5/30/2015

Concern on Volatile Foreign Exchange

Decline of Japanese yen eventually harms Japanese economy, which is stepping into crucial moment of regaining power for stable growth. While small or mid-size businesses and individual consumption are two keys for its revival, cheap yen adds unexpected cost on productive activity of manufacturers and prevents consumers from purchasing goods. Having doubted on possible manipulation, the government of Japan has exercised no effective measures to cool enthusiastic market down.

New York Foreign Exchange marked ¥124.40 for $1 on Thursday. That was the lowest value of Japanese yen against U.S. dollar for there twelve years. Market dealers have been buying USD, responding to the expectation of ending U.S. monetary easing later this year. With steep down of Japanese yen for five consecutive days, its value was reduced ¥5 within a month.

Manufacturers basically welcome current trend. “It is definitely a following wind for us manufacturers,” told Fumihiko Ike, President of Car Industry Association. Cheap yen actually renders Toyota, Honda or Nissan, competitiveness with lower price than other makers in Europe or America in foreign markets.

Companies dealing with tourism also welcome cheap yen. Travelers from Asian nations appear everywhere in Tokyo or other cities. Retailers expect “explosive purchase of Chinese tourists who buy souvenir to their relatives in China. Monthly foreign travelers t Japan in April exceeded 1.7 millions for the first time. Hotels have been securing firm interests even they discounted room price.

But major companies that already shifted their factories to oveseas have not received the benefit of volatile foreign exchange. “One yen of decline worth seven billions yens of operational profit” said public affairs section of Sony.

Machine factory has also been affected. “Cost for raw materials such as aluminum and utility price had negative impact on our balance,” said the manager of a machine parts producer. Being unable to withstand costly procurement, a major bread bakery, Yamazaki, decided to raise the price of 168 commodities by 2.6% in average. It is not unusual that a customer disputes to a clerk about the price on their purchase with misunderstanding on unexpectedly high price.


Economists predict further decline of Japanese yen along with deliberation of Federal Bureau of Reserve on its turn to monetary tightening. But some are worrying about excessive hike of U.S. dollar with erosion of current growth. Fragile revival of Japan with weak asset investment and individual consumption will soon be affected by U.S. economy.

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