CHINA SLOWDOWN
Regardless of who wins the US election, 13 per cent of Japanese companies are considering reducing operations in China, while 3 per cent are looking into expanding their businesses, with 47 per cent planning to maintain their current exposure, the survey showed.
Among those thinking about paring down operations in China, 35 per cent said they saw no prospects for economic recovery, 29 per cent cited tough price competition and another 29 per cent pointed to economic security risks as reasons to cut back.
China’s economy grew much slower than expected in the second quarter and its exports rose at their slowest pace in three months in July, adding to concerns about the outlook for its vast manufacturing sector.
Major Japanese companies that have announced cutbacks in their China operations in recent months include Honda Motor and Nippon Steel.
The survey also showed 24 per cent of respondents saw recent rounds of intervention in the foreign exchange market by Japanese authorities as appropriate, compared with 9 per cent that found the moves inappropriate and 64 per cent that believed they were unavoidable.
The yen kept falling earlier this year despite intervention in April and May, touching a 38-year low of 161.96 to the dollar on Jul 3. Japanese authorities are suspected to have stepped in again in mid-July to put a floor under the yen.
“The extreme weakness in the yen had to be corrected. It just couldn’t be helped,” an official at an electronics company said.
Asked if the Bank of Japan should raise interest rates to shore up the yen, 51 per cent said such a step was allowed only when exchange rates fluctuated excessively, while 22 per cent said they didn’t support a monetary policy change aimed at affecting the foreign exchange market.
On expectations for the yen, 32 per cent saw it trading in a range of ¥145 to ¥150 to the dollar at the end of the year, while 25 per cent predicted the Japanese currency to be firmer at ¥140 to ¥145, while 22 per cent saw it trading between ¥150 to ¥155.
During the period of the survey, the yen was volatile and touched its strongest level since the start of the year before reversing course. It has since continued to weaken.
Source: CNA
