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AnonymousInactivehttp://online.wsj.com/article/SB122902846535799289.html?mod=googlenews_wsj
Currency Pain in Asia
Japanese Competitive Edge Gets Lost in Translation
In
an economic slump, the lowest cost producer wins. That is, unless, the
low-cost producer is a Japanese company.The yen has emerged from the
credit crunch as one of the year’s best-performing currencies. It is up
20% against the dollar, and 35% against the euro.
An electronic board shows the 12-month movement of the Japanese yen against the Hong Kong dollar in October.movement of Japanese yen
Add
in the impact of plunging currencies among its Asian rivals, and
Japan’s exporters have a real problem on their hands. South Korea’s
currency, the won, has tumbled 31% against the dollar this year, for
example. It is down 43% against the yen.Small wonder then that, in
local-currency terms, shares of Korea’s Samsung Electronics have fallen
only 13%, while those of Japanese rival Toshiba are down more than 61%.Even
if both sell a DVD player for $60 at Best Buy, the profits they’ll take
back to Seoul and Tokyo will be starkly different. It also means that
Samsung has room to cut prices further than Toshiba does, without
hammering margins in local currency. If the currency adjustment lasts
for any length of time, it provides a chance for Samsung to boost
market share.But Japan isn’t alone in this pickle. The won also is down
29% against the new Taiwan dollar, giving Korean memory-chip makers a
similar edge over their Taiwanese rivals.Like Japan, China has
also seen its currency strengthen as a result of Beijing’s
exchange-rate fixing mechanism. A 23% drop in the rupee against the
yuan means the advantage swings to clothing factories in India.When the
won last slumped this much a decade ago, South Korea relied on exports
to nurse itself back to health.A repeat might be more
challenging with American and European consumers wary of buying some
goods even at deep discounts. Meanwhile, currency fluctuations take
time to have an effect, because importers and suppliers need time to
adjust contracts.But if the currency moves last, Korea’s extra
competitiveness may give a fillip to the economy in 2009, even though
Korea also could face negative effects from a weak won, such as more
expensive imported raw materials.One question is whether those
with strong currencies look for a way to protect their exporters.
Competitive devaluations don’t appear on the agenda right now for Japan
and China.But China already has given a signal that the steady upward
climb of the yuan against the U.S. dollar could be over for now. And
speculators have started betting that a deep global recession could yet
inspire more radical currency moves. -
AuthorDecember 12, 2008 at 10:54 AM
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