The Japanese yen’s depreciation has had a limited impact on Taiwan’s export-oriented economy with the negative consequences mainly reflected in lower tourist arrivals, DBS Bank said in a report.
There have been widespread worries about the yen’s depreciation boosting Japan’s competitiveness at the expense of other countries, including Taiwan, especially after the nation’s GDP grew a disappointing 1.54 percent in the first quarter, slower than the government’s forecast of 3.26 percent, because of lower exports.
The yen has plunged 14 percent against the US dollar this year, as of Thursday, while the New Taiwan dollar has weakened 2.6 percent versus the greenback during the same period, according to exchange rates posted on the central bank’s Web site.
“Contrary to popular perception, there is little evidence that yen depreciation has weighed on Taiwan’s exports,” DBS economist Ma Tieying (馬鐵英) wrote.
Ma said the export weakness last quarter was a regionwide phenomenon, adding that Taiwan outpaced Japan in terms of export growth.
In the electronics sector where competition is intense, Taiwan fared better than Japan by a wide margin, he added.
From Japan’s perspective, the benefits of a weaker yen have been mainly reflected in higher yen-denominated export revenues, rather than export volume, Ma said.
“Japanese exporters are taking the opportunity of a weak yen to recoup their losses incurred during the strong yen episode from 2008 to 2012, rather than rushing to cut prices,” Ma said.
Competitiveness is not determined by exchange rates alone, but also by production costs, productivity and non-price factors, such as technology, product quality and brand, he said.
However, a falling yen is dampening Japan’s outbound tourism.
Japanese account for about 20 percent of foreign visitors to Taiwan, Ma said, adding that a cheaper yen may also divert foreign tourists to Japan from other Asian countries, including Taiwan, although the drop in Japanese visitors may be offset by an increase in visitors from China.
“An 11 percent increase in Chinese tourists to Taiwan could offset a 20 percent fall in Japanese visitors” now that Chinese tourists have become the largest tourist group, thanks to close cultural ties and more friendly political relations, Ma said.
Still, Taiwanese exporters heavily reliant on the Japanese market are losing orders to Japanese rivals, while others are facing increasing pressure to cut prices to retain business.
Kingmax Digital Inc (協泰國際), a Taipei-based maker of flash memory cards and storage products, is taking a bite in business due to the falling yen, company CEO Joe Liu (劉福洲) said last week.
“Few companies in the business of exports can stay unaffected by the currency’s volatility,” Liu said.
Kingmax Digital ranked first in memory card sales in Japan in the past two years, but is bound to lose the title this year to local peers as a result of a weaker yen, Liu said.
Japan generates more than 20 percent of Kingmax revenue, he said.
Volktek Corp (定揚科技), an optical Ethernet solution supplier, is also feeling the pinch though by a lesser degree.
“Japanese customers have inquired about the possibility of price cuts following the yen’s depreciation,” Volktek president and founder James Chen (陳慶元) said during an interview yesterday.
So far, the company is trying to keep Japanese orders by delivering better-quality products and services, Chen said, adding that price-adjustments pressure may intensify if yen keeps depreciating.