economic interaction under globalization.