March 19, 2013
The new Japanese government’s moves to stimulate its economy have sent the yen tumbling and created a tough environment for Australian food exporters. Dairy Australia’s Peter Myers says Australian cheese exporters, who mainly sell 25kg blocks of industrial cheese to Japan, will find the situation has changed. “An increasing Australian dollar relative to the US dollar, and also the Japanese yen will impact on Australia’s competitiveness and the profitability of selling product into those markets,” he said. Australia’s cheese exports to Japan have ceased to be of high value as deflation has hurt prices and salaries in that country, The Australian Financial Review reports. “The big-ticket items are those 25kg blocks of cheese that are further processed in Japan by Japanese dairy companies – in a lot of cases they are mixing it with domestic cheese and manufacturing processed cheese for the Japanese market,” Mr Myers said. The dollar has increased from buying ¥75 in June to ¥94 on Tuesday afternoon, as the prospect of big economic reforms in Japan raised the chances of inflation in that country. Looser fiscal and monetary policy championed by Japanese Prime Minister Shinzo Abe could reverse years of deflation in Japan. The expectation of yen inflation has led to it falling against the world’s major currencies. The yen’s weakness helps Japanese exporters, and when it comes to Australia, that means car companies. Australia’s largest import from Japan is passenger motor vehicles, worth more than $7 billion in 2011-12, compared with $2.2 billion for the second biggest category, refined petroleum. Mazda Australia, which had the best-selling car in Australia in 2012, the Mazda 3, stands to benefit from a higher yen. Spokesman Steve Maciver said consumers could not expect prices to drop because the company was guided by domestic market competition in setting prices, but head office might be in for a windfall “We obviously have to set our prices with head office in Japan and, given the exchange rates, there are occasionally times when we are under more pressure price-wise because we are perhaps not delivering as much profit as we made in good times,” he said. “You just have to accept that in some situations we are making pretty good profit and at other times [when] the exchange rate isn’t as favourable, that’s not the case.” Others smiling about the change in the value of the yen are those holidaying in Japan. The most popular months for Australians to visit Japan are December and January, when good skiing conditions coincide with Australian school holidays. Japan is Australia’s second largest trade partner, behind China, with $59 billion of goods and services exchanged each year. In 2011, two-way trade fell as automotive exports were interrupted by the huge earthquake, tsunami and nuclear meltdown on the island of Honshu. Australia halted imports of some Japanese foodstuffs because of radiation concerns. But trade relations with Japan are improving again. Queensland Premier Campbell Newman announced this month that he would lead a group of Queensland companies on a Japanese trade mission in February. The mission will aim to boost the $11.8 billion contribution to the state economy from exports to Japan, and will include visits to Japanese steel and energy companies. Last year, Australia’s ambassador to Japan, Bruce Miller, defended progress towards a free-trade agreement with Japan, which has been under negotiation since 2007. Japanese and Australian foreign ministers met this month and committed to work for an early conclusion of a Japan-Australia economic partnership agreement.