TOKYO–A steady de­cline in the yen is prov­ing a god­send for ex­porters such as Toy­ota and has won sol­id sup­port from Japan's main trad­ing part­ners, who are bet­ting the im­pact on their own cur­ren­cies will be off­set by gains from a re­cov­ery in the world's third-largest econ­o­my.It's not such good news for en­tre­pre­neurs like Tha­mon­wan Tha­worn­thawee­wong, whose An­gry Bird fish balls, squid rings and oth­er prod­ucts now cost more to sell in Japan.

The yen slipped past 100 to the US dol­lar ear­li­er this month and is now hov­er­ing near 102 yen per dol­lar–over 20 per cent weak­er than six months ago ver­sus the US dol­lar and eu­ro–a lev­el that is giv­ing pause even to Japan­ese com­pa­nies and pol­i­cy­mak­ers.Japan in­sists the yen has weak­ened due to ex­treme mon­e­tary eas­ing aimed at break­ing out of de­fla­tion­ary stag­na­tion, not be­cause it is try­ing to make its ex­ports more com­pet­i­tive.

Whether it's in­tend­ed or not, coun­tries across Asia are see­ing their own cur­ren­cies pushed high­er, as their fi­nan­cial mar­kets are flood­ed with cash pumped out by the Bank of Japan to help dou­ble the coun­try's mon­e­tary base and hit a two per cent in­fla­tion tar­get.

Trav­el bud­gets of tourists from Thai­land and else­where are stretch­ing fur­ther thanks to the weak­er yen. But for Tha­mon­wan, whose com­pa­ny earns about a tenth of its sales in Japan, it's a headache. "It's af­fect­ing us be­cause Japan­ese cus­tomers need to pay more," she said. "We are now see­ing a slight de­cline in or­ders from Japan."

The "Abe­nomics" blend of fis­cal and mon­e­tary stim­u­lus and promis­es of re­forms cham­pi­oned by Japan­ese Prime Min­is­ter Shin­zo Abe helped boost Japan's growth to 3.5 per cent in Jan­u­ary to March. But the slide in the yen al­so has raised the pos­si­bil­i­ty of a "cur­ren­cy war"–where coun­tries use their ex­change rates as an eco­nom­ic weapon.Gy­ra­tions in ex­change rates can hurt busi­ness con­fi­dence and in­vest­ment, and if oth­er coun­tries re­spond to the falling yen by de­bas­ing their cur­ren­cies, Japan could be back to square one.

News of weak­er-than-ex­pect­ed growth for Thai­land in the first quar­ter added to pres­sure on its cen­tral bank to in­ter­vene to curb the baht's rise. Though the Bank of Thai­land has re­frained from in­ter­ven­ing so far, Tokyo can't ex­pect its trad­ing part­ners to hold out in­def­i­nite­ly for the even­tu­al pay­off from the re­cov­ery of the sec­ond-biggest econ­o­my in Asia, af­ter Chi­na.

Chi­na it­self is "not par­tic­u­lar­ly wor­ried," about the weak­er yen, since it helps bring down costs for ex­pen­sive fac­to­ry equip­ment and oil im­port­ed from Japan, said Ken­neth S Cour­tis, an in­vest­ment banker and for­mer Gold­man Sachs vice chair­man."The last time there was such an ag­gres­sive de­val­u­a­tion, it blew up Asia," he said, re­fer­ring to the Asian fi­nan­cial bust of the late 1990s that be­gan when a cri­sis of con­fi­dence in Thai­land's econ­o­my forced it to de­val­ue its cur­ren­cy.

Apart from the risks of es­ca­lat­ing de­val­u­a­tions, such tac­tics may be just the wrong med­i­cine for economies such as In­done­sia and the Philip­pines that al­ready are awash with too much cash, says Rob Sub­bara­man, chief Asia econ­o­mist for No­mu­ra."The pol­i­cy chal­lenges are get­ting more in­tense," he said.

The wor­ry is that the wind­fall from Japan's huge mon­e­tary eas­ing, added to the floods of "quan­ti­ta­tive eas­ing" from the West and ef­forts to spur lend­ing in Chi­na, could churn the al­ready hot mar­kets in­to bub­bles. The 10-na­tion As­so­ci­a­tion of South­east Asian Na­tions re­cent­ly voiced that con­cern in a joint state­ment with the Asian De­vel­op­ment Bank that not­ed po­ten­tial­ly "ex­ces­sive risk tak­ing and lever­age, cred­it ex­pan­sion, and as­set bub­bles."

Apart from over­heat­ing prop­er­ty mar­kets, econ­o­mists see signs of trou­ble in cor­po­rate debt and con­sumer debt, which has jumped 67 per cent in the past five years in Asia out­side Japan to US$1.66 tril­lion, ac­cord­ing to Eu­romon­i­tor In­ter­na­tion­al.

AP