September 28th, 2009
12:20 PM GMT
TOKYO, Japan - Imagine if your paycheck dropped 15 to 20 percent, without cause. You continue showing up for work at the same time, your job performance doesn't change, you don't change anything - but on Friday, your paycheck is 15 to 20 percent less.
Who would be happy?
Well, that's what sort of happened to Japan's biggest companies, thanks to the strong yen.
Now before your eyes glaze over at another currency story, consider this figure, cited by Toyota in a quarterly earnings report: A movement of one yen equals approximately U.S. $400 million for the company.
Before the global economic slowdown, one dollar was routinely worth 110 or 120 yen. Today, the yen hit a new eight month-high (and the dollar a big low) of just under 89 - that equals about $12 billion in loss.
Without looking at how companies are managed or how the global economy is moving, these companies have already lost billions of dollars, thanks to the currency market.
Companies like Toyota, Honda and Sony are global companies that export to consumer-hungry America, the land of the dollar. Not only do they have to cope with a slowdown in demand, the yen is hammering their bottom line. Not an enviable business position.
Japan's new government came in on a wave of consumer outrage, saying it would get more money into the hands of the consumer.
Japanese Finance Minister Hirohisa Fujii told reporters that the government was not considering jumping into the market to sell the yen and help exporters. No more trickle down like the old government, pledged the incoming Democratic Party of Japan. The mantra of the day is trickle up. Economists wait to see if the new government is right.
Meanwhile, consumers in Japan cheer the news and enjoy the power of their currency at home. But in the boardrooms across Tokyo, there must be quite a different sentiment. They're probably wondering when that 20 percent will come back.
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