Most of Japan's Manufacturers Hurt By Rising Yen - but Not All


IN just about every account of the yen's seemingly relentless appreciation, there are the inevitable wails of woe from Japan's manufacturing companies.

They suffer because the goods they export become more expensive in overseas markets as the value of the yen rises. When the heads of the world's leading industrialized nations meet in Naples, Italy, this weekend, many of Japan's industrialists are hoping for an international effort to make their currency cheaper.

But there are exceptions to every generality. Take Aiwa Co. Ltd., a maker of audio and other electronic goods that is 51.7 percent owned by Sony Corporation.

As Japan's other export-oriented electronics makers - including Sony - have listed through the recession, Aiwa has posted record profits. In the fiscal year that ended March 31, the company had sales of 178.65 billion yen (about $1.7 billion), up more than 10 percent from a year earlier. Pre-tax profits of 7.8 billion yen were up a mighty 120 percent.

As endaka, or yen appreciation, worsens the picture for many competitors, Aiwa can remain confident. Its export business won't be harshly affected because it has already exported most of its export business.

In the mid-1980s, before most Japanese companies realized that domestic costs were becoming prohibitive, Aiwa started moving its manufacturing sites to Singapore and Malaysia. By the end of this fiscal year, the company will be making 90 percent of its goods outside Japan, according to Aiwa president and chief executive officer Hajime Unoki.

Previous bursts of endaka have put the word ``restructuring'' on the lips of many Japanese executives, and some companies have indeed increased domestic productivity and opened plants in other countries. (Moving manufacturing sites also means that goods made by Japanese firms don't show up as part of this country's trade surplus; the products are registered as exports of the nation where they are made. The corporate profits, however, remain Japanese.)

But in an interview this week, Mr. Unoki says Japanese corporations will have to make major changes in the way they do business, and it won't be pretty.

``We have hit the limit,'' he says, now that the yen has broken the 100-yen-to-the-dollar barrier and seems poised to rise to 95 yen or even 90 yen to the dollar. Surveying his competitors and other Japanese businesses from his comfortable position as a pioneer who went where others are now forced to follow, Unoki adds: ``We have to more drastically change the ... operations of our businesses.''

Not only will Japanese firms have to move more production facilities offshore, but they will again have to reexamine Japan-based operations. That means that firms may finally start doing what is unthinkable in Japan: closing plants and laying off workers. ``We are facing the second stage of restructuring,'' Unoki asserts. When he led Aiwa through this process, the social costs were minimal. The economy was booming here in the late 1980s, so workers who were displaced by Aiwa's transit overseas easily found jobs.

``I was lucky,'' Unoki says. Other Japanese companies, he suggests, won't be. He predicts that without government action to change the situation, Japan's traditionally low unemployment rate may reach 10 percent in five or 10 years.

Does that mean that Japan's venerated manufacturing companies, long nurtured by a powerful, business-friendly bureaucracy, will now be forced to hurt the country? ``Yes,'' Unoki says. ``Exactly.''

The singular feature of Japan's post-war economic ascension has been the convergence of government and corporate interests. Endaka, at least in this executive's view, may mean the end of all that.

``The prime purpose of the president of a company is to save the company itself, not to save the public,'' Unoki says. ``High unemployment, of course we know that that's not a good thing for the society, but that is ultimately not the responsibility of the corporation, because the responsibility of the corporation is to give returns to the shareholder.

``Today the company's interest and the country's interest are not necessarily in the same line. That's a revolution.''

Unoki adds that Japanese authorities must genuinely pursue the deregulation and market-opening measures that are the topic of constant debate here. In a statement that must be music to American officials committed to reducing Japan's $131 billion trade surplus with the rest of the world, Unoki concludes that Japan has ``to maintain a good balance between imports and exports.''

``If the Japanese government maintains or tries to maintain today's conventional attitude toward the economy, then Japan will be out,'' he says. The country, he adds, ``will be weakened.''

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