The recent weakness in the value of Japanese yen has triggered depreciation of the New Taiwan dollar, but the declining yen is not likely to substantially affect Taiwan’s export competitiveness, Credit Suisse said in a report.
Hong Kong-based Credit Suisse economist Christiaan Tuntono said on Friday that Taiwan’s industrial structure does not overlap much with Japan’s and Taiwanese exporters generally do not directly compete against their Japanese counterparts.
“There is limited competition between the two economies in areas like foundries, backend and IC design,” Tuntono wrote in the report issued on Friday.
Instead, he said major manufacturing equipment buyers in Taiwan would likely benefit from the ongoing trend of a weak yen, because the lower yen would reduce their import costs for equipment and raw materials from Japan.
The yen has depreciated more than 13 percent against the US dollar in the past three months, after Japan’s government adopted a policy of monetary easing aimed at getting the country out of a deflationary recession.
While Taiwan and Japan are in direct competition in some other areas, such as passive components and IC substrates, the recent decline in the yen still has a limited impact on Taiwanese technology companies, Tuntono said in the report.
“The cost differential between Taiwanese and Japanese products is about 20 percent to 30 percent, hence a 10 percent depreciation of the Japanese yen so far should not significantly impact [Taiwan’s] competitive landscape in the near term,” he wrote.
Last month, Hong Kong-based UBS AG regional chief investment officer Pu Yonghao (浦永灝) said he did not expect the weaker yen to affect Taiwan’s exports significantly.
“Taiwan is just part of the global supply chain and does not make many end products when compared with Japan,” Pu told reporters in Taipei.
Additional reporting by CNA