A year ago, the mighty exporting companies that drive Japan's economic engine were screaming in protest. The skyrocketing value of the yen had cut manufacturers' profits by 30 percent and was making it difficult to sell Japanese products abroad. Companies announced plans to trim their work forces and cut costs by any means. The Japanese economy was in a deepening slump.
But today, as the yen reaches new highs against the dollar, Japanese corporate officials are calm. (Yesterday, the dollar fell to a record low of 132.45 yen.)
``In the past, everytime the yen went up, they cried `I give up','' says Toshishige Namai, an editor of the leading economic journal Toyo Keizai (Oriental Economist). ``But now they have confidence.''
Economic analysts here see several sources for this assurance:
Japan's domestic economy is enjoying a broadbased recovery, which has boosted the home-market sales of major exporters like auto and electronics producers, compensating for still dropping exports.
Cost-cutting measures and rationalization of production have taken effect. Japanese firms are emerging leaner and meaner from the currency crisis.
Japanese exporters have changed sales tactics overseas, shifting to higher-priced products which bring bigger profits per item.
Exporters are implementing a longer-term strategy of shifting production facilities overseas, particularly to the US, to escape the effect of the high yen.
At Matsushita Electric, all of these factors are combining to brighten the outlook. The company anticipates a 7 percent gain in profits in the fiscal year ending March 31, 1988. The profits are coming largely from domestic sales, which are projected to rise 11 percent. Export sales are falling by 6 percent compared to the previous year.
``We are aiming to reduce costs by 10 percent and introducing new products, involving more high technologies, to compete in Japan,'' explains a company spokesman.
Like other companies producing consumer products, Matsushita has been benefiting from a boom in consumer spending and construction, particularly of private housing.
Matsushita factories are rolling out new items as electric breadmakers for the home, along with traditional VCRs, televisions and stereo hi-fi sets sold under the National and Panasonic brand names.
Overall the electronics industry is looking to the domestic market for its sales. The export component in consumer electrics has gone from about 70 percent in the late 1970s to 30 percent now, says David Gerstenhaber, an economist at Morgan Stanley International Ltd. in Tokyo.
At the same time, companies like Matsushita are hedging against the yen rise by moving production facilities overseas. The company currently has 57 factories operating in 28 countries worldwide. The production from overseas plants represents 11 percent of Matsushita's sales, and the company aims to boost that to 25 percent in the future.
In general, comments Mr. Gerstenhaber, Japanese companies ``are dramatically expanding the ratio of overseas production to overseas sales. The gains they've made in doing this are extraordinary.'' He points to the example of the auto industry, which didn't produce a single car overseas in 1979 and will be manufacturing 2 million cars abroad by 1990.
``There was no reason to do it while the yen was weak because it was more profitable to do it at home,'' he notes.
The Japanese consumer is also responsible for the turnaround of the auto industry. According to the Japan Automobile Manufacturers' Association, October domestic sales of vehicles rose 3.5 percent for the fifth straight month. Exports, in contrast, suffered their ninth consecutive monthly drop.
The auto industry, says Nomura Research Institute analyst Shiro Tanigawa, is divided into two groups. The leaders, like Toyota and Nissan, are less dependent on exports and therefore doing better. ``The further down the line, the heavier the reliance on export - Subaru, for example, exports about 90 percent. If 90 percent of sales come from exports, a little growth in the domestic market is not going to save you.''
Honda, among the better performers, is an exception. Though foreign markets account for two-thirds of sales, it has prospered from a decision in the 1970s to move production to the US.
Auto makers have also cut costs. According to a Nissan official, such cuts brought savings of 200 billion yen (about $1.5 billion) in the last year alone. ``We asked our parts suppliers to lower their prices and advised them in rationalizing their operations ... At the same time we are asking all factories to minimize waste and reduce costs. They may be little things but we are turning off office lights during lunch hours and [limiting] overtime work.''
The results, the official said, are dramatic. The first half of 1986, the company lost 19 billion yen. The first half of this year, profits reached 27 billion yen.
While the situation varies from industry to industry, analysts agree that Japanese firms are better prepared to live with yen's latest rise. Earlier this year, the currency had stabilized at around 150 to the dollar. At that time, says Sanyo Research Institute analyst Toshihiko Sasabe, the electronic companies had planned for a 140 yen for the fiscal year. Auto firms also had similar targets.
In the electronics industry, says Mr. Sasabe, Sony and Matsushita can be profitable at 120, while for other major firms ``the limit is 135.'' What worries them most, he says, ``is the decline of consumption [in the US] caused by the market crash.''
Many analysts believe Japanese firms can handle even further declines in the value of the yen. The key is currency stability, says Mr. Namai, so that companies can plan with safety. With stability, most can survive at 120 and even at 100.
Tetsuo Jimbo contributed to this article.