Application Toshiba Copes with a Rising Yen by Cutting Costs 
By 1988, Toshiba’s cost cutting reduced its cost-to-sales ratio to where it was before the yen began rising. The company shifted production of lowtech products to developing nations and moved domestic production to high-value-added products. At a VCR plant outside of Tokyo, it halved the number of assembly-line workers by minimizing inventories and simplifying operations. Other cost-reducing international activities included production of color picture tubes with Westinghouse in the United States, photocopier production in a joint venture with Rhone-Poulenc in France, assembly of videocassette recorders in Tennessee, production of similar VCRs in Germany, and establishment of a new plant in California for assembling and testing telephones and medical electronics equipment. Overall, Toshiba is estimated to have saved ¥115 billion to ¥53 billion by redesigning products, ¥47 billion in parts cutbacks and lower raw material costs, and ¥15 billion in greater operating efficiency. Similarly, by 1989, with the dollar around ¥125, Fujitsu Fanuc, a robot maker, had streamlined itself so thoroughly and differentiated its products so effectively that it estimated it could break even with only a fifth of its plant in use and a dollar down to ¥70.
In the early 2000s, Japanese companies once again faced a rising yen (¥107/$ by 2005). And once again they coped—by restructuring to become more efficient, focusing on higher-end products, and shifting production of lower-end products to China. For example, Ricoh, the Japanese copier company, cut the cost of its liquid-crystal operation panels from ¥12,000 in 1994 to ¥8,000 in 2004, while making them more sophisticated. Ricoh is also monitoring sales in real time to adjust production volume every week, thereby reducing its stock of copiers that will be outdated when a new version supersedes it; previously, it adjusted production every month. Similar actions by other Japanese companies have ensured that they can profit even if the dollar buys less than ¥100.
8 Quoted in Christopher J. Chipello, “The Market Watcher,” Wall Street Journal, September 23, 1988, p. 14.