# If the Japanese Yen is now low, why are Canon prices staying high?



## Britsinbeavercreek (May 18, 2013)

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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## Click (May 18, 2013)

I’m going to follow this thread with interest, I do not understand why the prices are not going down neither.


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## Brand B (May 18, 2013)

Probably because they wanted them higher to begin with but could not raise them and remain competitive. They can now enjoy higher margins for a while.

Have Nikon's or Sony's prices dropped?


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## pdirestajr (May 19, 2013)

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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## brett b (May 19, 2013)

Britsinbeavercreek said:


> 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.



Why would they lower their prices? Just because their margin is higher for the time being? 
They will lower their prices when the market forces them to...when demand falls.


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## barracuda (May 19, 2013)

Britsinbeavercreek said:


> 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.



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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## Mt Spokane Photography (May 19, 2013)

Prices did not rise when the yen went up, they won't drop unless its a deep and long term drop.


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## eml58 (May 19, 2013)

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.


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## jimenezphoto (May 19, 2013)

Britsinbeavercreek said:


> 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.



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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## AndyR (May 19, 2013)

dilbert said:


> Britsinbeavercreek said:
> 
> 
> > 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.
> ...



+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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## AndyR (May 19, 2013)

barracuda said:


> Britsinbeavercreek said:
> 
> 
> > 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.
> ...



dont know where ur getting ur info but its completely wrong dude...

http://www.bloomberg.com/quote/7751:JP

Canon's share price is up about 12% so far in 2013 and nearly 20% for the last 12 months they're doin' fine


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## J.R. (May 19, 2013)

Canon has upped it's profit guidance because of devaluation of the JPY. That basically confirms that there is no price reduction in the offing. Canon is just going to use the forex gains to boost their balance sheets.


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## AndyR (May 19, 2013)

J.R. said:


> Canon has upped it's profit guidance because of devaluation of the JPY. That basically confirms that there is no price reduction in the offing. Canon is just going to use the forex gains to boost their balance sheets.



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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## barracuda (May 19, 2013)

AndyR said:


> barracuda said:
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> > Britsinbeavercreek said:
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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. (May 19, 2013)

AndyR said:


> J.R. said:
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> > Canon has upped it's profit guidance because of devaluation of the JPY. That basically confirms that there is no price reduction in the offing. Canon is just going to use the forex gains to boost their balance sheets.
> ...



There are some many misstatements in your above posts I wouldn't know where to begin ... I suggest you read this -

http://in.reuters.com/article/2013/04/24/canon-earnings-idINDEE93N05I20130424


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## eml58 (May 19, 2013)

J.R. said:


> AndyR said:
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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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## Jens_T (May 19, 2013)

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


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## eddiemrg (May 19, 2013)

Britsinbeavercreek said:


> 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.



Becouse this kind of segment is not "economically flexible" regarding market changes.


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## TW (May 19, 2013)

Britsinbeavercreek said:


> 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.



Gray market prices should fall as soon as the old stock is sold and replaced, I would think.


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## tiger82 (May 19, 2013)

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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## AndyR (May 19, 2013)

J.R. said:


> AndyR said:
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And you believe a JOURNALIST from Reuters? If they were any good they'd be working for Goldman Sachs making some real money! And journalists never get it wrong....

.....over the last year Canon products have been falling in price in both major overseas markets Europe + USA....go back and look at CR forum about "Why I should wait till prices fall further" and "Why pay the early-adopter price premium for the 5D Mk III...etc."

..yet Canon's market share has increased in 2012, surpassing that of Nikon according to someone called Neuro


So average prices down in USD and EUR + Market Share is up (not to mention the global growth in the total numbers of people shooting with digital cameras), + the Japanese currency has dropped by a quarter in the last 6 months + CANON SELLING MORE UNITS....doh!!!!!


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## AndyR (May 19, 2013)

Jens_T said:


> 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.
> ...



don't know where to start here....honestly Canon make products that cost them X, then they sell them for X+Profit = Y, they publish Y in a Product Price List to Retailers....

later...that Retailer in say New York sees that Y is now a lot cheaper because their currency (the Dollar) has risen against Canon's currency (the Yen)....but here's the bit that everyone is MISSING: 'Price Y' for Canon is THE SAME....it is no different

....the only real benefit is that retailers will now be able to discount and still make a healthy profit and sell more units so they can now buy more off Canon



Do people on this forum actually believe that if the 1DX cost Canon 1 Million Yen to develop ($10k) that they would then turn around and sell it for $7k cos' they're really nice people!!!?? Canon are in business to make a profit...and they do, by selling goods and they make more profits when they sell more goods not because their currency has gone down viz-a-viz other countries domestic currencies.


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## AndyR (May 19, 2013)

Click said:


> I’m going to follow this thread with interest, I do not understand why the prices are not going down neither.



Part of the reason is the asymmetric bias that retailers have....their costs rise -> they pass on to the consumer....however their costs fall (they buy-in cheaper) -> they keep the prices the same and the RETAILER makes a higher margin NOT Canon. 

It is unfortunate that it takes time for retailers to respond, usually only when they have to i.e. competitors move first, then that forces them to follow suit


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## J.R. (May 19, 2013)

AndyR said:


> J.R. said:
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The profit forecast was raised by the Canon CFO and not a journalist from Reuters. Oh ... But of course you know better : : :

"_



We welcome Abenomics," Chief Financial Officer Toshizo Tanaka said at a news briefing, acknowledging the impact of Prime Minister Shinzo Abe's economic policies.

"The Japanese economy moves on this kind of mood so we value this and hope to find success," he added.

His company raised its forecast for the yen rate against the dollar to 95 yen for the business year compared with 85 yen to the dollar three months earlier.

Click to expand...

_


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## Jens_T (May 19, 2013)

AndyR said:


> don't know where to start here....honestly Canon make products that cost them X, then they sell them for X+Profit = Y, they publish Y in a Product Price List to Retailers....
> 
> later...that Retailer in say New York sees that Y is now a lot cheaper because their currency (the Dollar) has risen against Canon's currency (the Yen)....but here's the bit that everyone is MISSING: 'Price Y' for Canon is THE SAME....it is no different
> 
> ....the only real benefit is that retailers will now be able to discount and still make a healthy profit and sell more units so they can now buy more off Canon



Andy, I am not sure if I get the tone you're setting right...

Without knowledge on how retail prices in the US are set - and how Canon Japan sets prices to Canon US everything is speculation. My experience tells me that it is unlikely that any corporation will pass on FX gains to it's customers unless it is forced to.
Canon's prices to retailers also will not be the same - the mom'n pop photo store will not get the same price as best buy - and both are unlikely to get Yen prices (or USD prices indexed to JPY).

But that really is just the background - prices are changed beyond what individual retailers do if Canon sees the need for it.


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## AndyR (May 19, 2013)

_*The concept of prices as a function of cost is deeply ingrained in our minds, but it is not really true. *_


I'm still laughing about this quote above ;D


btw Canon make FX gains, usually when they repatriate their cash back from overseas periodically and there is a 1-6 month lag from when they sold gear in say USA with monies deposited in Bank of America, and the time when they transfer their overseas cash back to Japan (too costly to do this everyday, so maybe quarterly). So they sell a 5D3 for a MAP of quarter of a million yen (Canon e.g. charges B&H 200,000 Yen or $2200 and they sell it for a 18% markup so $2,00 to the customer), however that 200,000 yen or 2,200 dollars that Canon received in NY in December was put into a bank, later to be transferred back to Japan in April...but hey presto that 200,000 yen 5D3 is now 220,000 yen as the dollar appreciated 10%....but the Canon customer was not affected. Now a few months later B&H or Adormama go to Canon to buy gear and see that it ONLY costs them $2000 for a 5D3 wholesale because the Yen has dropped. Q.E.D.

Also, the asinine comments here on this site about Canon reaping extra profits etc., and multinationals bearing the FX risk is all pure NONSENSE - defies the Laws of Comparative Advantage in Economics plus it completely and utterly NEGATES THE RATIONALE FOR BILATERAL EXCHANGES RATES if Swiss Pharma are pricing in Sterling, Ford & GM are pricing in Yen, and British Alcohol Manufacturers are pricing in Dollars....then why have CURRENCIES AT ALL???


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## AndyR (May 19, 2013)

dilbert said:


> Do the people expecting immediate price drops think that Canon just gives shops cameras for free?
> 
> No.
> 
> ...



True....but eventually Canon USA will purchase a similar quantity of gear off Canon Japan for a lower invoice total, thanks to the stronger US Dollar...and then they can price accordingly to wholesalers/retailers


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## AndyR (May 19, 2013)

barracuda said:


> AndyR said:
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If you know anything about American Depository Receipts (ADRs) you know that they are not 1:1, they are bundled (or fractional) units - so adjust scale accordingly. It would be like me saying I walked 8 kms today, but only 5 miles yesterday....hey that's a 60% increase!


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## J.R. (May 19, 2013)

AndyR said:


> dilbert said:
> 
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> > Do the people expecting immediate price drops think that Canon just gives shops cameras for free?
> ...



No they won't (by the looks of it). Canon expects to keep the pricing for offshore markets at the same level which will translate to more JPY = more profits. If it were Canon's intention to reduce the pricing in the foreign markets, the JPY profit estimates (released by the CFO, not a journalist from Reuters) would have remained unchanged. 

Simple ... If it ain't broke, don't fix it. You can validly rant on the forums as to why Canon isn't selling for less, but simply because JPY is getting devalued doesn't make you entitled to a lower USD price.


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## dafrank (May 19, 2013)

*Market principles do not behave like your aunt Sally*



Britsinbeavercreek said:


> 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.



I have read many, but not all of the replies, so please forgive me if I repeat something someone else has already stated.

Unfortunately, you are thinking in ways that don't correspond to how businesses actually work. It is easy to do this because many of us tend to think of how we would behave - if we were perfectly selfless individuals acting on a one-to-one basis with a friend or relative - in setting prices on something or other ourselves. In this regard, corpporations, as well as individuals in business, who make and/or sell goods or services in the universal market environment in which we all conduct our financial transactions behave, at the most basic level, according to two principals: 1) they set their prices to maximize their income and profit, while always being careful not to set prices higher than would be the level to suppress demand, and 2) try not to churn the market by changing their prices too often or too rapidly, in order not to create ill will or confusion among their customer base and avoid pricing mistakes by basing their profit assumptions on too short a data sample.

Under the above realities, Canon has done two things: 1) when the value of the yen rose, it did not raise U.S. product prices as high or fast as the monetary valuations would suggest, and 2) when the value of the yen fell, it did not lower U.S. product prices as low or fast as the monetary valuations would suggest. And, if after testing the market for a period of time during which its competitors do not lower their prices and/or Canon's sales do not diminish or sales growth slow, they will probably take advantage of the period of lower yen evaluations to raise income and profit.

In short - no surprise here - the business world continues to operate under well known principles of supply and demand. "Fairness" in pricing is a principle that only exists in the minds of the naïve or schemes of various collectivist-minded "planners." The reality is that Canon will set its prices to maximize its income and profits, and only if the price levels they set punish them by reducing those two metrics, will they reduce their prices at all.

Regards,
David


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## Plainsman (May 19, 2013)

Britsinbeavercreek said:


> 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.



Answer= Cartel.

The Japanese (or South Koreans/Chinese) do not abide by the same competition rules as the West whether it is cameras or shipbuilding!

I am not saying prices will not fall but they might fall at a time to suit the Japanese camera companies - certainly not the Western consumer.

In any case the Japanese who have not experienced monetary loosening on the same scale as US/UK etc - until now - have had to suffer sky high yen which was damaging exports.

Unfortunately it does not look like their will be any real competition to Canon Nikon Sony etc from S Korea or China so the Japanese rule the roost for a very long time to come. No competition obviously from the West either as preference is given to the financial sector ie money churning rather than industry (Germany excepted).


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## Jens_T (May 19, 2013)

Plainsman said:


> Answer= Cartel.
> 
> The Japanese (or South Koreans/Chinese) do not abide by the same competition rules as the West whether it is cameras or shipbuilding!



Apologies taking this off-topic but I have to disagree to the way this statement is made, Plainsman.

Yes - there are governments protecting / supporting certain industries. Yes, competition is often not perfect. But that applies to most countries - the dispute between the US and EU about subsidizing / protecting Boeing / Airbus is just one example.

The whole FX impact topic has nothing to do with cartels. Such behaviour is normal business and can be found in any corporation, regardless of HQ location. Please consider this before accusing other countries of foul play.
But please let's not get into monetary politics 

BR
Jens


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## unfocused (May 19, 2013)

Several good and reasonable reasons have been identified here. But one that hasn't been mentioned that also contributes to this is that Canon is a multinational company. Its costs cannot be limited to any one nation or one currency. 

A falling Yen does not reduce the costs of its production facilities in other countries and it may actually increase some of its costs for materials and labor.

Another major consideration – Advertising makes up a huge percentage of a company's total costs. A falling Yen is not going to reduce the cost of advertising in National Geographic or any of the hundreds of publications that Canon advertises in. They have to pay for those ads in the local currency, so exchange rates, again, can hurt as much as help.

When talking about a company the size of Canon, there are just too many variables to presume that one thing (like the exchange rate of the Yen) will have a major impact on prices


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