First it was Toyota announcing a loss. Today it’s Sony.
Japan’s Sony Corp (6758.T) will likely suffer an annual operating loss of about $1.1 billion, its first such loss in 14 years, due to sluggish sales and a stronger yen, a person with knowledge of the matter said.
The mention of a “stronger yen” is a critical point here. It’s a clear indication that Sony lost money in the U.S., its biggest market. “So what?” you may be wondering. “It’s a tough economy. Everyone is losing money.” That’s true, but there’s a huge difference between foreign and domestic companies. It’s a violation of international trade rules for a company to sell products at a loss in a foreign market. It’s a practice known as “dumping” and is expressly forbidden. It does’t matter whether it takes place in a good economy or in a recession. It’s still dumping.
The U.S. should immediately insist that Sony raise its prices. If they don’t, the U.S. should lodge a complaint with the World Trade Organization. And if the WTO doesn’t take swift action, the U.S. would be entirely within its rights to slap tariffs on Sony products, Toyota products, Toshiba products (also expected to post a loss) and any Japanese company that is selling products at a loss in our market.
“That wouldn’t be very nice,” you may be thinking. “We wouldn’t want them to treat us that way.” Think again. That’s exactly how the Japanese treat us, and even worse. Japan sustains a $100 billion per year trade surplus in manufactured goods with the U.S. by refusing to buy from us as much as we buy from them. That’s approximately 1.34 million high-paying manufacturing jobs they’ve taken from our economy.
“But we don’t want prices raised,” you may also be thinking. “I can’t afford things as they are now.” You can’t afford things because the downward pressure on wages caused by the trade deficit has driven down incomes more than prices have been held in check. If the prices of imports were raised, the profit potential needed to justify manufacturing in the U.S. would be restored. Wages would rise faster than prices. This would be true even if you work in a field not associated with manufacturing, as job-seekers vying for your job would be pulled out of the pool of available labor and put to work in factories.
For decades the U.S. has blamed currency valuations for our trade deficit and Japan has been a master of manipulating the yen-dollar exchange rate in its favor. Now the global economic melt-down has overwhelmed their ability to prop up the exchange rate, and the table has turned in our favor. It’s time to strike and force actions that will restore a balance of trade. It’s time to stop being played for a sucker in the global trade game.
One final comment on a quote from the article:
The company has assumed the yen at 100 yen per dollar and 140 yen per euro, compared with the current dollar/yen level of 89 yen and euro/yen level of 119 yen. A firm yen cuts into the value of its profits and makes its products less competitive in overseas markets.
A strong yen only makes Japanese products less competitive if they adjust the dollar price higher in response to the exchange rate. Have you seen any evidence of that? Of course not! If anything, they’ve been cutting prices to try to prop up sales. That’s dumping!!