Honda cuts prices thanks to currency advantage

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Honda cuts prices thanks to currency advantage

Honda surprised the market this week when it launched a motorcycle for commercial use at 2 million won ($1,792), which is almost the same price of competing Korean products.

The Japanese bike maker unveiled its plans to sell more than 5,000 units this year.

With its bike, Honda is just one of several Japanese firms that have been ramping up marketing here as prices are dropping thanks to the weakening yen resulting from the Shinzo Abe administration’s efforts to escape a decade-long recession.

Toyota announced earlier this month that it will sell its best-known models including the ecofriendly Prius and Camry for 3 million won less. This is a move targeted at middle-income Korean drivers who would normally opt for Hyundai Motor’s Sonata.

“Our sales in the first 10 days of this month doubled compared to April,” said a Toyota dealer in Gangnam District, southern Seoul. “The number of customers visiting our store has more than quadrupled.”

Canon, which produces the EOS 100D, the world’s smallest and lightest DSLR camera, didn’t go to shelves at department stores but headed to cheaper home shopping channels.

It sold all of its 1,100 cameras that were offered via home shopping as the DSLR camera retailed at 878,000 won with other accessories such as a camera bag, tripod and memory card reader. This is far cheaper than rival products, with the camera alone worth 900,000 won or more.

“Japanese companies are adopting a strategy of expanding their market presence as the weakened yen not only improved profitability but also increased the companies’ reserves for marketing and pricing of products,” said a senior analyst at LG Economic Research Institute.

The Japanese yen hit its lowest mark since 2008 when it traded at 102.76 against the U.S. greenback and yesterday depreciated 0.24 percent to close at 102.5.

The yen has lost nearly 17 percent so far this year, which is the most among Asian currencies.

The Korean won also reached a three-week low as of Thursday at 1,118.96 won against the greenback. The market was closed yesterday for a national holiday celebrating Buddha’s birthday.

The won’s recent depreciation was mostly triggered by growing optimism over the U.S. economic recovery.

Although the won has been falling against the dollar, the Japanese yen is depreciating at a faster rate, leaving concerns about the currency’s impact on the Korean economy and the financial market. The financial regulator on Thursday said it will step up its monitoring of risks that may surface from the Japanese currency depreciation.

However, Finance Minister Hyun Oh-seok said it is important for Korean companies to step up their competitiveness as the low Japanese yen is expected to be around for a while.

According to a recent study by Woori Financial Group, shipbuilders’ profits would plunge 236 percent should the yen fall to 110 and the Korean won strengthen to 1,000 against the dollar. Automobile companies would be expected to suffer a 57 percent loss.

While Japanese companies are expected to reap the benefits of improving sales, Korean companies are under immense pressure from the weakening yen that has been affecting sales.

“The credit quality of many Korean private-sector corporate issuers will remain under pressure, and therefore, negative rating actions will continue to outnumber positive ones over the next 12 months,” Moody’s reported earlier this week.

“The main reasons for the pressure will be weak growth in key export markets, subdued domestic consumer spending, the Korean won’s appreciation against the U.S. and Japanese currencies and some companies’ aggressive investment strategies,” said Chris Park, Moody’s vice president.

Korean automakers, unlike rivals including Toyota, are expected to be hit the hardest along with chemical and construction companies.

By Lee Ho-jeong, Choi Ji-young [ojlee82@joongang.co.kr]
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