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To: Les H who wrote (180225)	7/16/2002 8:39:59 AM
From: Les H	Respond to of 436258

WRAPUP 2-Corporate Japan gets reality check as yen surges Tuesday July 16, 7:26 AM EDT (adds BOJ policy on hold para 5, Mazda paras 19-20, updates yen) By Jason Szep TOKYO, July 16 (Reuters) - Corporate Japan got a reality check on Tuesday as a tumble in the dollar drove the yen close to the break-even point for many of the big exporters at the heart of a fragile economic recovery. From Japanese ministers to company officials, the response to the dollar's fall is getting louder, although maybe not as deafening as many had expected after the yen rose to a 17-month high on Monday. "We have no choice but to monitor the situation closely," Finance Minister Masajuro Shiokawa said, in comments that looked remarkably restrained beside more candid statements from him in recent days that caused markets to gyrate and baffled investors. There was no sign of intervention by the Bank of Japan as the yen rose to 115.65 per dollar, nearing a 17-month high of 115.44. The central bank left monetary policy unchanged on Tuesday after a two-day meeting despite mounting concern about the yen's rise. The dollar is now only a shade away from the 115.30 yen rate that, on average, Japan's listed non-financial companies said would be their break-even point on export operations this year, according to a recent Cabinet Office survey. But economists say it may take another three to six months before the rising yen starts to carve into Japan's exports, which have expanded for five straight months as fast-recovering Asian economies build up inventories. LAGGING IMPACT "We expect it will take around six months until the impact appears on the exports," said Dresdner Kleinwort Wasserstein economist Shuji Shirota. "At the current exchange rate of around 116 per dollar, exporters in some raw materials-related industries such as steel and textiles may have already seen their export operations slip below the break-even level," he added. But for the high-tech exporters who played the biggest part in pulling Japan out of last year's recession thanks to surging demand from Asia, the yen can afford to climb a little further. In the Cabinet Office survey, exporters of electrical machinery flagged an average break-even yen exchange rate of 112.46 per dollar, general machinery exporters 113.78 and transport equipment makers 115.91. Those three sectors are Japan's main engine of economic growth, accounting for the biggest portion of industrial output at 43 percent. Some economists expect the Bank of Japan to intervene again if the dollar threatens to reach those levels. "We should not underestimate the potential negative impact on the Japanese economy if the yen were to continue its advance to levels which would cause even exports in these three industry sectors to slip below the break-even point," Shirota said in a report to clients. BACK TO THE BEGINNING The yen has now returned to where it stood in September last year, before it began a 14-percent, five-month slide that was credited with pulling Japan from recession by helping exporters gain a competitive advantage in overseas markets. "It would be great if the dollar would get back to 125 to 130 yen," Kunio Nakamura, the head of Matsushita Electric Industrial Co, the world's second-largest consumer electronics maker, told a reception for reporters in Osaka this week. Matsushita, maker of Panasonic and National brand goods, earns about half of its revenues abroad -- less than many other Japanese global manufacturers such as Sony Corp (6758) and Canon Inc (7751), where the ratio is two-thirds or more. Sony chairman and chief executive Nobuyuki Idei last month repeated his view that 125-130 yen per dollar was a good level. "Taking the overall situation into account, a weak yen is desirable as Japan lives on exports," Economy, Trade and Industry minister Takeo Hiranuma told a news conference on Tuesday. But Nissan Motor Co Ltd (7201), Japan's third-largest automaker, said on Tuesday it would not revise its forecast of a third straight year of record profits despite the yen's surge. The president of Japan's fifth-largest automaker, Mazda Motor Co (7261), took the same line. "There will be adverse profit implications," Lewis Booth told reporters when asked about the yen's rise, before adding: "We have not changed our forecasts for this fiscal year." Auto analysts have said they do not expect a major negative effect on Japanese automakers' profits in 2002/03 from the yen because most firms hedge currency risks three months in advance and made substantial gains when the yen was at 130 to the dollar. But concerns about the strengthening of the yen have weighed on the stock prices of automakers, which saw a weak yen provide an additional boost to their results in 2001/02. The president of electronics group Pioneer Corp said in an interview published on Tuesday that every one yen decline in the dollar would cost it 300 million yen ($2.6 million) in income. Speaking to the Nihon Keizai Shimbun, Kaneo Ito said the rising yen was a risk for Pioneer, which had set a target rate of 130 yen per dollar for the year to next March. "On the other hand, the rise in the euro has been a plus for us, so we don't expect that much impact from currency rates," Ito added.