①Question: What do you think the appropriate foreign exchange rate in Japan compared to these ten years?

　　衆院選前、日本の為替レートは適切か？

②What do you think about the policy abolishing the consumption tax on groceries?

　　衆院選前、食料品消費税ゼロはどうなのか？

　

My two questions to AI and AI’s answers:

　　AI: Copilot in Windows provided Microsoft /January 21, 2025

I asked Microsoft's AI, Copilot, about some of the issues that have been bothering me lately. There was a comment that "AI sometimes uses inaccurate information," but it gave me relatively reasonable answer. As I thought it would be helpful, I'd like to share it here.


①Question: What do you think the appropriate foreign exchange rate in Japan compared to these ten years?

AI’s Answer:

Determining an "appropriate" exchange rate is subjective, as different levels benefit different sectors of the economy. However, comparing the current rate in early 2026 to the past decade reveals that the yen is currently at a historic low, far weaker than long-term economic fundamentals would suggest.

1. Historical Context (Last 10 Years)

Over the past decade, the USD/JPY rate has shifted from a period of relative stability to extreme volatility.

Stability Period (2016–2021): For much of this time, the yen traded in a "typical" range of ¥100 to ¥115. This was often considered a balanced level for Japan's export-driven economy.

Recent Surge (2022–2026): Starting in 2022, the yen began a rapid decline as U.S. interest rates rose while Japan kept theirs low. As of January 21, 2026, the rate is approximately ¥157.95, nearly 40% weaker than the decade's average.

2. Estimating "Appropriate" Value

Economists use several models to determine where the exchange rate "should" be based on the cost of goods and economic health.

Purchasing Power Parity (PPP): According to various PPP models, which compare the cost of identical goods across countries, the yen's "fair value" is estimated to be between ¥80 and ¥125.

IMF/OECD Estimates: The IMF's implied PPP conversion rate for 2026 is approximately ¥93.67, suggesting the current market rate is significantly overvalued for the dollar.

Institutional Targets: Many financial institutions, such as MUFG and BNP Paribas, forecast that a more "normalized" or sustainable rate for late 2026 would be in the ¥140–¥148 range as global interest rate gaps narrow.

3. Economic Impact of the Current Rate

Sector/ Impact of Current Weak Yen (¥158)

Exporters/ Positive: Boosts profits for giants like Toyota and Sony when they bring foreign earnings back to Japan.

Consumers / Negative: Drives up the cost of imported fuel and food, leading to persistent inflation and lower purchasing power.

Tourism / Positive: Makes Japan an exceptionally affordable destination for international travelers, fueling a tourism boom.

Summary Opinion

While there is no single "perfect" rate, many experts believe a rate closer to ¥120–¥135 would be more appropriate for long-term stability. This range would provide a better balance between supporting export competitiveness and protecting Japanese households from the rising costs of imported goods.



②What do you think about the policy abolishing the consumption tax on groceries?

AI's Answer:

In early 2026, abolishing the consumption tax on groceries (currently 8%) has become a central and divisive issue in Japanese politics as the country approaches the February 8, 2026, snap general election. While intended to provide immediate relief from high food inflation, the policy is heavily debated by economists and markets due to its multi-trillion yen fiscal impact.

1. Political Positions and Proposals

The debate has shifted rapidly as parties prepare their election platforms:

*Ruling LDP & Japan Innovation Party (JIP): Prime Minister Sanae Takaichi and the ruling LDP, alongside their coalition partner JIP, have pledged to consider a temporary two-year suspension of the consumption tax on food. This marks a major reversal for Takaichi, who previously expressed caution about the move's immediate effectiveness.

*Centrist Reform Alliance (CDPJ & Komeito): This newly formed opposition force has pledged to permanently eliminate the tax on food and drinks to make anti-inflation measures more visible.

*Smaller Opposition: Parties like the Japanese Communist Party and Reiwa Shinsengumi advocate for the complete abolition of the consumption tax across all categories.


2. Potential Economic Benefits

*Inflation Relief: Proponents argue that since food represents a larger share of spending for lower-income households, zeroing the tax would reduce the "regressive nature" of the current system.

*GDP Growth: Some estimates suggest eliminating the 8% tax on food could increase Japan's economic growth rate by approximately 0.4 to 0.43 percentage points.

*Public Support: Surveys from mid-2025 indicated that 60% of voters support a temporary cut to the consumption tax as a countermeasure for rising prices.


3. Major Concerns and Risks

*Fiscal Deterioration: Suspending the tax on food would result in an annual revenue loss of approximately ¥5 trillion ($31.6 billion). This is significant because consumption tax revenue is legally designated to fund social security programs.

*Market Instability: The proposal has already spooked financial markets. Concerns over Japan's fiscal health—already the worst among G7 economies—led to a sell-off in government bonds, pushing the 10-year yield to 2.275% on January 19, 2026, the highest in 27 years.

*Counter-Productive Inflation: Critics warn that boosting demand through tax cuts while supply is constrained could further accelerate price increases. Additionally, if fiscal concerns weaken the yen, the resulting increase in import costs could offset any savings at the grocery store.

*Administrative Burden: Some point out that temporary cuts are "sticky" and difficult to reverse, and they would require businesses to perform costly updates to cash registers and accounting systems twice.

	英単語	読み方	意味 / 解説/ 例文
	stability		安定、安定性
	volatility	ぼらﾃｨりﾃｨｰ	変動性、揮発性 *株式や為替などの金融商品の価格がどれくらい変動するか（値動きの大きさ・激しさ）を示す指標で、「ボラ」と略されることもあり、高い・低いで表現され、リスクの度合い（高いほどリスク大）を示すものとして投資家が利用します。標準偏差で数値化され、急騰・急落を繰り返す相場は「ボラティリティが高い」、小幅な値動きが続く相場は「ボラティリティが低い」とされます。  株式投資の世界では、「株価の値動きの大きさを示す指標」という捉え方をするのが一般的です。
	Investors are worried about the high volatility in the stock market recently.		投資家たちは、最近の株式市場における激しい変動を懸念している。
	He studied the volatility of currency exchange rates.		彼は為替レートの変動性を研究した。
	PPP purchasing power parity	ﾊﾟﾘﾃｨｰ	購買力平価 「長い目で見れば、ある一定の基準の財・サービスを買うのに必要な為替レートは、両国の物価水準が同じになるように調整される」という考え方。 It shows the idea that "in the long run, the exchange rate needed to buy a certain standard of goods and services is adjusted so that the price levels of both countries are the same."
	MUFG		三菱UFJフィナンシャル・グループ Mitsubishi UFJ Financial Group
	BNP Paribas		*フランスの多国籍メガバンクおよび金融サービス持株会社で、2000年にパリ国立銀行（BNP）とパリバが合併して設立された。
	IMF		International Monetary Fund 国際通貨基金： 国際金融と為替相場の安定化を目的として設立された、国連の専門機関の一つ。
	OECD		Organisation for Economic Co-operation and Dvelopment 経済協力開発機構
	sector		区域、部門