Strong Yen Is Dividing Generations in Japan

One big reason, analysts and some politicians say, is simple, if generally left unsaid: A high yen benefits Japan's rapidly expanding elderly population, even if it hurts other parts of the country.

By speeding the flood of cheaper imported products into Japan, the strong yen is contributing to deflation, a broader drop in the prices of goods and services that has helped retirees stretch their pensions and savings. The resulting inaction on the yen, according to a growing number of economists and politicians, reflects a new political reality, with already indecisive leaders loath to upset retirees from the baby boom who make up more than a quarter of the population and tend to vote in high numbers.

"Japan's tolerance of the strong yen and deflation is rooted in a clash of generations," said Yutaka Harada, a professor of political science and economics at Waseda University in Tokyo. "And for now, the seniors are winning."

That victory comes at a high price, however, hastening the hollowing out of Japan's industrial base as companies continue to move abroad, exacerbating the nation's two-decade-long economic stagnation.

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The Finance Ministry, meanwhile, has taken small steps to drive down the yen by buying a total of $200 billion worth of United States currency during the last two years. But officials said its efforts were never intended to do more than blunt surges driven by speculators.