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Windfalls from soaring yen not necessarily passed on to consumers

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Somehow it seems like much longer ago, but at its lowest point in 2007, the Japanese yen was trading at the rate of 124 to one U.S. dollar. Last week, the yen was threatening to break past the 80 yen to one dollar barrier. It should be a matter of simple arithmetic, says Shukan Post (Nov 5), that imported goods should be selling around 35% less than they were three years ago.

Because many of its thermal power generators rely on imported fossil fuels, for every 1 yen of appreciation against the dollar, Tokyo Electric Power Co profits by an additional 14 billion yen per year. But the savings passed on to individual householders from this October were miniscule -- around 20 yen per month. Isn't a little more generosity called for?

"There's a time lag on power fees," a spokesperson for the utility explains. "The October charges reflect May-to-July fuel costs, whereas November's will be June-to-August. We expect to reduce them by another 70 yen or so."

Shukan Post then asks All Nippon Airways about abolishing the fuel surcharge and reducing fares. A calculation shows that for each yen that appreciates against the dollar, the company should realize an annual operating profit of 300 million yen. But it has not reduced fares.

"Certainly the appreciation of the yen brings an advantage, but deficits were incurred when the yen was trading at a less favorable rate, so we have no plans to reduce prices to reflect the current exchange rate," is how the company's spokesperson explains it.

Still, the magazine persists, wouldn't a reduction in fares result in an increase in passengers?

"There are a variety of factors we have to consider when calculating fares, such as the prices of competitor carriers," comes the reply.

Calculated on a caloric basis, Japan's food self-sufficiency ratio in 2009 was about 40%. The soaring yen, then, should have provided restaurants and foodstuffs manufacturers with a windfall.

A spokesperson for Sukiya, the largest beef-over-rice said the company would not accept reporter's questions related to yen appreciation.

"Their beef comes from Australian cattle, and the yen value has declined relative to the Australian dollar, so they are actually at a disadvantage in this case," says a source in the food industry.

"Our food procurements are pegged to the Japanese yen, so there is almost no advantage to the appreciate of the yen," a spokesperson for the No. 3 chain Matsuya Foods tells the magazine.

No. 2 chain Yoshinoya, which sources beef mostly from the U.S., says that the company contracts procurements are set to adjust prices. "We're not affected by exchange fluctuations," he insisted.

McDonald's Japan says that its food import costs are contracted one to three years in the future, so the merits of yen appreciation are not immediately evident. "We're not currently contemplating any price reductions," a spokesperson told the magazine.

Acer, a Taiwan-based personal computer manufacturer, has reduced retail prices by about 20%. A spokesman in Acer's marketing department says that the company will endeavor to keep passing on benefits of yen appreciation to end users. "A new model was launched last February at a manufacturer's suggested retail price of 89,800 yen, but it has now been reduced to 69,800 yen."

A spokesperson for Hewlett-Packard Japan, meanwhile, said, "If other companies use yen appreciation as a reason for reducing their prices, there's a possibility we will do so as well."

A surprisingly high percentage of bicycles are produced outside Japan. Michiyoshi Arai, president of Ishimaru Cycle Ltd, tells the magazine, "About 90% of bicycles sold in Japan are imported, so we are thinking about price reductions. But if we do so and the yen were to subsequently decline in value, it would not be easy to return to the old price. As a manufacturer, we're scared to reduce prices based on exchange rate fluctuations."

The higher yen is definitely an advantage when bringing foreign entertainers to Japan, because their guarantee is invariably based on dollars.

"The price of an S-class seat to the Broadway musical we're bringing to Japan at the end of this year will be set under 10,000 yen, down by several thousands of yen," says promoter Yoshito Yamazaki, who added that while some top performers are demanding higher guarantees, his company might consider reducing prices provided the current yen rate continues for another six months.

"We promise to do our utmost to attract as many customers as possible," he pledges.

© Japan Today

©2019 GPlusMedia Inc.

26 Comments
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The fastest way a Japanese consumer can benefit from the soaring yen rate is to take a vacation abroad.

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Japan's answer. Raise taxes... I for one have send every yen overseas and living poor now. Every cent is moving overseas. I.E. I'm not spending a yen in Japan now. Great for the economy. Now can the average Japanese person think this way? Overseas.... what is overseas.

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Is this a surprise?

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to all the yen rising haters that think Japan will die...eat it... so many articles this past week or 2 have been claiming "this company making mad profits"..this bank made record profits..etc etc even with the high yen!! that 10-15% industry we call manufacturing industry is a joke..so many more are making money off this high yen who are in the service industry (restaurants and banks for example)..me included...I for one have passed on these savings to my students for the short term (i send money home monthly)and i even got more students because of my lower fee. Yen keep rising!! No, im just kidding about passing on the savings to my students, (im not that dumb and we are all greedy) but maybe in the future if the yen stays strong, then I might consider lowering my class fees ;)

Oh and for us teachers, no matter how the economy is doing..we always have students.. if the economy is bad, people want to upgrade their certifications when looking for new jobs so they take english lessons..when good..new English hobby anyone...

and yes, some savings are passed on, has anyone noticed the gas prices this past year..down down down!!

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These so-called 'windfalls' are only relative to older prices, if you are planning to spend some money and buy something.

It's not like potential free money fluttering from the skies.

Naturally I would be happy though to pay less for my gasoline/petrol, oh and air fares, definitely, yes...

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But when situation is opposite, these companies don`t wait to raise their prices. Why the delay now? All a bunch of money-grubbing crooks. As for gas prices (especially heating oil) the prices are still too high. The should be rock bottom like about 6 years ago. Less than 100 Yen per litre.

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Savings should be bonused out to execs and never passed on to consumers. That's the whole point of being in business.

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correct me if im wrong but the yen has steadily been gaining in value against other widely used currencies like euro and dollar for a couple of years and i would bet money that in that time little or no reductions on imported items has occurred.couldnt believe how expensive some things were at costco last time i went especially with the yen at such a high against the dollar.it should be cheaper now to buy stuff from abroad,right? Like someone else mentioned ill just keep my money and send it home to change back into euro..more money not being spent in the local economy..and they wonder why consumer spending is declining!

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Uh, it's easy to buy overseas via the net..., that's where the deals are.

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johnnyG:Yes, I remember when the dollar was at 79 about 15 years ago, mail-order shopping from the USA became very widespread, and with it some disappointments. Nowadays its even easier with the net.

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This headline can be easily confirmed to be correct simply by going into Kinokuniya or Maruzen and seeing the still outrageous prices of foreign books and magazines that do not reflect the yen rate in the least.

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This headline can be easily confirmed to be correct simply by going into Kinokuniya or Maruzen and seeing the still outrageous prices of foreign books and magazines that do not reflect the yen rate in the least.

yes, Sarge, this is so sad. Maybe it is better to order books from abroad as a software.

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A house builder I was talking to looked slightly surprised when I pointed out that their imported materials were at least 10% cheaper then quoted. But he did admit it after I said this. No concession to me though, a potential customer. Greed rules.

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I love the FT headline the other day that in the UK 'internet shopping', in 2010, is now bigger than their 'construction/ building industry. Perhaps the Japanese should not only tweet but buy online too :)

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Got my windfall. Just ordered about US$2000 dollars worth of goods over Amazon & others. Saved around %20 when converted to yen. Then went to various Japanese sites: Amazon, Rakuten, etc... and saw how the savings really piled up.

Yo, Japan! Wake up! Stop getting the short end of the stick. Get a clue.

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Japan imports very little, so there are few savings to be had.

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Japan imports almost all of its raw materials. So the high value of the yen is great news to some over here.

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One gross example of greed here in Japan is the Mexican lime, geez, the Japanese Yen has gotten way stronger to the US dollar, and the USD is always stronger than the Mexican peso, but instead of a crummy Mexican lime going say from 100 yen for 1 lime, I have now seen it at 150 yen plus? I should be selling Mexican limes here in Japan and make a killing!

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Savings should be bonused out to execs and never passed on to consumers. That's the whole point of being in business.

THAT THERE is a republican! Amazing. He doesn't want cheaper prices!!!!! He must be a robot, as we humans, have to eat and consume, so he is actually saying something that goes against his own wallet. LIke I said, THAT is a republican!! Or a robot who doesn't consume ANYTHING. WOW.

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Greed is what is wrong with Japan. Japans corps are greedy to the max. The Oji-sans are just greedy and do not think about their customers or employees.

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imported goods should be selling around 35% less than they were three years ago...

Wow.Thats a big profit that these companies are making on the strong yen. Surely that creates opportunities for new businesses to start up in competition.Or is everything in Japan so controlled by the big fish that competition is impossible?

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we never get things passed on unless it`s a higher price.

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Well it just goes to show you that fuel surcharges are anything but. They might as well as label them "extra profit charge".

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YuriOtani. You nailed it!

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And thats why the Japanese economy keeps killing others during this recession. People keep buying! even at ridiculous prices (and i thought we are in a deflation for decades!!)

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It`s an unwritten law of economics that as the yen strengthens, prices of imports remain very stable. Conversely, when the value of the yen goes down, the prices of imports are quickly adjusted upwards.

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