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Land of Rising Yen Struggles to Retain U.S. Market

January 18, 1987|JONATHAN PETERSON | Times Staff Writer

Yet sacrifices by Japan hardly guarantee any benefit for Americans. No major U.S. company even manufactures its own videocassette recorders, for example. "It doesn't matter if the American consumers are buying Japanese, Korean or Brazilian," observed Ralph J. Thomson, senior vice president of the American Electronics Assn. "It's still no gain for U.S. industry."

Missing an Opportunity

And even where American firms are alive and well, some have disappointed observers by continuing to raise their own prices rather than aggressively marking them down to lure new customers--or perhaps lure back their old ones. "Here is a tremendous opportunity for U.S. companies," Thomson said. "Let's take advantage of it. For us not to recapture markets is high folly."

Recapturing markets is not easy, though. Of the five main Japanese companies that export cars to the United States, only Nissan sold fewer cars last year than in 1985. By contrast, 1986 sales by General Motors and Ford were slightly down from the banner year of 1985. And that comes despite Japanese price hikes in the 14% range since late 1985. To cite one such example, the sticker price of a Honda Accord soared from $9,299 to $10,625 from 1986 to 1987. By comparison, U.S. auto makers increased most of their prices 3% to 4%.

"You could look upon this yen-dollar situation as a reprieve for the domestic (U.S.) manufacturers, but they have raised their prices also, though not as much," observed Chris Cedergren, an auto analyst with J. D. Power & Associates. He added: "The Japanese know that they really can't raise prices much more without impacting their business."

Japanese photocopier producers boosted prices three times last year, so that the cost of many machines ultimately went up about 12%, said Bruce England, a research analyst with Dataquest, a market research firm in San Jose. By comparison, such U.S. competitors as Xerox and International Business Machines held prices steady, despite flat sales.

"There's a period of vulnerability for the Japanese, but a company like Xerox, which would be in the best position to take advantage of it, hasn't been able to lower prices because of the slow U.S. economy," England said.

Cost of Parts Rose

In any case, Japanese price hikes are not necessarily good news to U.S. companies that rely on products made in Japan. Xerox, for example, gets engines for its laser printer from a Japanese subsidiary. "We feel the effect of a strong yen, as well as we feel the effect of a weak dollar," said Peter Hawes, a spokesman for the corporation based in Stamford, Conn.

Many, nonetheless, argue that the change in currency cannot help but improve the U.S. trade balance with other countries sooner or later, even if it is not a cure-all. The recent earnings figures provide ample evidence that Japanese companies are feeling heat from the high-powered yen. Moreover, many of these same firms may have been operating on time borrowed from the years when they enjoyed hefty profits--time that now is running out.

One hint of this came earlier this month, when giant Matsushita Electric Industrial announced that it would stop supplying color television sets to General Electric because the stronger yen had made it impossible for the two firms to agree on financial terms. Contrary to the trend of recent years, General Electric said that it might make the sets itself at an RCA facility in Bloomington, Ind.

"The cushion doesn't last forever," observed Susan MacKnight, chief economist for the Japan Economic Institute, a Washington research group financed by the Japanese government. "At some point they are going to have to pass on some of that increase and risk losing sales."

Roger Bolton, a spokesman for U.S. Trade Representative Clayton K. Yeutter, said the Reagan Administration still expects the currency change to diminish the U.S. trade deficit, but he counseled patience: "You can't undo five or six years worth of damage in six months or a year. It's simply going to take some time."

CUTTING INTO THE BOTTOM LINE

Japanese corporate profits,

annual percent change

'84 '85 '86* Textiles 51.5% 8.1% -17.5% Electrical/ electronics 38.4 -23.6 -24.7 Autos/parts 27.7 -10.2 41.2 Office equipment 21.9 -0.4 -37.9 Photo equipment 9.8 21.2 -17.7 Precision instruments 33.5 -17.0 -22.2

*Forecast

Source: Nomura Research Institute

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