Oct 26th - Toshiba Uses Strong Yen To Its Advantage

Toshiba, one of Japan's biggest industrial groups, claims to have turned the strength of the yen - long the bane of the country's exporters - to its advantage.

The group, which sells everything from refrigerators to nuclear power plants around the globe, said on Monday that changes to its production strategy since 2009 - essentially by buying and building more outside the country - meant it had profited from the yen's rise in the first half to September.

The turnround is remarkable in a country where industrial groups are almost uniformly gloomy about the effects of the soaring currency.

On Monday, the yen was trading at about Y80 to the dollar, within a whisker of its all-time high of Y79.70 set in 1995.

At such levels Japanese-made products are hard to sell profitably in foreign markets, while the value of groups' overseas earnings shrinks drastically when reported to shareholders in yen. Toyota, for instance, expects currency swings to cut Y120bn from its operating income this year.

Yet Toshiba's experience suggests companies may be more resilient in the face of yen strength than is widely believed.

Speaking at a management forum, Norio Sasaki, Toshiba's chief executive, said it had launched a review of its operations last year called "Project 70," in which it postulated the effects of a rise in the Japanese currency to Y70 to the dollar.

"People said the yen would never go to that level when we came up with this plan last October, but looking at the weakness of the dollar and the strength of the yen now, that may not be too far from reality," he said.

Toshiba made 48 per cent of its products in Japan in the period from April to September 2009 and bought 45 per cent of its components from Japan-based suppliers. By the same period this year, the ratios were down to 44 per cent and 42 per cent respectively.

The change added Y4.2bn to Toshiba's operating profit in the half to September, or Y700m for each one-yen increase in the Japanese currency's value against the dollar. That compared with an Y800m loss on each increase last year.

Toshiba cautioned the reversal could prove temporary due to shifting sales and production cycles and said the yen's strength against the euro remained a burden.