The persistent weakness in the yen might continue to drag down Taiwan’s machinery exports, the Taiwan Association of Machinery Industry (TAMI, 台灣機械工業公會) said on Thursday.
“Local machinery manufacturers are facing rising competition from their global peers, as well as challenges from the impact of easing monetary policies in Taiwan’s major trading partners, especially Japan,” said Wang Cheng-ching (王正青), secretary-general of the Taichung-based association.
Machinery exports last month declined 6.3 percent to US$1.8 billion on a yearly basis, with overseas shipments of machine tools and other machinery goods falling 5.5 percent and 6.4 percent over the period respectively, Ministry of Finance data showed.
According to statistics compiled by the association, Taiwan’s machinery exports declined 5.9 percent year-on-year to US$13.8 billion in the first eight months of this year due to intense global competition.
However, the yen’s depreciation since late 2012, one of the key measures of “Abenomics” launched by Japanese Prime Minister Shinzo Abe, has caused greater harm to Taiwanese manufacturers.
“Japanese makers have lowered their US dollar-denominated prices for high-end machinery products in global markets, benefiting from the yen’s depreciation against the greenback,” Wang said in a statement.
To compete with Japanese rivals, Taiwanese manufacturers would need a depreciation of the New Taiwan dollar, which Wang said should be depreciated to between NT$34 and NT$35 against the US dollar.
The association said Taiwanese machine exporters are also facing rising threats from South Korea, as manufacturers in the two nations produce similar products for the global market, but South Korean firms enjoy zero tariffs on their exports thanks to the country’s free-trade agreements (FTAs) with other nations.
South Korea has inked FTAs with major economies, including the top two buyers of Taiwanese machinery, China and the US.
In the first eight months of the year, Taiwan’s machinery exports to China accounted for 24 percent of the nation’s total machinery exports, while shipments to the US and Japan accounted for 18.5 percent and 6.8 percent respectively, the association’s statistics showed.
The association said trade talks between China, Japan and South Korea could pose risks to local manufacturers if Taiwan cannot come up with effective measures to secure new trade agreements with other nations.
Taiwan’s machinery exports plunged 6.9 percent annually to US$19.4 billion last year, the lowest since 2011, the finance ministry’s data showed.
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