German exports are resistant to the depreciation of Japanese currency

German exports are resistant to the depreciation of Japanese currency

According to a report of Deutsche Bank Research (DB Research), German exports are practically resistant to the depreciation of the Japanese currency. The newly installed government has taken some measures to depreciate the JPY further in order to stimulate exports. On the other hand this positive effect will be somewhat offset by higher import prices.

In the last year and a half, the JPY has lost around 40 % against the EUR, the lowest level in the last four years.

DB Research explains also the considerable difference between Japanese and German export structures. Obviously the two countries are competitors in the domestic and global market. However the share in trade between the two countries is relatively small, therefore the impact of the JPY’s depreciation on Germany’s overall economy remains limited. German imports from Japan have a share of 2.4 % and the share of Japan’s imports from Germany amount to 1.6 %. In view to market orientation, Germany’s focus on exports is still Europe, whereas for Japan it is evidently Asia. Thus it is not surprise that the exposure of the JPY in the EUR exchange rate is only around 7 %, as against 20 other major trading partners. Therefore 40 % depreciation of the Japanese currency results only in an appreciation of 3 % of the EUR.

The stated facts conclude that German exports are rather resistant. TextileFuture wishes to add a fact reported by German (and Swiss) textile machinery manufacturers. It is not only the fact of the depreciation of JPY that competition is heating up but prices for textile machinery are under pressure, especially for European manufacturers supplying Asian markets. In the quarterly report of Oerlikon Textile it was obvious that the business was less profitable than a year ago. In addition Japanese textile machinery producers have close ties to the Chinese market and they can offer also better financing conditions than European manufacturers. It is why TextileFuture voices the opinion, and from a market perspective, European mechanical engineering exports face a fiercer competition from Japan (and other Asian nations) and this is partially supported by the weaker JPY.

www.dbresearch.com  


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