Toshiba to receive gov't funds to counter yen appreciation


Toshiba Corp will receive funding to counter yen appreciation from the Japan Bank for International Corporation's fund.

Announced by the Ministry of Finance in its Aug 24, 2011 emergency package against yen appreciation, the fund supports Japanese companies in carrying out overseas M&As. Toshiba has negotiated U.S. dollar-denominated loans totaling approximately $1 billion, some $600 million from the government fund and $400 million from Japanese private banks.

Toshiba reinforced its Smart Community business with the July 2011 acquisition of Landis+Gyr, a global leader in energy management solutions for utilities, in a deal financed by a short-term bridge loan raised from private banks. Toshiba said that funding from the government's fund will allow it to extend the loan period and to reinforce its financial base while minimizing the impact of the cost of the acquisition.

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Unfair unless govt provides proper financial aid to jobless or part-time workers.

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This headline should finish with an "or else!" at the end. It's just a matter of time till Toshiba goes.

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Why would Japanese companies need aid when the yen is high to make an acquisition in a foreign country?

Surely that is an advantage????

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Illegal subsidy.

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The root of the issue relates to incentives.

Generally speaking, Japanese industry produces in Japan. Japanese companies tend to use Japanese suppliers based in Japan. There is nothing inherently wrong with that. To the devil's advocates who point at global production from leaders such as Komatsu, et al. -- there are always examples of global producers. I get it.

On the negative side, a relatively strong yen reduces profitability of Japanese goods produced in Japan that are sold abroad, which reduces Japanese corporate profits.

On the positive side, a relatively strong yen provides for a stronger currency with which to acquire foreign companies. The accretion could boost Japanese corporate profits.

It seems to me that the incentive of the program highlighted in this article motivates Japanese companies to keep its manufacturing base in Japan, for aid for M&A on the back of a strong yen seems more like an employment subsidy aimed at offsetting the profit crunch by selling relatively higher cost Japanese goods abroad.

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