Doing business in Japan is very expensive by far. If the value of the USD drops, what would the effect be on business? How about if the value of Yen were to drop, how would that effect business? This is provided, the business in mention is American
The company in mention is already established over in Japan.
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May 27th, 2008 at 5:27 am
We do not know whether the company is mostly buying or selling in Japan.
If it is selling into Japan, as Yen drops in value your customers will find your prices too high, so sales will drop, or you will drop your prices to maintain sales. Either way , you make less money when expressed in Yen. But the reduced earnings in yen becomes much reduced amount in USD.
Now value of stock in inventory will initially rise in value in terms of yen, until you adjust your prices downward to sell.
Values of other assets will rise in terms of yen but decline in terms of USD as imported inflation sweeps Japan.
If you are buying Japanese products for sale in the USA, Japanese products will become less costly to Americans, so your margin can rise, your profits rise.