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Strong yen leads Japanese firms to look to overseas parts procurement

01 Sep 2010

Source: Daily Yomiuri

 
The recent strength of the yen is pressing Japanese companies to take countermeasures, such as increasing the rate of local parts procurement at their overseas factories and raising the prices of their products in overseas markets. Observers said, however, that expanded overseas procurement and production may gut domestic industries and aggravate the employment situation. The strong yen makes overseas purchases easier for Japanese companies, but it reduces the value of their overseas sales.

While some companies are suffering as the strong yen cuts their earnings, other companies plan to expand their business overseas by acquiring foreign companies, taking advantage of the strong yen. "We'll increase local procurement of parts that are used at overseas manufacturing bases [in Hungary and other countries]," Suzuki Motor Corp. Chairman Osamu Suzuki said at a new car release event Thursday. Suzuki made it clear that his firm will decrease the supply of auto parts from Japan to help cope with the rising yen. A rising number of electronics manufacturing companies are also shifting to local procurement of parts. Hitachi Ltd. plans to increase its overseas procurement ratio from 25 percent in fiscal 2009 to 50 percent in fiscal 2012.

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