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Nikon to revise US Dollar and Euro foreign exchange estimates

Bloomberg reports that Nikon will revise its US Dollar and Euro foreign exchange estimates:

"The yen has gained about 19 percent against the euro and 5 percent against the dollar this year. Nikon, which earned more than 80 percent of its revenue outside Japan in the 12 months ended March 31, is using currency hedging and increasing overseas procurement of parts to become less vulnerable to fluctuations in exchange rates, Kimura said. The Tokyo-based camera maker assumes a yen exchange rate of 90 yen to the dollar and 120 yen to the euro for the fiscal year to March 2011, it said May 11. The yen traded at 88.36 to the dollar and 111.82 to the euro at 12:45 p.m. Tokyo time. A stronger yen erodes the value of overseas earnings at a Japanese company when repatriated."

It remains to be seen if this will lead to any price adjustments for the US and European markets.

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  • Click

    I don’t know anything about currency exchange, does this mean Nikon products will cost more or less. I just imagine the answer is MORE…..

    • Banned

      OK, the article says that they are currently trading based on 1 USD = 90 YEN.

      So if a lens is sold in the US for 1000 USD, they get 90,000 YEN.

      Nowadays the current rate is 1 USD = 88 YEN. It means that for the same lens they would earn only 88,000 YEN, had they not hedged currency at the 1 USD = 90 YEN level through March 2011.

      In conclusion it means nothing as of now, because they have protected themselves by hedging currency. But in March 2011 when it’s time to renew their hedging, there might be a price change, depending on the level of the YEN at that time.

    • Hooray

      Wadda you think?
      If the japanese currency gets an UPWARD revaluation so the Yen costs more what will happen if you buy a JAPANESE product? Ummmm… :D
      How much more depends on how spread out their factories really are and – well – on their greediness.

      • Hooray

        And the good thing is: Nikon is the only japanese camera manufacturer.
        Oh, wait! It isn’t… darn… leaves us only Samsung and Hasselblad :D

        • Anonymous

          There’s plenty more non-Japanese camera manufacturers buddy. Leica, Rollei and Phase One to name a few more.

  • http://nikonrumors.com/ [NR] admin

    If Nikon assumed higher exchange rates in their financial calculations, that means they MAY raise prices again in order to achieve their financial goals. Am I right?

    • AS

      This means that they are estimating for every US dollar they bring in it equals 90 yen. When in fact the exchange rate is really bringing Nikon in 88 yen for ever US dollar. Meaning they are over estimating what they are bringing in.

    • Jabs

      Hey Administrator,
      This is a complex question and it depends on WHEN Nikon and its’ Subsidiaries transfers their money BACK to Japan, hence hedged funds.
      The money transferred to Japan is based upon how much they SOLD of goods in COST to each Subsidiary and also what was the going Exchange rate WHEN the money was transferred. Since these are Banks to Bank transfers or sometimes Reserve to Reserve country Bank exchanges, then they are basically gambling on what will be the exchange rate WHEN they transfer EARNINGS abroad – LOL!
      It is all about the Transfer process and not the sales.
      If they underestimate the value of the money returning to them, then they lose.
      They estimate a trend of either going up or down WHEN they exchange money and then adjust their prices to reflect the value of the goods sold to their Subsidiaries and the value of the money WHEN they transfer it. They can delay the transfer if the value of the currency in relation to THEIRS increases or decreases – YUP!

      • Jabs

        SORRY, but I forget to specify – WHEN they transfer EARNINGS from goods sold abroad back to japan.
        This is why Companies have Subsidiaries in each Market, as they sell to THEMSELVES as Independent Companies abroad.

        • Hmm

          There have been some solid points made in this thread so far clarifying foreign exchanges, but I want to make one comment – not a correction but a clarification for those who may not have taken any econ since high school:

          There is not a magic wand out there which transmutes dollars to yen. If Nikon sells a camera for a dollar they must then find someone who will buy that dollar and sell them a yen.

          If they arranged this trade in advance (as Banned suggested early on) that is not really hedging in the classic sense. Hedging would be planing your business on a certain market trend /and taking a counter position to limit losses/ the other direction.

          • Jabs

            Hey Hmm,
            Good points, but what is mainly forgotten here is that the Exchange Rates quoted daily are NOT what Banks get but what Banks GIVE YOU, the average customer.
            They make a profit on Exchange Rates too.
            Therefore it is almost pointless to guess what Nikon gets per dollar of PROFIT in sales transferred back to Japan from say, their USA Subsidiary.

    • longtimenikonshooter

      here is YEN’s long term chart and you can say price hike has been built in since 2001.

    • Nikonbeacon

      NR Admin…. Yes you are absolutely right. The prices may rise again…
      Simple way to look at it. If the yen gains value, you will need to pay more to get the yen.

      Same goes the other way round.. If the dollar loses value , you will need to pay more dollars to buy yen currency. Hope this helps

  • shivaswrath

    I think this means they’ll raise it AGAIN. . .jesus christ, I might as well just buy all the lenses I need NOW, this is getting frankly QUITE absurd. . .and Canon hasn’t done this, so not sure why Nikon is making it more difficult to keep up with them. . .

  • Banned

    Sorry Admin that’s a double post, please delete this.

  • The invisible man

    I’m back.
    o)

  • jeff

    price increases aren’t necessarily bad if you like to stay current on big glass. purchasing different models 2007-2008 before the price increases caused the used value to be high related to the purchase value since larger glass holds it’s value very well and the used price is tied to the new price at any given time.

    example: purchase a 300mm 2.8 in 2007 for $4400 and sell in 2010 for $4050
    that’s pretty cheap rent!

    Assuming you guessed correctly on future price increases, you could purchase now and get the same benefit 2-3 years from now.

    • daniel

      That’s a very retarded way of thinking. If you paid 4400 in 2007 and the price of it now (2010) is 6000 new, you effectively lost 1600 even if you sold it for 4400 again in 2010.
      How so? Because if you sold it because you wanted a different lens which has been priced 4400 in 2007 and 6000 in 2010 (the same), you now can’t affor it because your money can’t buy the same stuff as it could, it’s not worth the same.
      That’s what devaluation means.

      • Jeff

        You missed the point by a mile.
        1. the assumption is you upgrade your glass with new models every 3yrs or so. Read the first sentence…
        2. you purchase before a price increase. If you purchase the same lens new after the price increase then want to upgrade, then used value of your used lens is still the same. So it effectively costs you more to upgrade.

    • Hmm

      You’re ignoring the cost of money.

      That $4400 invested at a (reasonable) 5% rate of return instead of in glass would be worth $5093, adding almost $700 to your “rental” cost – making the total loss over a grand.

      And that cost of money is much more assured, unlike the speculation your scenario is taking on currency futures.

      • Jeff

        again, missing the point. A shooter who likes to keep current on glass. Meaning you are going to purchase both lenses regardless of market conditions, but purchasing the older model before it goes through a price increase saves you real cash.

        you purchase the older model at 4400, then sell at 4050, or you purchase the same lens after the price increase for 5200 and sell at 4050 (we all know the used prices are fixed in a narrow range at any given time). Again the assumption is that you are going to buy the new model (5900) and you are going to sell the older one to parially fund that purchase.

        If I know a price increase is likely during the time I plan to have the lens then it’s prudent to purchase it before the price increase. If the increase doesn’t happen, no big deal, you were making the purchase anyhow, but if it does…

        • Whatever

          And, despite your claims on others, YOU are the one missing the biggest point. And the most basic of maths.

          Your argument hinges upon something we’ll accept as fact for sake of this argument: If new prices go up by X%, used prices will as well.

          We’ll Call N1 the old lens list price. We’ll Call N2 the new lens list price
          X = currency related percentage of price increase.
          Y = depreciation of selling used.

          X*N2-Y*N1*X 2200-2000*.8
          660 > 600

          In this example I have shown (try any numbers you like) that price increases increase your “rental” cost.

          • Whatever

            WOW I pasted that formula wrong!
            X*N2-X*N1*Y > N2-N1*Y

        • Whatever

          Otherwise you’re just offering the totally mind-blowing advice “buy before a price increase”, which is obvious REGARDLESS of whether one keeps current on the big glass.

          • Jeff

            Now your taking those smart pills!

  • Anon

    it will only affect products that are produced in japan. if the yen has risen 5%, that means the cost of selling you this product has risen 5%, so the price may rise for goods produced in japan and it will increase by a percentage that is lower than 5%, because demand is not perfectly inelastic.
    for goods that are produced elsewhere eg thailand, it depends on the thai currency nd us dollar

    • GlobalGuy

      That’s not exactly true, but there is a lot of truth in what you are saying. Your problem, when you say only the products produced in Japan are affected, is that you are assuming that profits are made in Thai dollars or whatever elsewhere (not to mention that even products produced in Japan are likely made from raw materials sourced elsewhere, meaning that a strong Yen benefits Nikon’s products costs favorably). Regardless of fluctuating production costs, ultimately, profits are always made in Yen. Whether or not it is eventually profitable must include all transaction costs, of course, but the most important are expected profits (in Shareholders currency – Yen) and purchase price (in Dollars). If the range deviates significantly (such as the Euro), this is a problem. In case of the dollar, I am skeptical, but its likely the strong Yen improved overall production costs, due to Chinese and Thai sourcing. Still, every dollar/euro eventually becomes a Yen, because the interests of the Shareholders are the ultimate concern for a corporation.

      I believe what you are trying to explain is that manufacturing does not necessarily increase in cost. In fact, its possible that the manufacturing costs DECREASE even as Nikon’s profits also decrease. And that the cost of manufacturing cost increases and decreases must be included in all considerations of exchange rates. Example:

      Product Cost = 5-Thai
      Purchase Price = 10-Dollar
      5 Dollar Profit = 10-Yen

      Product Cost = 3-Thai (because Dollar strengthens against Thai)
      Purchase Price = 10-Dollar (no change, despite weaker Thai)
      7 Dollar Profit = ??? -Yen

      It ultimately depends on the Dollar-Yen exchange rate:

      If 7 Dollar Profit = 10-Yen (Dollar weakened, but not enough to affect price)
      If 7 Dollar Profit = 5-Yen (Dollar weakened so severely prices must be raised, despite the decrease in Thai production costs)
      If 7 Dollar Profit = 11-Yen (Dollar may have weakened slightly, but actually increased profits, due to decrease in Thai)

      .. then you can see how Shareholders would be concerned in some cases.

      In other words, the production costs & materials must be considered in their origin currencies. But ultimately it is the Yen-Dollar exchange rate which will determine how the Shareholders at Nikon experience profits. If the purchasing currency and the shareholders currency distance more than the production currency, then adjustments (or profit cutting) will be inevitable.

      Therefore, yes, it is a bit disingenuous for Nikon (or anyone else) to claim that it is JUST the Yen-Dollar which must be considered and that only the strong Yen or weak Dollar is the problem. However, assuming that all the other currencies stay within a predicted/expected range of the Yen, then the Euro especially, but also the Dollar may have some problems.

      • Anon

        Firstly, please correct your grammar, trying to make sense of what you write is very difficult.
        if the good is not produced in japan, yen-usa rate doesn’t have any impact on the price in usa. price only depends on cost of production and sales and demand determinants.
        For example, a company registered in country A, produces product in country B and sells that product in country C. Only the exchange rate between B and C affects the price level of that product in country C. Suppose the exchange rate between A & C changes and the rate between B & C stays the same (note: that implies the rate between A & B also changes). Cost of producing and selling of each product doesn’t change. Demand doesn’t change. So the original price still maximizes profit. On the other hand, if the currency rate between B & C changes, that will change the profit maximizing price.

        • Jabs

          Hey Anon,
          You are wrong.
          The country that sells the goods to what Subsidiary of itself is what counts and not where it was manufactured.
          Manufacturing costs is determined by WHERE it was built and where the supplies to build it came from plus where it was assembled and packed.
          When it is a finished product, then where it is SOLD from as a finished product affects its’ price as to where it is being sold.
          Companies sell their OWN products to themselves or properly, their own Subsidiaries in each area or region of the world and thus the price discrepancies.
          Supply costs plus production costs = manufacturing costs.

          List price = manufacturing cost plus sales and distribution costs with expected profit margin for them, their Subsidiaries plus Local Distributors/Resellers/Dealers.
          Everybody has their hand in the pot – LOL!

          The list price or retail price is determined by all the factors including country or place of manufacturing, so that is why many goods are partially manufactured in some countries and assembled in other places as you forgot the cost of IMPORT and EXPORT duty.
          Add shipping to that.

          • Anon

            you just made my point
            List price = manufacturing cost (if it is produced in thailand, it is all in thai currency) plus sales and distribution costs (all in US currency) with best possible profit margin (depends on US consumer market condition). value of japanese yen isn’t important when you determine the optimal price level for selling a ‘made in thailand’ product in USA, even if it is a japanese company. A multinational firm doesn’t sell its product from thailand, to japan, then from japan to USA. Even if a firm is stupid enough to do that, the ‘no arbitrage’ condition still ensures it is the baht-USD ratio that matters. Because if the baht-usd ratio doesn’t change, all the changes in yen-usd ratio must be offset in the baht-yen ratio.

          • Jabs

            Hey Anon,
            An answer for you, perhaps!
            The point of manufacture and the point of distribution might not be the same even within the same country, hence we would have to know a lot about the equipment being manufactured and where its’ final assembly plus packaging takes place.
            Many countries have DUTY-FREE manufacturing zones where trans-shipments occur blurring the line between where it is claimed to be manufactured and where it really was.
            Unless you know exactly WHAT Nikon does for each item in this complex puzzle, then you and I are both guessing.
            Part of International Trade is that you try to not only manufacture in the lowest price country that has competent people to do this, but also assemble in an area where shipping costs are minimized to your intended market or even a part of your equipment is made locally.
            This is why so many factors are in place and we do NOT know, but merely guess.
            Some countries have plants to produce certain items nearby and thus either partial assembly takes place there or even final assembly. Today, equipment is outsourced to so many Companies and too many strategies are employed to lower costs, that usually only the manufacturer knows for sure why they produce/assembly here or there.
            Often equipment is moved around the world to get favorable ‘paper profits’ from currency fluctuations too.

          • Jabs

            Last point Anon,
            The concept of things produced in say Thailand does not mean that Thailand money is involved except maybe in salaries at times.
            Things are manufactured as sub-assemblies and dropped shipped all over the world and then assembled in areas with favorable Trade balances/Ports/Shipping routes, etc., to other locations.
            Companies have specialists who do all that figuring and thus timing/guessing/hedging funds are all skills employed.
            When you realize that many Duty-free zones where things are manufactured or even assembled are often NOT listed as the point of manufacture due to them being off shore.
            Some Duty-Free manufacturing zones are not even considered a part of the country, as in ‘country of origin’ produced goods. Tax beaks and Tax write offs are a complex part of this equation.
            Have a great day – LOL!

          • Anon

            Equipment are not moved around the world to take advantage of currency fluctuations. They may be moved because long-term undervalue of a currency eg chinese yuan, but not fluctuations. No manufacturing firm will shift their operation to one country this month because its currency’s value decreased then move it out again to another country next month after its value increased.
            Duty free zones are not off-shore. Completely different concept. A product made in a country’s duty free zone is still made in that country.
            If Thailand and China are only assemblers and most of the components are still made in Japan, then yes I agree, an increase in the value of yen will increase the cost of production and therefore final price for ‘made in thailand’ and ‘made in china’ goods. But as far as I am aware, the circuitry and glass are no longer made in Japan. If the sensors are still made in japan, then sent to thailand, that may increase the price

          • Jabs

            Hey Anon,
            I did not imply that finished goods are moved around from country to country, but you fail to realize what a Duty-Free Zone is today in Electronics. China has three basic places to manufacture goods – Hong Kong, Taiwan and ‘mainland China’ – The US has Puerto Rico, Hawaii, US Virgin Islands and mainland USA.
            Companies make deals with countries or countries attract foreign investment with elaborate deals for off-shore production or packaging of equipment in special Duty-Free or Tax-free manufacturing zones thus blurring the line between place of manufacturing – that was my point.
            We don’t know for sure!
            Companies make strategic decisions on where to make final manufacture or assembly of goods based upon FUTURE currency exchanges all to benefit their bottom line.
            Just look to how clothes, sneakers and computers are made today!
            Anyhow, end of this subject.

  • http://www.jmphoto.us Jelani Newton

    Advanced Corporate Finance! Gotta love it. In the end at some point I think the parent firm will want to add the money made back to the balance sheet as cash and not an account receivable, so I think what matters is what will the currency rate be at that time. Or, is there a trend that would warrant early conversion to cut aggregating losses. But still it means about as much as saying it’s going to rain because there are clouds in the sky. It may, it may not.

  • Joe D

    Usually it means prices go up for everyone. Trust me. And if it should go down, it doesn’t, it stays the same. Trust me.

  • Ren Kockwell

    Jesus. We’re talking about 2-3 percent here. Who cares? This thread has bored me to tears.

    • Zoetmb

      Over the long term, we’re talking about a lot more than 2-3%. In 2007, a U.S. dollar bought 120.16 Yen. Today it buys only 88.375. That’s an almost 27% drop. And this is with a weak Japanese economy. If the Japanese economy were stronger, we might be talking another 10-20%.

      The self-proclaimed economic experts on this site are trying to make this complicated. But it’s really very simple. It doesn’t matter (with the exception noted below) where the goods were manufactured. All that matters is the amount of money Nikon expected to receive from U.S. sales. If they expected $90 million, but they’re only getting $88.38 million because of currency values, they have to find a way to make up that money. Now if the currency in the places where they are manufacturing decreases in value as well, it could be made up there. But failing that, and failing an increase in sales beyond the original projections and failing anything they got by hedging, either Nikon has to reduce its forecasts or it has to raise prices.

      Don’t blame Nikon. Blame the weak U.S. economy and the high rate of U.S. debt. U.S. politicians try to fool us by lowering taxes, but if doing so raises the debt, it lowers the value of the dollar, and we just pay it back in increased costs of foreign goods and today, almost all goods are manufactured overseas. But the politicians can claim at re-election time that they lowered taxes. The fact is that inflation is a tax and so is a dollar that decreases against foreign currencies.

      In some cases, it doesn’t matter that much because the cost of goods, such as much consumer electronics, is so inexpensive that it borders on the absurd. (DVD players for $49? Mid-line 7 channel receivers for $250?.) But DSLRs have not really fallen much in price in spite of the fact that they’re largely manufactured in Thailand, Singapore or China.

      The debt issue is why physical wars between large nations have largely become obsolete. If China wanted to “kill” the U.S., all it has to do is stop buying its debt. If that happens, you’ll be paying for Nikon cameras with a wheelbarrow of U.S. dollars.

  • ich bins

    Correct, Zoetmb! The only thing what counts in US, is military power. More than 40 % of all taxes go into military toys and firms. Then look at the cities and public welfare. Don’t become ill there or loose your job for a while. That’s a policy which is ill and crazy.
    On the other side, Nikon is looking for reasons for screwing up their prices, although they are producing in low-wage countries as China and Thailand, in the near future perhaps in Mali (consisting of 98 % desert). And nobody here mentioned the progress of rationalization. When I compare my 35/2 from 1974 (fully metal construction) and a comparable glass of today, there are some differencies. The battery cover of my D700 is made of cheap plastic, the same with the cover for USB etc. China produces near HongKong in the free trade zone more than 5 million electro motors every day – so don’t tell me that Nikon has to rise up the prices because of the currencies. Look at the price tag of the D3x – overpriced in every screw.

  • Hey-nonny-mouse

    Interesting that prices seem to go up when yen falls in value, and I can imagine that the prices will go up now due to yen rising in value.

    Suspicious that is….

  • Michael

    In other words

    If the yen goes down, we increase our prices; if it goes up, we increase our prices.

    You guys at Nikon are Bullshit artists of the first degree. You are absolute pricks (there goes the post). Congratulations at finally giving a real Nikon fan and buyer of pro bodies/lenses the absolute shits.

    Michael

  • Marc

    Daniel made an interesting point…”If you paid 4400 in 2007 and the price of it now (2010) is 6000 new, you effectively lost 1600 even if you sold it for 4400 again in 2010. How so? Because if you sold it because you wanted a different lens which has been priced 4400 in 2007 and 6000 in 2010 (the same), you now can’t affor it because your money can’t buy the same stuff as it could, it’s not worth the same.”

    However, it is almost apples to apples. Lets say the dollar improved against the yen. New lenses are now $4000 in 2010 instead of $4400 in 2007. But you cant say the used lens for $4000 anymore. It is now worth $3300. So you still need to shell out more money when buying a new lens. The cost to rent increased as prices for new lenses went down. It is probably not one for one but it does show that there is always a cost to owning a lens and always a cost to exchanging it.

    • Jeff

      My point about cheap rent was taken out of context by many. My point was that I purchased for 4400 and sold for 4050, so I used my 300 2.8 for three years as often as I liked for $350. Regardless of where you rent that’s about 10-15 days and that doesn’t include shipping!

      So I used my lens all I wanted for three years for $350. Now assume I purchased a new model for 5900 and keep it for another three years (remember this is a shooter who keeps current). based on past history it’s likely that there will be a price increase (usually at least $900) and the used price will be the same at any given time for the same model in the same condition. It’s possible to do the same thing again… perpetually. Then again the price could go down (again look at history).

      If I wanted to make money I’d invest it. The point of my comment was based on a shooter who will purchase this lens regardless and who will upgrade to the newer model every three or so years.

      In reality that lens didn’t cost me anything, in fact it made lots of money due to the sales of photos made from it. But that wasn’t what I was trying to convey.

  • Michael

    Re: my previous post. I really didn’t expect it to go through and i apologize to anyone who is offended by my language, however the sentiment of expressing that Nikon are not acting ethically remains.

    Regards

    Michael

  • Ren Kockwell

    Ugh. Admin, please don’t post this type of information anymore. It’s inconclusive, doesn’t reveal the full financial picture and has only speculative impact on camera prices at best. Plus, hearing 30 nerds trying unsuccessfully to out-talk finance with one another just makes me wince.

    • Hmm

      It spurs conversation and drives eyeballs, and thus income for Admin. I believe your cries will go unanswered.

  • Dean

    Anyone have a chance to read this post:

    http://www.prophotohome.com/news/2010/07/09/new-high-iso-nikon-dx-dslr/

    Seems like a guess. Can’t believe they’d go lower than 12MP but if they can deliver noise reduction in the current 12MP sensors then I can’t wait to see what they have planned for the next generation of FX sensors!

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