Strong yen raises cost of Kenya’s debt to Japan

The effects of a strong Japanese yen greatly affected the company between July 2008 and March 2009 when it appreciated by 34 per cent, thereby resulting in unrealised exchange loss of Sh896 million.

The company took JPY1.7 billion loan in 1990 at the rate of 2.5 per cent for expansion of production capacity.

Portland took the facility as part of a bilateral package negotiated by the government from the Japanese Bank for International Co-operation (JBIC).

The firm’s loss of Sh489 million as at December 31, 2008, was partially attributed to foreign exchange rate losses.

“This is going to hurt the competitiveness of imports from Japan in the local market,” said an official from the embassy of Japan in Nairobi who sought anonymity on protocol grounds.

A number of the country’s steel manufacturers import from Japan, hence the strong yen has direct budget implications on their operations.

More dollars

“The Japanese steel is expensive and the appreciation has made steel imports from Japan unsustainable,” said Mr Raval Narendra, the managing director at Devki Steel Mills.

Individual importers from Japan are set to pay more as a result of a 16 per cent rise in the strength of the yen against the dollar.

Since imports from Japan are priced in the yen, an appreciation in the currency means that one will require more dollars to acquire the same commodity.

Peter Mwaura of the Shina Trading, an importer of Japanese cars, says though the costs have remained the same in yen, the rising exchange rates have significantly pushed up the cost of cars.

“We have been affected since our clients are now paying more because we need more dollars for one Japanese yen,” he said.

Even though the yen is expected to depreciate with the end of global recession, it is likely that it will remain significantly high.