The Japanese Yen has fallen considerably in value in recent months. Japanese exports should therefore be much cheaper now for buyers, so why are Canon prices remaining so high? I'd love a new Canon 5D mk III but current MAP limitations are keeping prices high and stopping me from buying.
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If the Japanese Yen is now low, why are Canon prices staying high?
- Thread starter Britsinbeavercreek
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It must mean Canon can do it, which means they actually know a few things about running their business. Oh well.
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Britsinbeavercreek said:
The falling yen does not benefit all Japanese companies equally. In Canon's case, every dollar move in dollar/yen costs Canon $80 million dollars in earnings because of their reliance on imported parts. For example, in the last week, the dollar/yen went from about 101.87 on Monday May 13th to 103.16 on Friday. That move costs Canon about 103.2 million dollars in earnings. Canon's stock price reflects the effects of quantitative easing by the BOJ (Bank of Japan), as it is down over 5% for the year in a Japanese market that is up over 41% for the year. Canon can mitigate the effects of dollar/yen moves by hedging strategies, e.g. stock piling on imported parts when the value of the yen is higher on the currency markets, but that can be tricky if they buy too many parts that they cannot use. Similarly, airline companies trade oil futures to mitigate their fuel costs, i.e. buying when prices are low.
Pure Japanese exporters benefit the most, i.e. companies with the least amount of reliance on imported parts and capex spending.
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The Apple/Adobe scenario in fact for Aussies.
You would benefit where you buy your gear in Yen, in Japan, as long as you started out in USD.
Problem there of course is that camera Prices in Japan are not that cheap when compared to the USA, the US benefits by Market size, here in Singapore we try to purchase local equivalent to a US best price using say B&H as a base point, then if we leave Singapore within 2 months we benefit by the GST refund 7%, it's one of the few ways I've found to get a cheaper price than the US.
Hong Kong you certainly can, but you then need to be more concerned about "Grey" Market issues & lack of Support when the shiny new Camera decides to go belly up.
You would benefit where you buy your gear in Yen, in Japan, as long as you started out in USD.
Problem there of course is that camera Prices in Japan are not that cheap when compared to the USA, the US benefits by Market size, here in Singapore we try to purchase local equivalent to a US best price using say B&H as a base point, then if we leave Singapore within 2 months we benefit by the GST refund 7%, it's one of the few ways I've found to get a cheaper price than the US.
Hong Kong you certainly can, but you then need to be more concerned about "Grey" Market issues & lack of Support when the shiny new Camera decides to go belly up.
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Britsinbeavercreek said:
Why would Canon lower their prices when people (not me) are all too happy to cough up their cash. When I hear of a lens being updated I know the price of the replacement lens will be 3 to 4 times higher than the out going model. I only own Canon lenses (six of them) but Canon is doing it's best to price me out. Sigmas are getting more interesting of late. Maybe it's time to look at independent lens makers.
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dilbert said:
+1 same as gas station when they buy their product...then the price of oil plummets on global markets...their tanks in the ground are full of higher price fuel...so they sell at the pump at the same price and do not adjust their prices until they buy in more product
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J.R. said:
Canon doesn't play the fx market -> they price in yen and pay their staff in yen...the 5d mkii was launched in yen as was the mkiii...both actually less than 5000 yen apart despite a 4 year gap, thats fifty bucks increase in american dollars between 2008 to 2012 for all the extra features (more af points, higher iso etc.).
If canon were pricing their products in foreign currency and paying their costs in domestic...well that would be the same as you having a Norwegian Krone home loan whilst being paid in American Dollars => R I S K Y. Stocks who run un-hedged fx risk get hosed by brokers and investors.
Canon guided higher probably because they're selling more products (volume boost) thanks to more affordability in overseas markets thanks to the weaker yen...WHY cos' they price in yen! Would also explain why people on this site recently refer to increase in mkt share that canon is enjoying over other jap cam companies
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AndyR said:
I'm using Canon's ADR's on the NYSE (so in USD terms). Symbol CAJ:
http://finance.yahoo.com/q/hp?s=CAJ&a=11&b=31&c=2012&d=04&e=19&f=2013&g=d
So closing price on 2012/12/31=$39.21; and closing price on 2013/05/17=$37.10, of course both in USD.
Also, the $80 million (USD) earnings loss per each dollar/yen move up comes from CNBC (about 1:17 into the video):
http://video.cnbc.com/gallery/?video=3000167955&__source=yahoo%7Cheadline%7Cquote%7Cvideo%7C&par=yahoo
I'm a CAJ stock holder, so I feel the pain of the 5% loss while the market indices are generally up for the year and in the case of the Dow and S&P 500, at all-time highs.
So if you extrapolate, the weakening yen is causing Canon's margins to get squeezed (higher import parts costs). In that environment, Canon would be hard pressed to decrease prices. I'm guessing Canon has already accounted for fluctuations in the exchange rate, which is why MAP prices are so high and why they will remain high as they release new products.
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J.R. said:
The only Multi National Companies that sell products into Foreign markets that Don't Play/Hedge the FX Market against fluctuation Currencies, are the ones you no longer see in Business. For a Company the size of Canon, with the Majority of sales in Foreign Currencies NOT to take into account FX Exchange rates in their fiscal Policy going forward & Hedge those Positions, is a reasonably straightforward recipe for disaster.
Dilbert (i have to admit) made an excellent point in his earlier Post, Canon incur costs to get a product to Market, those Costs are incurred with a 3 to 6 month Historical Position, if the Current weak Yen continues for the next 6 to 12 months, you might see a reduction in Canon equipment, but I wouldn't hold my breath, Sales Prices are determined by the Market, if Nikon starts reducing prices, so will Canon, but if demand remains the same, Canon will simply reap the benefits of a weaker Yen/USD, it's called Business.
I'm pretty sure you wont see a Honda/Toyota/Suzuki Car at any any reduced price in the near future, unless the Market dictates it by other Car Manufactures reducing price to get Market Share.
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Simple answer - prices are only indirectly depending on FX impact.
First we're talking about consumer goods in a B2C market - no FX clause and very low value deals. No business wants to have permanently fluctuating prices as this would create extra work and makes planning even harder. Also Canon sells to retailers at completely different prices to what retailers charge the end customer. So first Canon would have to adjust prices to retailers and then this price change would have to be passed on to customers.
On a more fundamental basis - The price a company charges for its goods usually depends on its market strategy with the underlying given cost structure and the target to maximise return on investment (profit) in a specific time frame. If you have a multi-national set-up with income and cost in different currencies you incurr FX risk.
Canon Corp has a strategy for the US market and probably centrally sets revenue and income targets for the US entity. Based on this prices (to their resellers) are set to achieve the objectives.
How Canon internally operates, i.e. if Canon US gets USD objectives and which Canon entity bears the FX impact is a different story. If for example Canon US buys at a fixed FX rate from Canon Corp then the FX impact would only show up in Japan and Canon US would not have any incentive to change prices.
If FX rates change massively against a company, i.e. leading to losses, the company might still accept those losses in order not to loose market share. If FX moves the other way the company probably just sticks with the old price/strategy if everything was ok with it and enjoy the translation/transaction FX gains.
So I wouldn't expect any permanent price changes from FX.
The concept of prices as a function of cost is deeply ingrained in our minds, but it is not really true.
BR
Jens
First we're talking about consumer goods in a B2C market - no FX clause and very low value deals. No business wants to have permanently fluctuating prices as this would create extra work and makes planning even harder. Also Canon sells to retailers at completely different prices to what retailers charge the end customer. So first Canon would have to adjust prices to retailers and then this price change would have to be passed on to customers.
On a more fundamental basis - The price a company charges for its goods usually depends on its market strategy with the underlying given cost structure and the target to maximise return on investment (profit) in a specific time frame. If you have a multi-national set-up with income and cost in different currencies you incurr FX risk.
Canon Corp has a strategy for the US market and probably centrally sets revenue and income targets for the US entity. Based on this prices (to their resellers) are set to achieve the objectives.
How Canon internally operates, i.e. if Canon US gets USD objectives and which Canon entity bears the FX impact is a different story. If for example Canon US buys at a fixed FX rate from Canon Corp then the FX impact would only show up in Japan and Canon US would not have any incentive to change prices.
If FX rates change massively against a company, i.e. leading to losses, the company might still accept those losses in order not to loose market share. If FX moves the other way the company probably just sticks with the old price/strategy if everything was ok with it and enjoy the translation/transaction FX gains.
So I wouldn't expect any permanent price changes from FX.
The concept of prices as a function of cost is deeply ingrained in our minds, but it is not really true.
BR
Jens
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There may be a lag as today's inventory was purchased months ago with a stronger yen. Maybe if the dollar stays up against the yen for a couple more months or as the higher cost inventory sells down will we see price drops across the board. Or they can just reap extra profits.....
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