PM Takaichi's "Flourishing" Yen Comment Ignites Public Fury Amid Cost-of-Living Crisis

On January 31st, a statement made by Prime Minister Sanae Takaichi during a House of Representatives election stump speech in Kawasaki sparked considerable debate on social media. Regarding the current depreciation of the yen, she commented, "This is a great opportunity for export industries. The Foreign Exchange Fund Special Account (FEFSA) is currently in a flourishing state."

The Foreign Exchange Fund Special Account is a special account established by the government to stabilize exchange rates and facilitate foreign exchange transactions, primarily managed with foreign currency-denominated assets such as dollars. When the yen depreciates, the valuation of these foreign currency assets increases when converted to yen, resulting in accounting profits.

The Prime Minister emphasized that the weak yen benefits export industries and leads to increased operational profits for the FEFSA, promoting the advantages of the exchange rate. However, her use of the term "flourishing" (ほくほく, hokuhoku) and her emphasis on the benefits of the yen's depreciation drew widespread criticism on social media.

A particularly common criticism highlighted the disconnect between her remarks and the reality of escalating import prices, which are pressuring household budgets. One user commented, "The statement that 'the FEFSA is flourishing' completely lacks imagination regarding the struggles of daily life due to rising prices." They further criticized, "Even if the government's books are flush, the source of that wealth is the 'yen depreciation cost' (high import prices) paid by citizens. It is utter deceit and a severe reversal of priorities to speak of government profits, built on the pain of the public, as an 'achievement'."

Other comments reflecting a disconnect with real-life experiences included, "How many times do we have to tell them that raw materials are imported?" and "While we're struggling with price hikes due to this absurdly weak yen, the government announces that the FEFSA is 'flourishing'!"

Concerns were also raised that expressing excessive yen depreciation as "flourishing" contradicts the FEFSA's original purpose, which is exchange rate stability. One user expressed apprehension, stating, "The fund is essentially savings prepared for unforeseen future circumstances. Depleting it is a form of populism that prioritizes 'as long as things are good now' and lacks sustainability."

Conversely, some voices supported the Prime Minister's remarks, suggesting that "the weak yen offers only advantages for Japan" and "it's a tailwind for export companies." However, overall, the statement intensified the public's widespread anxiety and dissatisfaction regarding the weak yen. The Prime Minister's remarks have become a catalyst for renewed questioning of future exchange rate policies and the government's consideration for the public's well-being.

The context

Japan's economy has been significantly impacted by a prolonged period of yen depreciation, which has intensified in recent years. While a weaker yen can be beneficial for Japan's export-oriented industries by making Japanese goods cheaper abroad and increasing the yen value of repatriated profits, it simultaneously drives up the cost of imported goods, including essential resources like energy, food, and raw materials. This leads to higher consumer prices and a significant burden on household budgets, especially for a country heavily reliant on imports.

Sanae Takaichi, a prominent and often hawkish member of the ruling Liberal Democratic Party (LDP), is frequently discussed as a potential future Prime Minister. It is important to note that while the original Japanese article refers to her as "Prime Minister Sanae Takaichi," she is not the current Prime Minister of Japan; Fumio Kishida holds that office. This specific phrasing in the article may be a hypothetical scenario, a reference to a past unofficial designation, or a factual error in the original Japanese source. Her comments regarding the Foreign Exchange Fund Special Account (FEFSA) came during a stump speech, a common platform for politicians to rally support and articulate economic policies.

The FEFSA is a governmental special account holding significant foreign currency reserves, primarily for intervention in currency markets to maintain stability. When the yen depreciates against major currencies like the dollar, the yen-denominated value of these foreign currency assets increases, leading to "paper" or accounting profits for the FEFSA. Takaichi's use of the colloquial term "hokuhoku" (flourishing or toasty) to describe these profits, while potentially accurate from an accounting perspective, was perceived by many as tone-deaf and insensitive given the economic hardships faced by ordinary citizens due to inflation. This triggered a strong backlash on social media, highlighting the deep public concern over the rising cost of living and the perceived disconnect between political rhetoric and everyday reality.