The Japanese Yen has decreased in value in response to the stimulus package the government offered in attempt for an economical kickstart. Although the currency was weakened, Japanese products by exporters’ should become more competitive and profits should be effectively boosted.
U.S. firms project, however, that the falling Yen will have negative consequences for profit margins. The following breaks down companies and sectors likely to be affected by the weakened Yen.
Technology manufacturers are likely to be greatly affected by Japanese currency dropping in value. 10% of IBM sales are in Japan, and Analog Devices and Texas Instruments, who manufacture components for computing, will feel the weight of the falling Yen. 10% of Texas Instruments’ revenue is from Miho, Japan’s plant.
Pharmaceutical and medical companies in the U.S. derive a lot of their profits from sales that take place in Japan, specifically Abbott Laboratories, where a great number of medical products are produced, 20% of sales made in Japan. 10% of Merck’s sales, another pharmaceutical company on a global scale, are also from Japan.
Consumer Discretionary Stocks
The consequences of this should also be felt by the sector of consumer discretionary. Big players globally are likely to suffer if they have a great Japanese presence. Tiffany, a well known jewelry maker, will be affected as 15% of sales are made in Japan. Coach, a clothier based in New York, could also feel the heat. Caterpillar, with a greater product lead time, may escape the worst of the consequences. With longer times for production, companies like Caterpillar have time to prepare to the Yen’s decline and keep costs of production down long term.
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