The Japanese yen continues to weaken. The slide began when the current prime minister was elected two years ago.
Prior to his election, one dollar was less than 80 yens, but is now more than 118 yens -- 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 their exports are more competitive in overseas markets. A strong US 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 US dollar. The numbers of the cars exported did not increase, but the companies received more yens; more profits for the same amount of work! Auto manufacturers paid out bonuses and increased salaries, and finance companies are profiting 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 electronics 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 their 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 yens for their products made in China when they import them.
Japanese manufacturers lost most of their global market share over the last few years because of 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 in tack, 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 for them to sustain long term profits in a volatile currency market. The only ones who profit is the speculators who buy and sell these currencies.
Dominique K. Numakura, This email address is being protected from spambots. You need JavaScript enabled to view it.
DKN Research, www.dknresearchllc.com
DKN Research Newsletter #1434, November 30, 2014 (English Edition) (Micro Electronics & Packaging, www.dknresearchllc.com)
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Headlines of the Week (Please contact This email address is being protected from spambots. You need JavaScript enabled to view it. for further information of the news.)
1. DNP developed a new digital signage system operated wind power, photovoltaic cell and second battery for outside use.
2. Teijin developed a new low cost carbon alloy catalyst for fuel cells without platinum.
3. Rohm codeveloped a new wearable bio-sensor technology with Kobe University. The new device consumes only 6 micro A.
4. Nidec developed a new motor driving technology without magnet introducing SiC base inverter.
5. Hitachi developed a new lithium ion battery technology introducing new electrode materials with special 3D structure. It makes battery life double.
6. UTAC will start the volume production of GQFN (Grid Array Flat No-lead) package at Thailand Plant in the first quarter 2015.
7. Toppan Printing and Sony codeveloped a virtual reality technology with a higher resolution than 8k TV.
8. Tanaka Holdings developed a platinum base glass powder for the sintering process of 3D printing.
9. Mitsubishi Electric commercialized a new power hybrid IC “SiC DIPPIPM” with SiC base diode as conditioner of photovoltaic cells.
10. Sharp rolled out a crystalline base photovoltaic module series “BLACKSOLAR” for home use.
11. 3M's fluorinated inert liquid was adopted as the coolant of the super computer developed in Japan.
12. Kyocera released a FFC connector series “6866” with 0.2mm pitch for connecting rigid circuit boards and flexible circuits.
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