When you live abroad but are paid in sterling, as I am, you become pretty sensitive to exchange rate movements. In the 18 months that I have been in Japan the yen has strengthened by 12 % against the pound. Which leads to some odd anomalies, like it costing me more, in pounds, to have my shoes re-heeled than it originally cost me to buy them in M&S (maybe I should move upmarket next time. Might make me resent the repair cost less. Hey, any excuse to buy some new shoes!).
My personal footwear finances aside, the strong yen does mean that British products now enjoy a real price advantage here, with many retailers reducing the cost of foreign products, and manufacturers welcoming the savings accruing from cheaper supplies of imported raw materials, intermediary parts and components. Japanese industry badly needs those savings: the country posted its first trade deficit since 1980 in 2011, and although that’s partly down to exports being disrupted by the tsunami, partly to the high yen forcing production overseas, and partly to increased imports of LNG and oil to substitute for nuclear power it’s also down to the growing price competitiveness of imports.
Taking advantage of that, Chinese New Year brought a flood of Chinese tourists to Japan in search of bargains, with special buses ferrying tour parties straight from the airport to shopping malls, which now accept Chinese credit cards and boast Chinese-speaking staff. Completely counterintuitive to traditional perceptions of Japan and China, but perhaps suggests an interesting way for British companies to test the Chinese market.
Obviously reducing your price won’t always be the right move. Back in the 80s I was involved in a long campaign to reduce the tariff on scotch whisky coming into Japan. When we finally won the battle and prices came down sales collapsed: scotch had relied on its positioning as a luxury product, prized as a gift, and once it was priced on a par with domestic alternatives it lost its cachet (smartly regained, and now a stalwart of UK exports to Japan). One alternative, if you don't want to sully your brand reputation by bringing down prices is to keep the price the same but improve the quality. One current campaign in my local supermarket features individual cheesecakes whose manufacturers have kept the price stable but increased the proportion of cream cheese in the product. Yum!
So, a good time to be looking at the Japanese market. If you are doing so, then quality, a unique concept and good service are just as important as price, if not more so. One company I saw this week, in the railway industry, put their success down to a mixture of a simple but effective design, top quality manufacturing techniques and attentive customer service. Oh - and sheer persistence: it took them 5 years to win an order in Japan. But that was 25 years ago and they've reaped the prize of loyalty ever since. I love the idea of UK companies exporting rail technology to Japan – coals to Newcastle or what?
One conversation I had about the yen this week, with the former President of one of the powerful general trading companies, took me back even further than the 80s. During the Second World War and its aftermath the yen weakened drastically and in 1949 the decision was taken to fix its value against the dollar. The value chosen, my contact told me, was 360 yen to the dollar, and there it stayed until 1971. Not particularly remarkable, unless you know that the character for yen (or “en” as it’s actually pronounced) also means “circle”. Maybe economists have a sense of humour after all.
Sue Kinoshita
Director Trade & Investment, UKTI Japan