The World of

Brian Deeb, Robert Braden & Trevor Davisson

ECNM 478.433/12/2014

History of the Japanese Yen & Sony

• Post World War II Years: Yen was extremely weak against the dollar

trading at ¥357.65

• 1958 : Officially became Sony Corporation and began being listed on

the Tokyo Stock Exchange

• 1961: First Japanese company to list American Depositary Receipts

(ADRs) on the NYSE

• 1970: Began listing its shares on the NYSE

• Yen was extremely weak against the dollar and highly controlled by

their government

• Foreign exchange policies favored companies and industries gov’t

wanted to succeed, especially in export markets.

source:Daniels text

The First Endaka

source: http://en.wikipedia.org/wiki/Endaka

source: http://gizmodo.com/5245132/sony-product-timeline-is-a-glorious-gadget-history-lesson

The second Endaka

• Yen rose to ¥80.63 in 1995

• Toyota announced the one-point increase in yen eliminated $111

million in dollar-denominated profits from U.S. operations

• Japanese companies again looked for ways to cut cost

• Japanese economy was in a recession so the Bank of Japan dropped

interest rates to stimulate demand.

• Yen fell against the dollar, favoring exporters once again!

source:Daniels text

U.S. Global Collapse

source: http://www.istockphoto.com/stock-photo-7970554-symbolic-image-of-economic-depression.php?st=7e22fdb

Earthquake/Tsunami

• March 11, 2011: $300 billion price tag

• Japan produces 25% of the world’s semiconductors and 40% of

electrical components.

• Plants and infrastructure were shut down in affected areas.

• What did this do to the yen?

source: Daniels text

Earthquake/Tsunami

Yen rose against the dollar.

Carry trade: Companies liquidated investments made with cheap Japanese money (low interest rates) and invested in

emerging markets where returns were high.

Japanese companies often bring money back to Japan at the end of their fiscal year (March 31) which satisfied the

needs for the massive amount capital.

Yen rose so much the U.S. government joined with other countries to help push down the yen.

How this relates to Sony

Question #1

Why did the contraction of the U.S. and Japanese

economics and the rise in the value of the yen hurt

Sony’s exports from Japan?

Answer #1

• Countries who import are paying a premium on

Japanese products.

• Makes it increasingly difficult to compete in a global

market.

• Cheaper for these countries to purchase goods

elsewhere.

Question #2

In what other ways has the strong yen affected Sony’s

bottom line? What would be the effect of a weak yen?

Answer #2

• Net assets and net worth are worth less in yen when

translating from Euro or Dollar perspective.

• Sony’s foreign operations remitting less yen back to

Japan due to weak dollar and euro weaken against the

yen for cash flows.

• If the yen dropped – foreign operations would produce

more cash, and Euro and dollar financial statements

would be worth much more.

Question #3

Given the instability in the currency markets, why

do you think it is important for Sony to

manufacture more products in the United States

and Europe and to also buy more from suppliers

in other countries in Asia?

Answer #3

Sony has to take advantage of the operating

efficiencies in these respective countries

(logistic & wages)

Sony should take advantage of their purchasing

power (stronger currency) in other countries in

Asia.

Question #4

What are the major forces that affected the

Japanese yen prior to the global financial crisis in

the fourth quarter of 2008? What has had the

greatest impact on the yen since then, and

where do you forecast the future value of the

yen?

Answer #4

Q4 2008 Japan’s economy was deeply affected by a lack of exports.

This did not affect the value of the yen because currency investors took money out of emerging markets and purchased the yen (carry trade).

Inverse relationship between yen and U.S. stock market.

5 country comparisonThe dollar rose to a six-week high against the yen as U.S. employment gains exceeded forecasts, boosting speculation that the Federal Reserve will continue to pare monetary stimulus that’s seen as debasing the currency.

Mar 7, 2014

http://www.bloomberg.com/news/2014-03-07/dollar-rises-to-6-week-high-as-jobs-gains-back-fed-tapering.html#disqus_thread

Australian Dollar

The AUD is at a 5 year low compared to the USD, down from its

peak last year in April of $1.05 USD VS 1 AUD .

•http://www.theaustralian.com.au/business/economics/sliding-australian-dollar-delivers-for-exporters/story-e6frg926-1226846652864#

Australian Dollar

http://www.xe.com/currencycharts/?from=USD&to=AUD&view=10Y

Colombian Peso

http://www.xe.com/currencycharts/?from=USD&to=COP&view=10Y

France (Euro)

http://www.xe.com/currencycharts/?from=USD&to=EUR&view=10Y

Hong Kong Dollar

http://www.xe.com/currencycharts/?from=USD&to=HKD&view=10Y

Morocco Dirham

http://www.xe.com/currencycharts/?from=USD&to=MAD&view=10Y