Weak Dollar Pays Off For Some Japanese Companies The Yen’s Rise Has Allowed Companies To Make Decisions That Would Be Impossible In More Normal Times

With every drop in the dollar against the yen, Japanese industry leaders groan in agony. Commentators warn of impending doom for Japan’s export-oriented economy and implore the government to do something.

But for some, things may not be as glum - for example, companies that import raw materials paid for in dollars and consumers who are enjoying cheaper imported goods.

Over time, parts of Japan’s economy might even emerge stronger if the sense of crisis from the dollar’s fall promotes reforms and deregulation, analysts say.

“I call it the jujitsu of Japanese policy,” said Merrill Lynch analyst Ron Bevacqua, referring to the martial art that uses an opponent’s weight against him. “Rather than stand in the way of the rising yen, you use it for whatever advantage you can.”

Without question, the dollar’s fall is squeezing profits. Exporters are forced to either sell products cheaper than they would like in foreign currencies or raise prices and risk a loss of market share.

Late Wednesday, the dollar was worth 85.70 yen in Tokyo, about 14 percent less than two months earlier and close to its lowest level since World War II.

Manufacturing giants like Toyota and Sony estimate that every one-yen drop in the value of the dollar costs them billions of yen (tens of millions of dollars) in income.

But the yen’s rise also has allowed companies to make decisions that would be unpopular or even impossible in more normal times, such as reducing work forces or procuring parts from different suppliers, including lower-cost foreign sources.

“It’s a matter of the pace, speed and the adjustment process. As long as it’s not too rapid, I think the rise of the yen is not necessarily a bad thing,” says Kathy Matsui, a strategist at Goldman Sachs (Japan) Ltd.

Iron and steel companies, for example, face lower profits as the dollar declines.

But they also have tons of excess capacity, and the high yen is forcing them to cut their work forces and close less-efficient plants - painful moves for now, but ones that should make them more competitive in the long run.

By the end of this fiscal year, Sumitomo Metal Industries will have cut 38 percent of its work force of two years earlier. Kobe Steel has 4,000 fewer workers than five years ago.

Industry hopes the plunging dollar will prompt Japan’s notorious bureaucrats to loosen a plethora of regulations it says strangle innovation and new businesses.

“It’s likely to force some change, and some pretty wrenching change,” says Bevacqua.

Japanese consumers, too, have been changing their habits and could in the long run be winners.

Increasingly price-conscious consumers are forcing retailers, especially clothing sellers, to pass on savings they have made from imports that cost them less as the dollar falls.

For some lucky companies, the weak dollar already represents a windfall.

Tokyo Electric Power Co., for example, says every one-yen fall in the dollar gives it an extra 3.5 billion yen or about $40.2 million in profits because it relies so heavily on imported oil, sold in dollar-based contracts.

Restaurants that import large amounts of beef and some liquor importers also are reporting higher profits.