The markets all around the world have celebrated the Japanese Yen's plunge. Or more likely, the great sea of liquidity unleashed by the Bank of Japan (along with the Federal Reserve).
It's understandable that Japanese equities have rallied mightily on the Yen's (FXY) 30%+ plunge in just 6 months. After all, that plunge will ease the burden of Japan's exporters by making their exports more competitive, or alternatively allowing for higher profit margins. So Japan rallying makes sense even if the Japanese market's valuation does not seem incredibly low, with a dividend yield of 1.5% and a price/earnings ratio around 25 (hard to pin down, though).
On the other hand, the implications of a resurgent Japan are not all positive. For some reason, "beggar thy neighbor" policies of devaluation have historically been frowned upon. The gains made by Japanese exporters will be someone else's loss. And at the same time, those Western companies doing brisk business in Japan can expect both a physical contraction of that business, and lower revenues and profits to boot, because of two effects:
First, they will have to raise prices to compensate for the decreased profitability when expressed in foreign currency. This will affect volumes;
And second, even the same level of Yen revenues and profits would translate into lower values of foreign currency.
Victims, export competitors
It's not easy to pin down who will be affected by Japan's greater competitiveness. Generically, anyone facing a Japanese exporter should suffer as the currency move was incredibly strong (30% in a few months).
Japan is a large producer of automobiles. This makes for a first possible set of victims: Ford (F) and General Motors (GM). After all, Toyota, Nissan, Honda, Suzuki and Subaru will all be close to 30% more competitive. Part of it can easily be translated into better pricing and still the Japanese will see better margins.
Japan is also a large producer or electronics. It's home to many manufacturers including Canon, Casio, Fujitsu, Hitachi, Mitsubishi Electric, NEC, Nikon, Panasonic, Sharp, Seiko, Sony (SNE) and Toshiba. These companies compete with hundreds of Western and Oriental companies. Again, Japan's devaluation was so quick that it's likely these companies will be much more competitive - to the detriment of their competitors.
Victims, exporters into Japan
Rather few foreign companies have Japan as a meaningful market for them. Still, some have a portion of their revenues there. For instance, Amazon.com (AMZN) had revenues of $7.8 billion in Japan during 2012. That's 12.8% of Amazon.com's 2012 revenues. Not large, but not zero either. A 30% move on 12.8% can have an overall negative impact of up to 3.8% on Amazon.com's revenues.
While most equity markets celebrated with each Yen implosion, the truth is that the Yen falling has negative implications for many companies in the West. Both companies competing with Japanese exporters, and companies exporting to Japan are affected.
Generally speaking, an environment of competitive devaluation is not necessarily positive for the health of companies outside the zone that's devaluing. And worse still, Japan is likely to be emulated by many of its neighbors trying to maintain competitiveness.
Over time, we should see many companies which are facing Japanese competitors talking about this phenomenon. The cries will call the attention of politicians.