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View all search resultsRupiah depreciation squeezes Japanese manufacturers’ profit
A previous JETRO survey conducted in August and September of last year found that over a third of Japanese companies in Indonesia projected an increase in profits this year and everything shifted after the war began.
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Workers assemble truck parts at a factory in East Karawang, West Java. (JP/Seto Wardhana)
J
apanese companies operating in Indonesia are expecting declining profit this year as rupiah value swung worse than anticipated while the Middle East conflict introduced more adverse effects that spiked costs in logistics and raw material imports.
A survey conducted by Japan External Trade Organization (JETRO) in April and May found that almost half of 205 Japanese manufacturing firms involved in the survey expected a declining profit this year.
Yamada Kenji, JETRO Jakarta senior director, told The Jakarta Post on Friday that “import costs are rising” due to “weak currency” given that the contracts were mainly in United States dollars.
The rupiah value against the greenback had dropped by about 7.5 percent from 16,675 per dollar at the turn of the year to Rp 17,940 on Sunday. The plunge made it Asia’s weakest performing currency this year.
The latest reading had already marked an improvement from a nadir of over 18,200 per dollar recorded in June when the currency breached the historic low of 17,300 per dollar that lasted for decades, recorded during the Asian Financial Crisis in the late 1990s.
The currency started weakening when the Iran war began in late February. The depreciation played out gradually at first until it turned rapid in late May and early June, which was only contained after Bank Indonesia hiked the interest rate outside the scheduled monthly rate decision.
“Exchange rate fluctuations have been greater than anticipated, and combined with soaring transportation costs, purchase prices exceed projected levels, putting pressures on profits,” reads an excerpt from the survey.
