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Stronger Yen No Boon to Japanese Consumers

February 18, 1986

TOKYO (AP) _ Japanese who drive $30,000 American cars or sip $50 scotch are getting more bargains, but the surge of the yen against the U.S. dollar has not eased the pressure on the average Japanese pocketbook.

On Tuesday it took only about 180 yen to buy one dollar, based on current exchange rates, making the yen 25 percent stronger than in September when 242 yen equaled one dollar. Ideally, that would mean dollar-based imports from oil to oranges would be 25 percent cheaper for yen-paying customers.

″It’s not that simple,″ said Koji Monda of the Economic Planning Agency. ″The strong yen will eventually help keep consumer prices down, but we can’t say when or by how much.″

The yen has risen strongly against the dollar since September, when the governments of Japan, the United States and other major industrialized nations agreed to reduce the dollar’s foreign exchange value. The action was intended to help reduce the U.S. trade deficit by making imports more expensive, and in turn curb protectionist sentiments in Congress.

But in Japan, consumer buying habits, stable costs for utilities and other overhead and a slow retail price changes have meant that typical imports are not much cheaper than they were before the surge began.

Monda said that in 1978, the last time the yen pounded the dollar, Japan’s complicated distribution systems were a factor in the nine-month delay of the resulting modest downturn in consumer prices.

During the current yen surge, some department stores and supermarkets have lured customers with temporary ″yen-daka,″ or high yen sales, but general prices remain untouched.

″We might see some effects by summer, or late spring at the earliest,″ said Ryuhei Akimoto, a spokesman for Seibu, a major department store. He said the store has lowered prices on some rush imports, for example an American buckskin coat now costs about $389 at current rates, down from $444.

The determined bargain hunter can find a set of Ben Hogan golf clubs slashed to $600 from $933, or a 750-milliliter bottle of premium Black and White scotch marked down to $44.40 from $55.50.

But most articles on the shelves still are priced according to contracts signed six months ago, before the yen took off.

Pontiac’s Firebird Transom this year is going for $32,500 - or 5.85 million yen - down by $2,222, or 400,000 yen, from the 1985 models.

However, Ken Kano of the Japan Automobile Importers Association said 80 percent of the 50,000 autos imported last year were German models unaffected by the weaker dollar.

Kano also said the 1985 record of 1,816 U.S. auto imports probably will not improve despite lower prices for U.S. cars, ″because American cars have had a real image problem since the energy crisis of the late 1970s.″

For the everyday shopper, ″there is no evidence of benefits from the strong yen,″ said Naokazu Takeuchi, head of the Japan Consumers Union. ″As long as the big trading companies monopolize imports and middlemen take high profit margins, we don’t expect much.″

Power generating companies will reap an estimated $1.1 billion in the October-March period because of cheaper oil and the stronger yen, but they say the windfall can best be used to ensure long-term price stability.

Takeuchi said his group was pushing for lower gasoline and electricity rates, ″but government and industry are uninterested.″ The government also has recently called for lower electricity rates.

Takeuchi also complained that Japanese shoppers could not shake the idea that imports were premium priced, luxury items.

″If the price of a brand-name product goes down, it loses its attractiveness ,″ he said.

The 1.5 million Japanese tourists who travel to Hawaii, the West Coast and other U.S. destinations this year will find their yen goes a long way once they arrive. But Hideaki Aihara, spokesman for Japan Travel Bureau, said tour package prices would stay the same because fixed yen-based air fares, which account for 60 percent to 70 percent of tour expenses, ruled out any major reductions.

An official of Mitsubishi Estate Co. said housing costs would not drop sharply despite the reliance on lumber imported from Canada and the United States.

The official, who spoke on condition of anonymity, said the price of land was the major factor in determining housing costs in Japan, where a cramped, two-story house in the can easily run about $278,000, or 50 million yen.

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