Economic theory suggests that a currency devaluation should make a nation's exports more price competitive and stimulate export demand. The Japanese yen has depreciated by 30% versus the US dollar but Japanese exports to the US has declined modestly during this period. This study by the Federal Reserve Bank Of New York explains why a substantial currency devaluation has not increased Japanese exports to the US.
Many Japanese firms invoice US importers in US dollars. That actually increases margins in Japan. The dollars received in Japan translate into higher yen margins. Another factor is that Japanese exporters are also large importers of raw materials and energy. Therefore, their cost of production increases. Higher product costs limit the advantage gained by currency devaluation. Japanese firms are also protective of their large market shares in the US market. They are willing to accept lower prices to maintain market share.
This article does not discuss Japanese competition with foreign competitors in the US market but that may also have contributed to slower growth in exports to the US. In particular, firms like Samsung and LG have been successful in the US consumer electronics market. Hyundai and Kia have also been successful in the US auto market. They have competed with Japanese products on quality as well as on price.
No comments:
Post a Comment