Ja­pan does an Ap­ple

Financial Mirror (Cyprus) - - FRONT PAGE -

com­pa­nies have cap­i­tal­ized on the earn­ings boost de­liv­ered by the yen’s post-2012 de­pre­ci­a­tion by ag­gres­sive over­seas M&A and build­ing up over­seas oper­a­tions as pro­duc­tion and dis­tri­bu­tion bases for for­eign mar­kets. Given that Ja­pan’s pop­u­la­tion is shrink­ing, it has made sense to move pro­duc­tion of its ma­jor prod­ucts— au­to­mo­biles, elec­tric ma­chin­ery and elec­tronic equip­ment— closer to the end market. Ja­pan Inc is also deep­en­ing strate­gic ac­qui­si­tions as shown by Softbank’s US$32bn pur­chase of the UK chip de­signer ARM Hold­ings.

This trend is hav­ing a pro­found im­pact on the struc­ture of Ja­panese busi­ness. In 2012 Ja­panese firms passed the thresh­old of pro­duc­ing/creat­ing more goods and ser­vices out­side of the coun­try than in­side. That ra­tio had risen to 58.3% at the end of the 2015 fis­cal year, ac­cord­ing to an Au­gust re­port by the Ja­pan Ex­ter­nal Trade Or­gan­i­sa­tion. This data was drawn from the fi­nan­cial state­ments of 186 Ja­panese firms (as a tech­ni­cal point, goods pro­duced in Ja­pan for ex­port are cal­cu­lated as “do­mes­tic sales”). The sug­ges­tion is that with the off­shore pro­duc­tion num­ber mov­ing to­wards 60% of to­tal out­put, some kind of tip­ping point has been reached such that a rise in the yen does not threaten Ja­panese firms’ com­pet­i­tive­ness and so market share (yen-based earn­ings will still face a neg­a­tive trans­la­tion ef­fect). The im­pli­ca­tion is that Ja­pan’s bal­ance of trade will no longer tell us much about cor­po­rate earn­ings.

It is worth not­ing that a 2014 US Bu­reau of Eco­nomic Sta­tis­tics re­port on multi­na­tional ac­tiv­ity showed Ja­panese

Newspapers in English

Newspapers from Cyprus

© PressReader. All rights reserved.