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Yen Skyrockets Again, But Japanese Business Adapting

March 7, 1995

TOKYO (AP) _ Once again, the Japanese yen is rampaging to new highs against the dollar and Japan’s top industralists are lamenting the impact on the nation’s economy.

But for many Japanese businessmen, ``endaka,″ or the high yen, has become a way of life. It’s something to fret about, but not cause for panic.

In the past few years, companies have raced to move production to nations where labor is cheaper. They’re cutting waste at home and importing more cheap components.

Endaka already has transformed Japanese business. The latest surge just means speeding the transformation.

This week, the yen has soared anew, reaching the highest levels since modern exchange rates were set in the late 1940s. In early trading Tuesday in Tokyo, the dollar was changing hands at 92.83 yen.

``People have become mentally prepared for endaka,″ said Shinichi Kihara, a researcher at The Japan Research Institute. ``Companies are making their business plans on the premise that the yen won’t get cheap again.″

In fact, some major Japanese companies have already braced themselves and planned for the possibility that the yen could reach the low 90s.

Take Japanese investment in China. It skyrocketed 63 percent in the first half of Japan’s fiscal 1994, the April-September period, to $1.14 billion.

The reason for the shift overseas is simple: with the yen so high, the cost of making anything in Japan has become astronomical. A Japanese unskilled part-time worker may make 800 to 1,000 yen an hour, an amount that is now equivalent to $8.60 to $10.70. Workers in China often are paid just the equivalent of a dollar or two a day.

``The movement of production abroad is going to accelerate,″ said Shusuke Kohiyama of the Federation of Employers Organizations, a top business group.

Even imports of industrial goods are beginning to rise after years of complaints from U.S. trade officials that Japan only buys raw materials from overseas.

According to trade ministry statistics, imports represented a record 14.1 percent of total industrial goods supplied in Japan in the last quarter of 1994.

The mood has changed as well since previous spurts by the yen in 1993 and 1994. Stocks typically plunge when the yen rises sharply because a high yen reduces the profits exporters make overseas when translated into yen. But on Monday the benchmark Nikkei Stock Average was actually up a bit.

Of course, that doesn’t mean Japanese are happy about the high yen, especially since it came so suddenly. The dollar had stayed around the 98-100 yen level for more than half a year before shooting up as high as the 92-yen level in the past few days of trading.

``I strongly fear that this will have a tremendous effect on small and mid-size companies and apply the brakes to our economic recovery,″ said Kosaku Inaba, head of the Japan Chamber of Commerce.

Kohiyama of the business federation said many companies fear the combination of the high yen and the Jan. 17 earthquake in Kobe, which has already cooled off consumer buying sentiment.

The higher yen also is not necessarily good news for U.S.-Japan trade friction, even though it tends to make Japanese goods more expensive and less competitive abroad and U.S. goods cheaper in Japan.

In the short term, by increasing the dollar value of Japanese sales to the U.S. market, it will increase the dollar amount of the trade imbalance between the two nations.

U.S. officials had long sought a higher yen to reduce Japan’s surplus in trade with the United States, but the trade imbalance between the two countries rose past $60 billion last year. Economists say that’s partly because the U.S. economic recovery encouraged more imports of Japanese goods.