As one of the primary investment safe-havens, are currency speculators inadvertently creating a super-strong yen at the expense of high-quality Japanese exports?
By: Ringo Bones
The world’s currency speculators and hedge fund managers had been as of late using yet again the Japanese yen as a safe-haven investment, a move that could ultimately make the currency super-strong. Add to that the Mainland Chinese financial firms in a current buying frenzy of 5 billion US dollars worth of Japanese sovereign debt and one could wonder if this could spell a death knell to Japanese exporters – especially one specializing in the manufacture of premium-quality specialist products.
In the Far East, even though Mainland China have already matched – even exceeded - the production capabilities of Japanese export firms, China is still several years away from equalling Japan in quality terms. When it comes to manufacturing premium specialist products – as in scientific and precision engineering gear, even hi-fi - is still a skill that China has yet to climb a steep learning curve to match the Japanese and American and even German competition.
Never mind the American and German expertise in this field because in the ASEAN region, Japanese specialist products have already carved themselves a niche when it comes to reasonably-priced alternatives to American and German products of comparable quality. A super-strong yen also places most export firms at a disadvantage. Making their high-quality but reasonably priced products less competitive overseas when competing with cheap and wonky Mainland Chinese produced goods. A lower profit margin resting from a super-strong yen could drive a significant number of Japanese exporting firms into bankruptcy.