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EPTE Newsletter From Japan: Yen Continues to Slide

The Japanese yen continues to weaken and the slide began when the current prime minister was elected two years ago. Prior to his election, one dollar was less than 80 yen, but that figure is now more than 118 yen, a 33% drop. Not all think this is a bad thing. The Japanese Government and large corporations in Japan welcome this depreciation in currency because exports are more competitive in overseas markets. A strong U.S. dollar will buy more Japanese products.

The stock market in Japan also welcomes the weaker yen. The Nikkei Index doubled in two years and automobile manufacturers increased their profits due to a spike in exports thanks to a strong U.S. dollar. The number of cars exported did not increase, but the companies received more yen; more profits for the same amount of work! Auto manufacturers paid out bonuses and increased salaries, which helps finance companies profit as well.

The other side of the coin isn’t so rosy. Companies that rely on imports are taking it on the chin due to a weaker yen. Japan imports most of their raw materials and food and costs have skyrocketed. Inflation is on the rise.

How are electronic companies shaking out with a weaker yen? You would think that Panasonic and Sony could increase their exports with competitive pricing. Unfortunately, it did not happen because Japanese electronics companies shifted their manufacturing to other countries with lower labor costs. Many of these companies built new manufacturing plants in China and southeastern Asia, while others transferred manufacturing to ODM or EMS companies in Taiwan. Nowadays there are not many manufacturing plants remaining in Japan. For this reason, Japanese companies can’t export their products and take advantage of a weakened yen. In fact, they pay more yen for their products made in China when they import them.

Japanese manufacturers lost most of their global market share over the last few years due to poor business strategy. These products include flat panel TVs, cellular phones, personal computers, MP3s, tablet PCs, and more. Their market share in the digital camera market remains on track, but this segment continues to shrink at an alarming rate. Some Japanese companies may throw in the towel. For them, a weak yen does not help their bottom line.

Conservative politicians and traditional economists in Japan still believe a weak yen will make the Japanese economy stronger. This way of thinking is wrong. Stable exchange rates are welcomed by most manufacturers. It is tough to sustain long-term profits in a volatile currency market. The only ones who profit are the speculators who buy and sell these currencies.

Dominique K. Numakura, dnumakura@dknresearch.comDKN Research, www.dknresearchllc.com

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Headlines of the Week

(Please contact haverhill@dknreseach.com for further information on the news.)

1. DNP (Major printing company in Japan) 11/6The company has developed a new digital signage system fo use with operated wind power, photovoltaic cell, and second batteries for outside use.2. Teijin (Major material supplier in Japan) 11/11The supplier has developed a new low-cost carbon alloy catalyst for fuel cells without platinum.3. Rohm (Major device manufacturer in Japan) 11/11The manufacturer has co-developed a new wearable bio-sensor technology with Kobe University. The new device consumes only 6 micro A.4. Nidec (Major device manufacturer in Japan) 11/13The manufacturer has developed a new motor driving technology without a magnet introducing SiC base inverter.5. Hitachi (Major electric & electronic company in Japan) 11/14The company has developed a new lithium ion battery technology introducing new electrode materials with special 3D structures. It doubles the life of the battery.6. UTAC (Semiconductor packaging firm in Singapore) 11/14The firm will begin the volume production of grid array flat no-lead (GQFN) packages at its Thailand Plant in the first quarter 2015.|7. Toppan Printing (Major printing company in Japan) 11/18The company has co-developed a new virtual reality technology with Sony that offers a higher resolution than 8k TV.8. Tanaka Holdings (Specialty metallic materials supplier in Japan) 11/18The supplier has developed a new platinum-based glass powder for the sintering process of 3D printing process.9. Mitsubishi Electric (Major electric & electronic company in Japan) 11/20The company has commercialized a new power hybrid IC “SiC DIPPIPM” with SiC base diode as a conditioner of photovoltaic cells.10. Sharp (Major electronics company in Japan) 11/20The company has rolled out a new crystalline base photovoltaic module series, “BLACKSOLAR,” for home use.11. 3M (Major electronics material supplier in the U.S.) 11/21The supplier's fluorinated inert liquid was adopted as a coolant for a super computer developed in Japan.12. Kyocera (Major electronics company in Japan) 11/27The company has released a new FFC connector series, “6866,” with 0.2 mm pitch for the connection between rigid circuit boards and flexible circuits

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