Japan Reduces Currency Risk on Rising Asian Trade: Chart of Day
July 26, 2010, 5:15 PM EDT
July 27 (Bloomberg) -- More of Japan’s exports are denominated in yen than any time in at least a decade, thanks to rising sales to Asia, reducing the risk that the currency’s appreciation will erode exporters’ profits.
The CHART OF THE DAY shows that 41 percent of Japan’s exports were sold in yen in the first half of 2010, the biggest proportion in data going back to 2000, a Finance Ministry report showed yesterday in Tokyo. By contrast, 48.6 percent of Japanese shipments abroad were made in dollars, a two-year low.
Over half of Japanese exports now go to Asian countries, which pay for them in yen 48.1 percent of the time, more than the proportions for the U.S. and Europe. By keeping the deals in their own currency, exporters avoid the value of their repatriated earnings being curtailed by a yen that has gained about 8 percent against the dollar in the past three months.
“The increase in the yen ratio is good news for Japan as it reduces the vulnerability to currency fluctuations,” said Azusa Kato, an economist at BNP Paribas in Tokyo. “There’s a tendency that the more exports to Asia increase, the more the yen ratio increases, and that will reduce currency risks.”
Kato said another reason why the percentage of exports traded in yen is increasing is that more Japanese companies are making the transactions using their offshore subsidiaries.
Komatsu Ltd., the world’s second-biggest construction- equipment maker, estimates it loses about 2.8 billion yen ($32 million) of annual operating profit for every 1 yen gain against the dollar. China surpassed Japan as Komatsu’s largest market last fiscal year, accounting for 19 percent of sales.
July 26, 2010, 5:15 PM EDT
July 27 (Bloomberg) -- More of Japan’s exports are denominated in yen than any time in at least a decade, thanks to rising sales to Asia, reducing the risk that the currency’s appreciation will erode exporters’ profits.
The CHART OF THE DAY shows that 41 percent of Japan’s exports were sold in yen in the first half of 2010, the biggest proportion in data going back to 2000, a Finance Ministry report showed yesterday in Tokyo. By contrast, 48.6 percent of Japanese shipments abroad were made in dollars, a two-year low.
Over half of Japanese exports now go to Asian countries, which pay for them in yen 48.1 percent of the time, more than the proportions for the U.S. and Europe. By keeping the deals in their own currency, exporters avoid the value of their repatriated earnings being curtailed by a yen that has gained about 8 percent against the dollar in the past three months.
“The increase in the yen ratio is good news for Japan as it reduces the vulnerability to currency fluctuations,” said Azusa Kato, an economist at BNP Paribas in Tokyo. “There’s a tendency that the more exports to Asia increase, the more the yen ratio increases, and that will reduce currency risks.”
Kato said another reason why the percentage of exports traded in yen is increasing is that more Japanese companies are making the transactions using their offshore subsidiaries.
Komatsu Ltd., the world’s second-biggest construction- equipment maker, estimates it loses about 2.8 billion yen ($32 million) of annual operating profit for every 1 yen gain against the dollar. China surpassed Japan as Komatsu’s largest market last fiscal year, accounting for 19 percent of sales.