Japanese importers profiteering by exploiting devalued Yen

Started May 17, 2013 | Discussions
Chad Gladstone Senior Member • Posts: 2,608
Japanese importers profiteering by exploiting devalued Yen
1

I don't know how many of you have noticed the near 30% drop in Yen value verses the dollar or Euro over the past year, but the profit generated by the currency devaluation is not exactly being past on to consumers, even with the instant rebates, the street prices of Japanese exports does not comport with the dramatic devaluation is the Yen's currency exchange.  To the contrary, parity in consumer price fails to mirror the near 30% rise in margins realized by the importers (without accounting for the cost of imported resources necessary to engineer and ship the consumer products).  One would expect to see a demonstrable rise in direct imports to counter this trend, but this has not yet occurred.  The bottom line is that the Japanese exports are purchased at margin far above what should be expected and foreign consumers are paying a substantial premium above their trade value because the foreign currency has more buying power.  If Nikon USA or whomever your countries authorized importer is, does not properly reduce their price of their products accordingly, direct importers should surely capitalize on the generous price gouging we are allowing ourselves to be subjected to if this trend continues.  How long are we willing to tolerate such practices?

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Chad Gladstone

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inasir1971
inasir1971 Veteran Member • Posts: 3,623
Re: Japanese importers profiteering by exploiting devalued Yen
4

Even with the depreciation of the Yen, US prices are still among the lowest in the world - and that's without rebates. (prior to the falls in the Yen Japanese prices were higher)

This suggestion of profiteering assumes that the products are manufactured in Japan. Apart from the D800/E & D4, I am not aware of any Nikon cameras that are produced there. As for lenses, I think only some of the pro lenses - even the 24-120/4 VR is made in Thailand. I think most if not all of the 1.8Gs are made in China. Not suggesting that this makes any difference to the quality of the product, only that the changes in the value of the Yen are not going to affect manufacturing costs as these products may have little to no Japanese content. Both the Chinese Renminbi and the Thai Baht have been appreciating over the last five years.

FYI, the Yen only started it's fall in Nov 2012 and didn't cross 90 to the USD till late January, and 100 only this month.

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Araucaria Forum Member • Posts: 85
Re: Japanese importers profiteering by exploiting devalued Yen

That's the idea behind devaluating the Yen, Japanese companies have been struggling with the strong Yen and this should normalize their income again.

Riker D
Riker D Contributing Member • Posts: 809
Re: Japanese importers profiteering by exploiting devalued Yen

If the trend keeps going on you could see an up swing in the used market. It may have already happened on some of the hotter items.

I resently saw a debut of the Nikkor 80-400 upgrade (now with VR and other goodies) and it was going for close to $2600. I think you could call this excessive! Glad that I have already invested in a simular lenss last year at about 40% of this price!

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Photo eye

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Lance B Forum Pro • Posts: 30,724
Wrong

Chad Gladstone wrote:

I don't know how many of you have noticed the near 30% drop in Yen value verses the dollar or Euro over the past year, but the profit generated by the currency devaluation is not exactly being past on to consumers, even with the instant rebates, the street prices of Japanese exports does not comport with the dramatic devaluation is the Yen's currency exchange.  To the contrary, parity in consumer price fails to mirror the near 30% rise in margins realized by the importers (without accounting for the cost of imported resources necessary to engineer and ship the consumer products).  One would expect to see a demonstrable rise in direct imports to counter this trend, but this has not yet occurred.  The bottom line is that the Japanese exports are purchased at margin far above what should be expected and foreign consumers are paying a substantial premium above their trade value because the foreign currency has more buying power.  If Nikon USA or whomever your countries authorized importer is, does not properly reduce their price of their products accordingly, direct importers should surely capitalize on the generous price gouging we are allowing ourselves to be subjected to if this trend continues.  How long are we willing to tolerate such practices?

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Chad Gladstone

How do you know how close to the bone they were selling products before the devaluation of the Yen? I mean, you are really making some huge assumptions here and have no proof whatsoever bandying about these wild accusations about pricing and gouging. For all you know, they could have been selling them close to cost in Yen terms and are now just starting to reap the benefits of the lower Yen. Also, do you have any idea of where and how they move their money around to offset or soften fluctuations in exchange rates, as many multinationals do?

The other thing to remember is that most of the products are not made in Japan these days, some being made offshore in China which is pretty much linked to the US$ and has moved abouit 2% in the last 12 months. Other countries where they are being made have not fallen to the extent the JPY has fallen. Nikon makes much of their product in Thailand and the Thai Baht has only fallen about 6% against the $US in 12 months, so no joy there.

With all this outsourcing, the cost of these outsourced product parts need to be factored into the cost of the total finished product even if they are assembled in Japan as these other countries currencies have all climbed against the Yen.

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Leonard Shepherd
Leonard Shepherd Forum Pro • Posts: 14,659
Re: Trading reality

The UK movement is around 25%. Importers to some extent cushion currency movements by not following them right down when they go down, or straight up when they go up. With this in mind the UK currency appreciation is closer to 15% for pricing purposes.

Nikon cut their gross profit margin from 10.5% to 8% last year because of the recession and plan to get profit margins up to 11% on reduced sales (primarily Coolpix) in the current year to maintain the profit amount. This is a common business practice.

A specific UK issue - the Jessops collapse may have cost Nikon UK around $1,000,000.

Despite all this body prices in UK are well discounted with recent price falls, lenses less so but still priced lower. Whether you agree with Nikon selling bodies in the UK as a "loss leader" to get money back on lens sales is for you to decide - but this seems to be a major part of the current Nikon UK sales direction.

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Leonard Shepherd
Many problems turn out to be a lack of intimate knowledge of complex modern camera equipment.

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reps2 Contributing Member • Posts: 813
Re: Japanese importers profiteering by exploiting devalued Yen

Business is all about making a profit for the shareholders - if the punters in some foreign country are willing and able to pay the price set in whatever currency they use there, why on earth should the manufacturer reduce the price, just because a change in the rate of exchange between the two currencies increases his profit margin? What, of course, it does make possible is sales promotions, if and when sales at list price start to slow down.

Go for a grey import, or buy yourself in the manufacturer's own country!

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Richard

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user_name Veteran Member • Posts: 3,134
Re: Japanese importers profiteering by exploiting devalued Yen

You might want to do some more research on the subject.  Nikon's net corporate profit margin is down 50% this last quarter in 2013, despite the value of the Yen.

I think the net earnings are hovering just above 4%, which is not a very good profit margin by normal business standards.

I don't know what your basing your claim on, but it seems superficial in that it does not take into account the deeper picture.

It also seems a little like corporate and free market bashing, which seems to be a popular theme these days in the political battle of us versus them.  That battle has little to do with making you a wealthier man, just making certain government parties stronger.

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rhlpetrus Forum Pro • Posts: 24,904
By your logic

camera makers and sellers should have raised price of cameras when the Yen increased in value much more than 30% a few years back. It didn't happen, the profits just went down. Now they are likely recovering part of that.

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eths
eths Contributing Member • Posts: 775
Re: Japanese importers profiteering by exploiting devalued Yen
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MOD TOF guy Forum Pro • Posts: 14,496
Profiteering is a strong word

Japanese companies had to raise their price in other countries to make up for their currencies going way down.

The trend has reversed in the last few months. Obviously the same companies are using this opportunity to beef up their profits in yens. It is also wise to avoid following the trend too closely. In any case one of them will blink soon enough and lower its prices. Thanks to competition we'll see the prices go down again (except in Japan of course). Canon, we're counting on you  !

That's what any other company in any part of the world would do. You'd do the same if you were the head of one of these companies.

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Thierry - posted as regular forum member

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OP Chad Gladstone Senior Member • Posts: 2,608
Re: Japanese importers profiteering by exploiting devalued Yen

user_name wrote:

You might want to do some more research on the subject.  Nikon's net corporate profit margin is down 50% this last quarter in 2013, despite the value of the Yen.

I think the net earnings are hovering just above 4%, which is not a very good profit margin by normal business standards.

I don't know what your basing your claim on, but it seems superficial in that it does not take into account the deeper picture.

It also seems a little like corporate and free market bashing, which seems to be a popular theme these days in the political battle of us versus them.  That battle has little to do with making you a wealthier man, just making certain government parties stronger.

This may definitely be the case.  I an not referring to the Nikon company, only those who imported goods from Nikon and other Japanese manufacturers and purchased those goods with foreign currency.  Somewhere in the supply chain, the wholesale cost savings were realized and none of the exchange has been passed on to the retail consumer.  I would be surprised if there was not a spike in "grey market" imports if this trend continues.

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Chad Gladstone

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OP Chad Gladstone Senior Member • Posts: 2,608
Re: Profiteering is a strong word

TOF guy wrote:

Japanese companies had to raise their price in other countries to make up for their currencies going way down.

The trend has reversed in the last few months. Obviously the same companies are using this opportunity to beef up their profits in yens. It is also wise to avoid following the trend too closely. In any case one of them will blink soon enough and lower its prices. Thanks to competition we'll see the prices go down again (except in Japan of course). Canon, we're counting on you  !

That's what any other company in any part of the world would do. You'd do the same if you were the head of one of these companies.

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Thierry - posted as regular forum member

Yes, the choice of words was perhaps too provocative.  I believe there is some vested interest in the subject that warrants further exploration.  It appears that the respondents have not taken an interest in exploring the topic any further than to question the factual basis for my perceived correlation that, given a sustained period of Yen devaluation, foreign purchasers of Japanese goods whether in dollars, pounds or euros, should expect the currency to have more buying power.

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Chad Gladstone

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ragspix Senior Member • Posts: 1,028
Re: Profiteering is a strong word

While you brought up an excellent point; these companies have hedge currency traders mitigating the fluctuations.

Some interesting points regarding the currency effects of outsourced countries.

My guess is, these companies have long term manufacturing contracts that are free of currency fluctuations until the contract renewal.

Then if they're too high (due to currency) the product is outsourced to another country and the prime company may send engineering help to the new subcontractor.

Interesting thread, however this is under the radar of the consumer.

Rags

user_name Veteran Member • Posts: 3,134
Re: Japanese importers profiteering by exploiting devalued Yen

Good point Chad.  I would think that these trading companies were publicly traded companies and as such you would be able to examine their quarterly reports. Any profit spike would be suspect, but it also may be buried so deep that it is not possible to make a connection.

Still, supply and demand rules and as long as customers are willing to pay the price their will be someone to supply it.

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bflood Senior Member • Posts: 1,666
Re: Profiteering is a strong word

You are operating on the assumption that all disadvantages of currency value are to be shouldered by the manufacturer, and any benefit from a change in currency value must be forfeited by the manufacturer to the customer, and if this doesn't happen, the manufacturer is cheating the customer.

Aside from your oversimplification of basing everything on only the change of the yen vs the dollar, bear in mind that the change in the yen is a recent phenomenon and if you as CEO of Nikon ordered product prices in the US to be adjusted to reflect the drop, you've be out of a job immediately. A multinational corporation never adjusts prices on short term changes - they will want to wait and see if the currency value remains stable at the new value.  Otherwise, changing prices now followed by a return of the previous currency value forces the company to either lose money on product sales or to RAISE PRICES back to what they were, something no company wants to do.  If you don't believe it, feel free to cite an example of a company that has done just that.

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Lance B Forum Pro • Posts: 30,724
Re: Profiteering is a strong word

bflood wrote:

You are operating on the assumption that all disadvantages of currency value are to be shouldered by the manufacturer, and any benefit from a change in currency value must be forfeited by the manufacturer to the customer, and if this doesn't happen, the manufacturer is cheating the customer.

Aside from your oversimplification of basing everything on only the change of the yen vs the dollar, bear in mind that the change in the yen is a recent phenomenon and if you as CEO of Nikon ordered product prices in the US to be adjusted to reflect the drop, you've be out of a job immediately. A multinational corporation never adjusts prices on short term changes - they will want to wait and see if the currency value remains stable at the new value.  Otherwise, changing prices now followed by a return of the previous currency value forces the company to either lose money on product sales or to RAISE PRICES back to what they were, something no company wants to do.  If you don't believe it, feel free to cite an example of a company that has done just that.

Exactly. Well put.

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Lance B Forum Pro • Posts: 30,724
Re: By your logic

rhlpetrus wrote:

camera makers and sellers should have raised price of cameras when the Yen increased in value much more than 30% a few years back. It didn't happen, the profits just went down. Now they are likely recovering part of that.

Good point.

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Lance B Forum Pro • Posts: 30,724
Re: Japanese importers profiteering by exploiting devalued Yen

user_name wrote:

You might want to do some more research on the subject.  Nikon's net corporate profit margin is down 50% this last quarter in 2013, despite the value of the Yen.

I think the net earnings are hovering just above 4%, which is not a very good profit margin by normal business standards.

I don't know what your basing your claim on, but it seems superficial in that it does not take into account the deeper picture.

It also seems a little like corporate and free market bashing, which seems to be a popular theme these days in the political battle of us versus them.  That battle has little to do with making you a wealthier man, just making certain government parties stronger.

Well said.

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inasir1971
inasir1971 Veteran Member • Posts: 3,623
Re: Japanese importers profiteering by exploiting devalued Yen

Most Nikon DSLRs are manufactured in Thailand; only the D800/E and D4 are made in Japan. Even the D800/E was originally intended for Thai production but due to damage to the plant during the flooding in Thailand, production was changed to Japan.

http://www.pcauthority.com.au/Gallery/291358,factory-tour-inside-nikons-camera-plant.aspx/1

Nikon lenses are currently made in Japan, Thailand, and China. It may surprise some to learn that even lenses like the AF-S 70-200/4 VR, AF-S 24-120/4 VR, and AF-S 105/2.8 VR are made outside Japan (Thailand in this case).

http://www.photosynthesis.co.nz/nikon/serialno.html

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