Vietnam hopes to increase exports to Japan after the latter announced a stimulus package to spur consumption though the devaluation of the yen could hit Vietnam's inefficient exporters, analysts said.
The Bank of Japan unleashed the world's most intense burst of monetary stimulus earlier this month, promising to inject US$1.4 trillion into the economy in less than two years.
The broad money supply in the economy will nearly double by the end of 2014, lifting inflation expectations.
Nguyen Van Nam, former head of the Vietnam Trade Research Institute, said the stimulus package would spur production and consumption in Japan, which would benefit Vietnam's exporters.
Japan is Vietnam's third biggest export market after the US and the EU. It earned some $13 billion last year from shipping mainly footwear, garments and textiles, seafood, and farm produce to Japan, according to the Ministry of Trade.
"Many Vietnamese exports cannot be produced in Japan because of high production costs, while others like raw materials are needed for production in that country," Nam said.
"Our garments and textiles, footwear, and seafood will have more opportunities to enter the market."
Japanese often increase spending on garments when a stimulus package is launched, Luong Van Thu, director of a garment firm in Hung Yen Province, said.
The difficulty for Vietnamese firms is that Japanese garment orders are often small, less than 10,000 products per type, yet they have stringent technical requirements.
The Vietnam Textile and Garment Association estimates garment exports to Japan to increase by 18 percent this year to nearly $2.4 billion.
Wood products companies are also eyeing the market after the stimulus was announced.
Nguyen Ton Quyen, general secretary of the Vietnam Timber and Forest Product Association, said exports to Japan have decreased since the earthquake and tsunami catastrophe there in 2011.
Japan was the fourth biggest importer of wood products from Vietnam last year behind the US, EU, and China, down from third place in past years.
The country has also resorted to importing low-quality products at low prices, he said.
"The stimulus package will boost consumption, including of wooden products. The country may rebound to third [place]."
He forecast exports to surge to $750 million this year from $600 million last year.
Japan would also import more high-quality products, he said. "Japan has ordered more wooden furniture and plywood instead of low-quality particle boards."
The yen has tumbled 16 percent in the last six months as Japanese Prime Minister Shinzo Abe, who took office in December, pushed for bold monetary policy to weaken the currency and defeat deflation, Nam said.
"This means prices of imports into Japan will increase. So we could [seek to] step up exports to the market only when we improve our products' quality and reduce their costs."
There will also be fiercer competition from other ASEAN members like Thailand and Indonesia, which would also try to make use of the opportunity to boost exports to Japan, he said.
"We may have opportunities, but whether we can tap them is another issue.
"I don't think it is easy for Vietnamese firms because of their low competitiveness."
Nguyen Huu Thanh, director of seafood company Vietfoods, said the yen devaluation could see Japanese importers ask Vietnamese producers for lower prices.
"Seafood production conditions have not been improved in many years, while advanced technologies are not used, causing high production costs," Thanh said. According to him, it is common for the export prices of shrimp from Vietnam to be higher by more than $2 per kilogram than those from India and Thailand.
Thu, the garment company director, said the yen devaluation is unlikely to have an impact on garment exports to Japan.
"Export volumes may continue increasing, but the value is unlikely to rise."
His firm's exports are expected to rise by some 10 percent this year.
Production costs have increased because of the higher electricity and raw material prices, he added, indicating profits are unlikely to rise.
Nam said the stimulus package would boost economic growth, which would see Japanese firm increase investment abroad.
"This is also an opportunity for Vietnam. But we not grasp it because of our poor business environment and complicated administrative procedures."
Many Japanese firms expanded investment in some ASEAN member countries like Indonesia, Thailand, and Malaysia when they diversified out of China, but they have not done so in Vietnam, he pointed out.
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