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Yen’s up, dong’s down – can Vietnam boost exports to Japan?
The yen’s gradual appreciation has given exporters an edge, but adds to the nation’s debt repayment burden.
At 4 pm on August 24, Japan’s currency, the yen, hit an historic high, closing at 84.34 to the American dollar. Yen 106.14 would buy a euro.
That’s a problem for Japanese policy makers, who’d like to see the yen’s value drop. The island nation’s growth slowed in the second quarter of 2010, weighed down by sagging exports.
Some Japanese businessmen think believe that the situation is not so bad. Thoi bao Kinh te Vietnam quoted Sachio Semmoto, the owner of Emobile, as saying that the high yen benefits cash-rich Japanese companies, presenting a golden opportunity for Japanese enterprises to make investments in foreign countries.
Up ten percent against dong this year
Late in 2009, 20,070 dong would buy ¥100; now it costs 22,148 dong. The Ministry of Planning and Investment (MPI) thinks the yen’s rise will have both good and bad impacts on Vietnam’s economy. Japan is a big trade partner, and buys more goods from Vietnam than it exports here.
MPI notes that yen appreciation will increase the competitiveness of Vietnamese goods in Japanese market. If export volume increases, it will help reduce the nation’s troublesome trade deficit.
In the first six months of 2010, says MPI, Vietnam’s exports to Japan surged 31 percent to $3.5 billion, rising at nearly double the general export growth rate. The bilateral current account deficit with Japan shrank to $500 million. “It is highly possible that our full-year deficit with Japan will be lower than in 2009 ($1.1 billion), predicts MPI.
For Vietnamese manufacturers that are willing and able to meet the Japanese market’s high quality standards, however, a strong yen and a weakening dong is a golden opportunity.
Thoi bao Kinh te Vietnam observes that Japan produces just 40 percent of the food it needs to feed its aging population. Yen appreciation increases the purchasing power of Japanese consumers, which ought to translate into more opportunities for Vietnam’s food and farm produce suppliers to export to that market.
On the downside, MPI warns that yen appreciation increases Vietnam’s debt burden. Japan is the leading supplier of ODA (Official development assistance, i.e., foreign aid) to Vietnam. Therefore, yen appreciation will make it more costly for the Government and private borrowers to repay loans.
To date, Japan has provided Vietnam ¥1394 billion in ODA - $16.5 billion at the current exchange rate.
vietnamnet, TBKTVN
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