Word: yen
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...current malaise was brought on by the exceptionally strong yen, which is now valued at 162 to the dollar, up nearly 40% since its February 1985 low. The yen has also risen against some European currencies -- 15% vs. the British pound, for example. The robust yen cuts demand for Japan's exports by making them more expensive to foreigners...
...country's GNP. But this year exports are likely to fall. Shipments of color TV sets in October were down 49% from the same period of 1985, the third consecutive monthly drop. The Japan Automobile Manufacturers Association calculates that at an exchange rate of about 160 yen to the dollar, auto exports to North America will decline 28% in the year ending March...
Still, not all Japan's troubles can be traced to the yen. Some of the country's older industries, including steel, shipbuilding and coal mining have been declining for the better part of a decade. One reason: they face fierce competition from what economists call the newly industrialized countries, like South Korea, Taiwan and Brazil. The NICs compete largely by paying lower wages. The average hourly salary of a South Korean steelworker, for example, is one-sixth the level of his Japanese counterpart...
...year-old shipbuilder, Hakodate Dock, was once the largest employer in the city of Hakodate. Now the company has no orders at all for next year and beyond. In shipbuilding, as in steel, the most forceful challenge comes from South Korea, whose currency, unlike the yen, is pegged to the dollar. South Korea's share of world shipping is expected to climb by year's end from 10.7% to 28.4%, while Japan's portion will drop from 49% to 41%. Says Kazuichi Murai, director of planning at the Shipbuilders' Association of Japan: "It's warfare...
Japanese manufacturers, for their part, are maneuvering to meet the challenges that have been posed by a strong yen and weakening exports. Companies are increasingly purchasing parts from low-cost foreign suppliers or & moving production to such cheap-labor countries as South Korea, Singapore and Taiwan. Many manufacturers are opening plants in the U.S., in part to avoid restraints imposed on imports...