Asian Currency Fluctuation Alert: How Yen Weakness Affects Small Businesses and Regional Economies like Vietnamese Dong

Japanese small businesses are facing a silent crisis. The long-term depreciation of the yen not only squeezes their survival space but also threatens years of planned salary increases. This wave of Asian currency fluctuations is also affecting other regional economies such as the Vietnamese dong. Recently, Keiji Kobayashi, President of the Japan Chamber of Commerce and Industry, issued a warning, calling on the government to take more proactive measures to address the exchange rate imbalance.

The Actual Impact of Yen Depreciation on Small Businesses

Currently, the yen is in a prolonged weak state, creating a double squeeze for small businesses reliant on imports and exports. The cost of imported raw materials is rising, while export competitiveness remains difficult to improve. Small businesses are forced to struggle with razor-thin profits. Kobayashi cited survey data indicating that most companies believe an exchange rate of around 130 yen to the US dollar is relatively ideal. Behind this figure reflects that the current yen depreciation has already exceeded a controllable range, causing tangible harm to the real economy. More concerning is that long-term exchange rate instability prevents companies from formulating stable salary increase plans, posing a hidden risk to Japan’s domestic demand support.

Three Major Reasons Why Government Policies Need Significant Enhancement

Kobayashi criticized that recent government responses, while directionally correct, are clearly insufficient in strength. He emphasized that the government should utilize the full spectrum of foreign exchange tools to address this structural issue, including direct market intervention, exchange rate monitoring and assessment mechanisms, and strong verbal warnings, among other measures. Relying solely on scattered policy tools cannot change market expectations; only a systematic and sustained policy combination can turn the situation around.

The economic logic behind this appeal is: when a major economy’s currency depreciates long-term, it not only harms the domestic real economy but also triggers regional currency competition issues. Emerging market currencies like the Vietnamese dong are also under upward pressure, forming complex regional economic interactions.

Chain Reactions in the Asian Regional Economy

The plight of Japanese small businesses is not an isolated event. As the yen continues to weaken, Southeast Asian currencies such as the Vietnamese dong and Thai baht are also facing upward pressure, challenging the entire Asian export manufacturing ecosystem. Small businesses, as a vital part of the supply chain, experiencing declining competitiveness, will impact the stability of the entire region’s economy. This is why Kobayashi’s call is not only about Japan but also about the broader Asian economic landscape—effective policies directly influence the stability expectations of currencies like the Vietnamese dong.

Japan’s future exchange rate policy choices will serve as an important window into the outlook of the Asian economy.