Japan rate rises will help the yen and domestic demand

Significance Rising trade values in the last year reflect higher prices, not volumes. Services now have a greater weight in exports, thanks to tourism's rise. A stronger yen is widely desired but the Bank of Japan (BoJ) will struggle to achieve this while US rates remain elevated. Impacts Yen weakness was always seen positively as it aided exports but equal attention is now paid to the impact of costlier imports. Japanese firms have responded to yen volatility by aggressively expanding overseas output capacity and sales networks, especially in Asia. Real interest rates are negative, typically prompting capital outflows and currency decline; this may slowly reverse as real rates rise.