Falling yen to make Japan's goods more affordable

Associated Press

Published: Friday, May 17 2013 12:00 a.m. MDT

In this Thursday, March 21, 2013, file photo, Cars for export are parked at a quay to be loaded on a freighter in Kawasaki, south of Tokyo. The weaker yen could hurt sales of European companies already struggling from the continent's recession. In Europe's shrinking consumer market, competitively priced Japanese cars could squeeze General Motors' money-losing Opel brand and France's Peugeot Citroen PSA, says Stefan Bratzel, an auto analyst at the University of Applied Sciences in Bergisch Gladbach, Germany.

Koji Sasahara, Associated Press

Attention, bargain-hunters around the world: Japanese goods — from cars to televisions — are going on sale.

Credit Japan's drive to pump cash into its economy to stimulate growth. The extra money flooding its financial system is helping shrink the value of the yen. A U.S. dollar now buys about 100 yen. Last fall, it bought fewer than 80.

When the yen's value falls, many Japanese goods become less expensive worldwide. Toyotas become cheaper in Germany, the United States and South Korea. So do Sony electronics. For tourists, Tokyo doesn't cost so much to visit.

By contrast, goods made in Europe, Asia and the United States become pricier compared with Japanese products. And as sales of Japanese products grow, Japan's economy benefits.

The rest of the world's economies? Not so much — not right away, at least. Japan's critics say it's manipulating its currency to give Japanese companies an unfair edge over foreign rivals. Japan says it's seeking to energize its economy, not lower the yen.

In the long run, economists say other nations gain, too. An economically stronger Japan means its consumers and businesses can afford to buy more goods from other countries, helping lift their economies, too.

Here's how a cheaper yen will affect consumers, companies and investors worldwide:


If you're a customer of Honda, Toyota or Sony somewhere outside Japan, a falling yen is your best friend. It means Camrys, Accords and PlayStations will likely cost less. And once foreign sales are converted into yen, more revenue flows to Japanese manufacturers.

When Toyota sold a Camry in the United States for $30,000, those dollars were converted into roughly 2.4 million yen. Today, Toyota would get 3 million yen from such a sale — 25 percent more.

That's in part why Toyota, the world's top-selling automaker, more than doubled its most recent quarterly profit from a year earlier. And why Sony is back in the black after four straight years of losses and predicts another profit for its current fiscal year.

Japan makes up about 35 percent of the U.S. auto market. It exported 1.8 million cars to North America in the fiscal year that ended in March, up nearly 6 percent from the previous year. Toyota's Camry is the top-selling car in the United States.

Toyota, Honda and Nissan receive roughly $2,000 more for each vehicle sold when the yen depreciates from 78 to 100 yen per dollar, according to an analysis by Morgan Stanley. For automakers that sell a larger proportion of their vehicles outside Japan, like Mazda, the advantage is greater: For Mazda, it's about $4,000 per vehicle.

Nissan's announcement this month that it's cutting prices of seven models was seen as the latest blow in a price war accelerated by the weaker yen. Morgan Stanley analyst Adam Jonas expects General Motors, Ford and Chrysler to lose some U.S. share to Japanese rivals within a few years.

That said, Japanese automakers now have to pay more for parts made by suppliers outside Japan. And Fitch Ratings predicts the weaker yen will be only modestly positive for Japanese electronics makers. That's true even for a company like Panasonic, which gets nearly half its revenue overseas.

In part, that's because, as with cars, many Japanese goods are produced in factories abroad. When the yen drops, it costs more for Japanese manufacturers to import those goods. Panasonic, for example, runs factories in China. A lower yen raises the cost of bringing its electronics products back to Japan to be sold.


Always dreamt of visiting Japan? It's becoming more affordable.

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