INTERNATIONAL BUSINESS
Strong Yen Hurts Japan's Chemical Firms All chemicals
Petrochemicals
Production index
Production index
130 1
120
125
115
120
110
115 105 u s I n η η ι m ι ι i r n t i t m I m s h 111 n ι ι 11 11 ι ι > m η 11 JASONDJFMAMJJASONDJFMAMJ JASONDJFMAMJJASONDJFMAMJ L 1984J ' 1985 ' ^1986^ ^984^J 1985 1 ^1986^
Synthetic fibers
Synthetic rubber
Production index
Production index
102
120 I
100
110
100
96 11 η ι· 1111 ι 11 M n 1111 ι n JASONDJFMAMJJASONDJFMAMJ L-I984-J I
1985
90 I I It I I It I i l l I Ι Ν Μ Μ Μ I JASONDJFMAMJJASONDJFMAMJ Ll984-J I
' L-|98frJ
Fertilizer
1985
1 L1986J
Plastics
Production index
Production index
90
130
85
125
80 120 75 115 70
65 H i i u i n i
ι ιιπιιιιπιι
JASONDJFMAMJJASONDJFMAMJ -19851-1986 -I ^1984^
110 11 Η ι ι l · Μ ι i t l i m m t i t JASONDJFMAMJJASONDJFMAMJ Ll984^ I
1985
Note: Base year for all indexes, which are seasonally adjusted, is 1980 = 100. Source: Ministry of International Trade & Industry 16
October 6, 1986 C&EN
' ^986-^
The Japanese yen has a lot more muscle than it did a year ago. Japanese chemical companies have a lot less. As the yen has appreciated from about 255 to the dollar a year ago to about 155 now, it has given a double dose of trouble to many Japanese companies, chemical companies included. First, it has hurt their trade. The stronger yen makes Japanese exports less competitive in world markets and imports become more competitive in the Japanese domestic market. Meanwhile, as the yen has appreciated against the dol lar, it has triggered an economic slowdown in Japan. The results have not been surprising. For many Japanese chemical companies, sales are down. Profits also are down or have disappeared. On a yen basis, sales of Showa Denko were down 15% for the first half of its fiscal year, which ended in June. Profits were down 31%. Sumitomo Chemical, whose fiscal first half also ended in June, saw its sales drop 16% and chalked up a loss of $46.5 million. For Mitsubishi Chemical Industries, first-half sales and profits were down 18% and 24%, respectively. The later chemical companies report their first-half fiscal results this year (the dates vary from company to company), the worse the fig ures probably will become. During the second quarter, real gross national prod uct grew a mere 2.2% and the outlook is for little or no improvement, despite a government plan to spur the sluggish Japanese economy. The plan calls for spend ing $23.5 billion, primarily in public works projects. It is part of Prime Minister Yasuhiro Nakasone's effort to transfer Japan's export-oriented economy to one driven by domestic demand. Many economists are skeptical about the prospects, however. The consensus is that the plan will add no more than 0.6% to economic growth. Recently, Sumitomo Bank cut its forecast for fiscal year 1986 growth from 2.5% to 2.0%. It also expects Japan's busi ness stagnation to continue into next year. That's little encouragement for Japan's chemical com panies. Through the first six months of the year, chemical output in Japan was down 3.6%, while the all-manufacturing average rose a paltry 0.7%. Surpris ingly, petrochemical output managed to inch ahead 1.1%, but drug output in Japan slid an unaccustomed 9%. Trade statistics are misleading, but there's little doubt that Japanese chemical exports are dropping and im ports are increasing. In the first half on a dollar basis, exports were u p 21%, and imports were 14% higher than last year. On a yen basis, exports and imports were down 14% and 19%, respectively. On a more revealing tonnage basis, for instance, six-month pet rochemical imports exceeded exports by 86,000 metric tons. That's more than the petrochemical trade deficit for all of last year. Earl Anderson, New York
