1. Why did the contraction of the U.S. And Japanese economies and the rise in the value of Yen hurt Sony's exports from Japan ?

The strong rise in the value of Yen and the contraction of US economy resulted in a sharp drop in exports from Japan. The decline in exports was primarily due to a lower demand for consumer electronic products in US due to the slowing US economy, as well as the strong rise in the value of Yen relative to US dollars or Euros making the exports more expensive or less affordable for foreign countries. As exporters saw their sales and profits declining, they started cutting operating costs and slashing orders from their suppliers thus creating a ripple effect in the Japanese economy affecting both production and employment. These events and deflation caused a sharp contraction in the Japanese economy where consumers were delaying purchases in hopes that prices would continue to fall. Sony as well as other local companies were hesitant to invest more in technology and or R&D due to these uncertain conditions thus making their exports less competitive relative to competiton.

2. In what other ways has the strong yen affected Sony's bottom line ? What would be effect of a weak Yen?

Exchange rate fluctuations affect Sony’s operating profitability because many of Sony’s products are sold in countries other than the ones in which they were manufactured. The strong appreciation of Yen created a negative impact on Sony's financial results as exports were invoiced in dollars to customers worldwide and production activities such as manufacturing, administrative functions and R&D was mainly concentrated in Japan which resulted in higher production costs due to rise in the value of Yen. A Stronger Yen resulted in net earnings and profits being worth less in yen when translated from US dollar or Euro financial statements. However strong Yen can also