Yen causing Sony and Square-Enix to suffer

The U.S Dollar keeps falling, and the Japanese Yen keeps on rising. It's not Microsoft, nor Nintendo who's Sony's biggest worry, it's the projection that the Yen will continue to go up, and the U.S Dollar down.

Major Japanese electronics and auto companies who rely heavily on export-oriented business, are in a talespin over what to do about this huge dilemma. Companies like Samsung, which competes against Sony in the HDTV market, saw their profits triple to $3.24 billion, one of the reasons being that the Korean Won is much lower in value than the Yen, giving Samsung the competitive edge over its rival.

Recently, Square-Enix, another Japanese company, readjusted their profits forecast by a startling 65% to 2.6 billion Yen or $28.4 million. The publishing giant said the adjustment was needed because of "special factors" they were facing, one of them being unfavorable trade exchange rates between the Yen and the Dollar.

Japanese executives from across the board have been singing the same song, things cannot hold steady if this trend continues.

"An abrupt appreciation on the Yen will be tough for the Japanese economy," Yokitoshi Funo, Toyota Corp.'s executive vice president said.

Honda Motor Co. President Takanobu Ito also said the currency rate will have a great impact on whether Japanese companies will be able to keep their bases in Japan or move them abroad where business conditions are more favorable.

"I sincerely hope Japan will remain a country where manufacturing sites can be maintained on a stable basis," he told Kyodo News.

So what will be Sony and Square-Enix's remedy? For one, Sony has been on a mission to cut cost, an effort that's already helping the software giant save cash. The company recently cut 16,000 jobs and closed numerous factories. On top of all the efforts mentioned, the Playstation 3 was redesigned and re-released at a lower price, because they found ways to reduce cost on various components, and pass on savings to consumers.

Square-Enix is also making moves of its own. Earlier this year, the company acquired Eidos Interactive for a substantial $121 million. Square has recognized that if they want to survive, they must move beyond Japan, a fact that caused them to open a new division in Europe, namely Square-Enix Europe.

No one is claiming that these two companies will fade, on the contrary, things a looking up for both of them. However, the rising Yen is still a heavy weight on said companies, a weight that has led to many good people loosing their jobs.

11/2/09 Ernice Gilbert