JAPAN's growing support for faster interest rate hikes could have a direct impact on Filipino workers, travelers and businesses as higher rates could strengthen the yen.
Behrouz MEHRI / AFP
Japan’s apparent willingness to support faster interest rate hikes could have consequences well beyond Tokyo, with hundreds of thousands of Filipinos living in Japan and billions of dollars in trade and remittances linking the two economies.
The Japanese government is reportedly becoming more supportive of the Bank of Japan (BOJ) raising interest rates sooner as authorities struggle to contain inflation and support the weakened yen.
The BOJ currently holds its policy rate at 1 percent, but financial markets are increasingly betting on another increase at its 17-18 September meeting. Traders were pricing in about a 76 percent probability of a rate hike as of Thursday, according to Reuters.
For Filipinos, one of the most immediate effects of a stronger yen could be felt in remittances.
According to data from the Bangko Sentral ng Pilipinas (BSP), cash remittances from Japan rose from $1.68 billion in 2023 to $1.71 billion in 2024 and about $1.79 billion in 2025.
Japan is also home to a large Filipino community. Japanese immigration data showed 341,518 Filipino nationals living in the country at the end of 2024, making Filipinos one of Japan's largest foreign communities.
If higher Japanese interest rates strengthen the yen against the peso, Filipino workers earning in yen could get more pesos for every yen they send home.
At current mid-market rates, one yen is worth about P0.385, meaning ¥100,000 converts to roughly P38,500 before fees.
A stronger yen, however, cuts both ways.
For Filipino tourists, the same currency movement that benefits OFWs could make vacations in Japan more expensive.
A hotel room costing ¥20,000, for example, is worth roughly P7,700 at a rate of P0.385 per yen. Should the yen strengthen, the peso cost of the same room would rise even if the hotel's Japanese price remained unchanged.
The exchange rate matters for everything Filipino visitors buy in Japan, from accommodations and train tickets to food and shopping.
Japan has become one of the most popular international destinations for Filipino travelers, making movements in the peso-yen exchange rate increasingly relevant to Philippine households.
Tokyo's problem is that a weak yen has made imported goods substantially more expensive.
Japan's producer prices increased 7.2 percent year on year in July, while import prices measured in yen surged 29.1 percent, according to BOJ data reported by Reuters.
That means Japanese businesses are paying substantially more for imported raw materials and other goods, increasing pressure to pass those costs on to consumers.
The BOJ has moved sharply away from ultra-easy policy, ending its minus 0.1 percent negative-rate regime in March 2024 and eventually raising its policy rate to 1 percent in June 2026.
Japan, the United States and South Korea also recently intervened in currency markets to support the yen, temporarily strengthening the Japanese currency by about 5 percent. Markets, however, increasingly believe higher BOJ rates will be necessary to sustain those gains.
Higher interest rates can make yen-denominated investments more attractive, increasing demand for the currency.
The impact extends to Philippine businesses because Japan remains one of the country's biggest export markets.
Philippine Statistics Authority data show the Philippines exported $11.57 billion worth of goods to Japan in 2025, representing 13.7 percent of total exports and making Japan the country's third-largest export destination behind the United States and Hong Kong.
That relationship remains strong this year.
In June alone, Philippine exports to Japan reached $990.16 million, equivalent to 11.3 percent of the country's total exports that month.
A stronger yen can potentially make Philippine goods cheaper for Japanese buyers when priced in yen, which could benefit exporters.
The opposite applies to Philippine companies importing Japanese machinery, vehicles, electronics and other goods. A stronger yen makes those purchases more expensive in peso terms, all else being equal.
