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TMCNet:  FOCUS: Weaker yen not unmixed blessing for Japan's electronics firms

[February 01, 2013]

FOCUS: Weaker yen not unmixed blessing for Japan's electronics firms

(Japan Economic Newswire Via Acquire Media NewsEdge) TOKYO, Feb. 2 -- (Kyodo) _ The yen's recent plunge against major currencies may help struggling Japanese electronics makers turn themselves around after massive losses, but it could also hamper their restructuring efforts in the long run.


After reporting huge group net losses for the April to December period on Friday, senior officials of both Panasonic Corp. and Sharp Corp. have expressed hope for positive effects resulting from the yen's depreciation, which is set to improve their overseas competitive edge and earnings.

In the most recent three months to December, the weakened yen lifted Panasonic's operating balance by 3 billion yen, while it raised Sharp's pretax balance by 8 billion yen, the officials said.

Panasonic Managing Director Hideaki Kawai said the company has so far seen only a limited impact from the yen's fall on its performance, but is expecting more favorable effects in upcoming earnings.

"We had not expected that the yen would move downward, but it will work positively for an improvement in the future," Kawai said at a news conference in Tokyo. "We are expecting that it will generate positive effects." Canon Inc., whose overseas sales accounted for around 80 percent of its total sales in 2012, expects the weakening yen will lift its operating balance by 109.2 billion yen in the current business year through December.

In the currency market, the dollar has risen more than 10 yen to above the 90 yen level since mid-November last year, when Liberal Democratic Party leader Shinzo Abe, prior to the Dec. 16 general election that made him prime minister, started urging the Bank of Japan to implement more aggressive monetary easing.

The U.S. currency climbed as high as 92.97 yen, a 32-month-high, in New York on Friday. The euro has gained more than 20 yen to trade around 125 yen recently, fetching 126.60-70 yen at 5 p.m. Friday in New York.

Sharp President Takashi Okuda welcomed the policy measures pursued by Abe's government, saying, "It is very encouraging that the new government was launched and is working on overcoming deflation, monetary and fiscal policies and a growth strategy." "Most of all, we feel heartened by the depreciation of the yen," he added.

In addition to lifting exporters' overseas earnings, a weak yen will also enable them to engage in price competition with South Korean and other rivals, said Koki Shiraishi, senior analyst at SMBC Nikko Securities Inc.

"It will give Japanese firms resources to cut prices of their products, although they have suffered a disadvantage in sales competition until now" because they have not been able to lower prices to prevent further deterioration in their earnings, he said.

But there could also be side effects of the yen's rapid fall, as it will lead to higher electricity costs in the country, which depends on imports of oil and other fossil fuels especially after the nuclear crisis at the Fukushima Daiichi complex in March 2011.

"The semiconductor-related business will benefit from a weak yen, but the rapid fall in the currency will increase costs because it uses a massive amount of electricity," Toshiba Corporate Executive Vice President Makoto Kubo told a press conference, adding a rate of 90 yen against the dollar would be "a comfortable level." Shiraishi of SMBC Nikko Securities voiced concern that the weakening yen may become an obstacle for the struggling Japanese electronics makers to implement their restructuring measures in the long term, as it will make their earnings look better.

"From the medium to long-term perspective, a weak yen may have adverse effects," Shiraishi said, as an improvement in earnings results would give them a reason not to carry out personnel cuts, although they face the need to slash surplus workforces.

In addition, their business environment is expected to remain severe for a while amid slumping demand for flat-panel televisions in Japan and slowing demand in Europe.

"The situation has not changed, as we are still seeing severe earnings conditions," Sharp's Okuda said.

Reflecting their cautious outlook, Sharp and Panasonic left their earnings projections for the full business year through March unchanged. Sharp expects to post its largest-ever group net loss of 450 billion yen, while Panasonic projects booking a group net loss of 765 billion yen.

(c) 2013 Kyodo News International, Inc.

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