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JPY gains value, Vietnam sees opportunity to boost exports to Japan
The appreciation of the Japanese yen (JPY) against the Vietnam dong could have a big impact on investment, trade and tourism between Vietnam and Japan.
The JPY has been increasing significantly for a long time against the US dollar. One dollar once amounted to 280-300 JPY. The exchange rate fell to JPY170-180/dollar several years ago, while it is now JPY88.7/dollar. Meanwhile, the USD –Index, after increasing from 75 points to 88 points, has dropped to below 84 points.
There are many reasons behind the appreciation of the yen recently. Japan has the second biggest GDP in the world. Though lacking in natural resources, Japan always exports more products than it imports, with its import revenue ranking fourth in the world. Japan’s consumer price index (CPI) increase over the last 10 years has always been minus. Japan is also keeps its bank interest rate at nearly zero percent over the last few years. Japan ranks 10th in the world in the human development index, and China recently has stepped up the purchase of Japanese bonds as the Euro and US dollar have depreciated.
The Japanese yen has also significantly increased in value against the Vietnam dong. In previous years, one JPY could be converted to 180-200 dong, while the exchange rate has risen to 211 dong/JPY. Analysts have pointed out that the appreciation of the Japanese yen will have big impacts on investment, trade and tourism.
From 1988 to June 2010 the Japanese foreign direct investment (FDI) in Vietnam registered capital had reached $18.9 billion. Japan ranks fifth among countries and territories which have the biggest FDI in Vietnam, and the country is a member of the seven member club which has FDI registered capital of over 15 billion dollars.
The appreciation of the Japanese yen against the Vietnamese dong, plus the low interest rate, both will have Japanese investors making investment in Vietnam, because Japanese investors have advantages thanks to their valuable currency.
Japan has been the leading country in terms of official development assistance (ODA) provided to Vietnam. To date, Japan has committed to provide to Vietnam JPY1,394 billion, or $15.7 billion. As the dong/yen exchange rate increases, the total debts of Vietnam, if calculating in Vietnam dong, will increase.
The enterprises and projects which borrow Japanese yen from ODA source, and the enterprises, which borrow yen in commercial loans, will be influenced due to the appreciation of the yen.
Japan is not only the biggest ODA provider, it is also a big trade partner of Vietnam.
Among the countries and territories with which Vietnam has trade relations, Japan now ranks second in exports after the US and ranks fourth in imports, after China, Singapore and Taiwan. In trade relations with Japan, previously Vietnam exported to Japan more than it imported from the country, but nowadays, Vietnam is importing more from Japan than it exports there.
In theory, when the Japanese yen appreciates, which means the Vietnam dong depreciates, Vietnam will have more advantages in exporting products to Japan. In 2009, the export reduction rate was higher than the import reduction rate. In the first six months of 2010, the export growth rate was equal to the import growth rate, at 31 percent. As such, Vietnam needs to take full advantages of the Japanese yen appreciation to boost exports to Japan, while it needs to reduce its trade deficit.
Japan has the largest number of tourists to Vietnam. In 1995, 119.5 thousand Japanese travelers came to Vietnam. That figure rose to 142,900 in 2000, 338,500 in 2005, and 359,200 in 2009. In the first six months of 2010, the number of Japanese travelers to Vietnam reached 230,800, an increase of 18.5 percent over the same period last year. It is clear that the Japanese yen’s appreciation will encourage more Japanese investors to go to Vietnam.
vietnamnet, Dau tu
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