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Japanese companies’ overseas production continues to grow

  • 2015-03-04 15:00:00
  • , Nikkei
  • Translation

(Nikkei: March 4, 2015 – p. 4)

 

 The Cabinet Office released on March 3 the results of a survey of corporate operations in FY2014.

 

 The overseas production ratio of Japanese manufacturers rose from 22.3% in fiscal 2013 to 22.9% in fiscal 2014, and this is expected to grow further to 26.2% in 2019. Despite the depreciation of the yen, the expansion of overseas production capacity continues, in anticipation of future growth in demand.

 

 The Cabinet Office surveyed 2,445 companies listed on the first and second sections of the Tokyo and Nagoya stock exchanges in January, of which 982 provided valid responses.

 

 The surveyed companies predicted the real GDP growth rate in FY2015 to be 1.3% while the nominal growth rate was reckoned to be 1.7%, unchanged from a survey conducted in the previous fiscal year. The fact that nominal growth rate is expected to be higher than real growth rate for two consecutive years shows that companies are anticipating commodity price increases.

 

 Their forecast of the yen exchange rate one year later is 119.5 yen to the dollar. This is up by 13.8 yen from their prediction in the previous survey, 105.7 yen to a dollar, showing they are now expecting a weaker yen. This rate is flat from the exchange rate of 119.4 yen to a dollar in December 2014, right before the survey was held, which means most companies are expecting the exchange rate to level off for the time being.

 

 Companies set the desirable exchange rate for exporting industries to remain profitable at 99 yen to a dollar, down from 92.2 yen to the dollar in the previous year.

 

 With businesses becoming more vulnerable to yen appreciation, the gap between their prediction of the exchange rate after one year and the profitable exchange rate is now 20.5 yen, representing the widest gap since this survey started in FY1986.

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