Home > News
  print button email button

Tuesday, Jan. 24, 2012

Weak euro's perks said few, unlike dollar's

High fuel costs, firms' lack of EU footholds pose fewer benefits


Staff writer

Having reached a historic high against the dollar last year, the sky seems to be the limit for the yen as it forges on against the euro.

But pundits say the perks of the euro being below ¥100 are limited and that its impact on the Japanese economy could be more damaging than the weak greenback.

"Obviously this will influence Japan's exports to Europe," Hiromasa Yonekura, chairman of Keidanren, told a news conference last week. "There is concern that it will have an impact on our economy. We do not have resources to solve the issue. This is becoming serious."

The euro last week was being traded around the ¥97 range. It has bounced back a couple of yen since then but remains at a historic high.

The limits to being able to import Europe's finest items for cheaper prices are slowly becoming tangible to the public.

Otsuka Kagu Ltd., a major furniture retailer, began discounting some of its products by 22 percent this month. The sale covers approximately 300 items mainly from Germany, Italy and Austria. It is the first sale caused by a weaker euro since November 2008, the company said.

But while some traders have begun cutting prices for European goods, including pasta and olive oil, not everyone has jumped on the discount bandwagon.

"We aren't planning to hold a discount because of the weak euro," a spokeswoman from wine retailer Enoteka Co. told The Japan Times on Monday.

"The euro is weak, but the high cost of wine this year as well as the price of shipping and other fees are serving as a counterbalance," she said "The merit of a strong yen is currently offset by such reasons."

Although exchanging yen for euros will give Japanese traveling to Europe greater buying power, the travel industry isn't able to return the benefits of a strong yen because of the high price of oil and the resultant surge in airline fuel surcharges.

"Euro-based imports make up only a fraction of dollar-based imports in Japan, and therefore there aren't that many products from Europe that the public can purchase at lower prices because of the weak euro," said Hideki Matsumura, a senior economist at Japan Research Institute.

Matsumura added that many European fashion names have refrained from discounting because that would weaken their brand appeal.

"As much as there is trouble with the dollar being weak, there are also tangible benefits for consumers. But it is harder for consumers to take advantage of the weak euro," Matsumura said.

Meanwhile, because trade with Europe is export-oriented, domestic manufacturers have been quick to feel the exchange-rate squeeze.

"There isn't much to expect" as far as doing business in Europe is concerned right now, Mazda Motor Corp. President Takashi Yamanouchi said earlier this month at a news conference.

Unlike Asia and the United States, where Japanese companies operate their own factories, many firms do not have major footholds in Europe.

This makes it difficult for Japanese manufacturers to do business directly in local currencies, forcing them to put up with the disadvantageous yen-euro rate.

Pundits expect the euro to remain weak because of Europe's sovereign debt crisis. Some say it could go well beyond the ¥95 line, depending on how Europe's leaders handle the situation.

"There isn't much that Japan can do as a country since the weak euro is induced from reasons rooted in Europe," Matsumura explained.

"For domestic companies, it will be crucial that they have their factories dispersed globally so their business can adapt to the changing currency rates."



We welcome your opinions. Click to send a message to the editor.

The Japan Times

Article 1 of 5 in Business news

 Next



Back to Top

About us |  Work for us |  Contact us |  Privacy policy |  Link policy |  Registration FAQ
Advertise in japantimes.co.jp.
This site has been optimized for modern browsers. Please make sure that Javascript is enabled in your browser's preferences.
The Japan Times Ltd. All rights reserved.