Are consumers being short-changed by the yen’s appreciation?
An ongoing matter of concern in the Japanese financial pages is the continued appreciation of the yen against almost every other currency. According to the overriding narrative attendant to this concern, Japanese exporters “enjoyed” a lower yen (en-yasu) until the middle of 2007, meaning that because the yen was valued low in relation to the currencies in the countries where these companies’ goods were sold, they made more money. That changed, and especially after the financial crisis of 2008, the yen shot up and continued to rise over the next three years, even after Japan’s economy was pummeled by the earthquake and tsunami last March. The yen is now up about 25 percent over what it was four years ago.
This is generally considered a bad thing since Japan’s economy depends on exports, but a lot of economists are saying the situation isn’t as dire as the media has portrayed it. Major exporters like Toyota and Sony have the ear of the mass media, so their troubles tend to represent all of Japanese industry in the financial press, but exports account for less than 20 percent of Japan’s economy. These companies threaten to move operations overseas if the yen isn’t brought down, but they’ve already moved a huge portion of their manufacturing overseas. In addition, they buy parts and materials from countries where their yen goes much further.
The economists who point this out also explain that the high yen can be considered a good thing for consumers, who should expect to “enjoy” substantially lower prices for imported products and Japanese products that use foreign ingredients. That should go without saying, and we’ve been waiting to see these savings at our local retailers. We’re still waiting. When we ask why the high yen isn’t reflected in prices we get answers like this: Though the yen is appreciating, commodity prices are increasing; many countries are experiencing inflation; since all imports have to be shipped, prices depend on the price of oil. In the end, these answers sound like excuses, because except for some isolated retail areas (Amazon; one particular brand of imported camembert, pictured), almost nothing sold in Japan from overseas has become noticeably cheaper in the last three years.
Take two obvious examples: cheese and wine. Both are subject to import duties and have little real competition from domestic products. Nevertheless, given the appreciation of the yen, prices should have dropped substantially. When we’ve asked retailers, we’ve been told that there’s always a time lag with the prices of imports. But three years? And what about produce, which should have no time lag? Kiwi fruit from New Zealand, avocados from Mexico and California, bananas from anywhere are generally the exact same prices they were three years ago. And it’s not just products. Why are concert tickets still so high? Are foreign artists taking advantage of the high yen to boost their fees, or are promoters gouging their fans?
Over the years we’ve read a few other excuses. One of the most ludicrous is that Japan is now suffering from deflation, so it would only aggravate the matter if wholesalers and other middle men passed on the savings they enjoy through the high yen. Then there’s the cultural angle: Japanese people don’t trust things that are suddenly cheap.
A fairly good indication of how some companies are benefiting from the high yen is the rash of mergers and acquisitions that have taken place in the last year. According to the Mainichi Shimbun, between April and September of this year, Japanese companies’ M&A activities were worth some ¥3 trillion, which is a 120 percent increase over the same period a year ago. In particular, brewers have been quite active in this area. Kirin Holdings has acquired a Brazilian beer company and Asahi Beer bought companies in Australia and New Zealand. It’s not just that the high yen makes these companies cheaper to purchase. While Japanese beer companies face a shrinking market, they’ve made decent profits with the high yen since they import most of their ingredients, like wheat, from overseas.
Since the media doesn’t seem overly concerned with this issue, we invite the readers of this blog to comment and offer evidence that either supports our observation or refutes it. Have you seen the high yen reflected in lowered prices of imported goods? And we don’t just mean limited bargain sales, but rather continuing low prices. If so, tell us where to find them. We’d love to be wrong.