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Straight from the Wall Street Journal -

“Even as the electronics industry wages a price war in the U.S. to drum up sales, Sony Corp. is heading in a different direction in Europe. In an industry where prices for televisions and digital cameras have consistently declined, Sony says it will next month start raising prices of a range of products sold in Europe. The reason: It needs to recoup some of its foreign-exchange losses after the yen has soared more than 25% against the euro since July. A stronger yen cuts into overseas revenue when brought back as yen.

The price increase, likely to be followed by other Japanese makers, shows how vulnerable Japanese companies still are to sharp currency fluctuations. Making matters worse, some of their fiercest competitors, South Korea’s Samsung Electronics Inc. and LG Electronics Inc., have seen the Korean won fall 30% in value against the dollar and 25% against the euro this year. The companies haven’t announced price changes in Europe. But at the very least, the weak won allows the Korean rivals to hold prices flat in Europe while absorbing some of the price cuts in North America.

A price increase could also slow Europe’s emergence in recent years as a critical market for Japanese electronics makers, which already face stagnating sales at home and cutthroat pricing in North America. In the past few years, the euro’s strength against the yen and a surge in consumer spending from emerging markets in Eastern Europe helped spur revenue growth.

European consumers, who tend to put an emphasis on design, have been more willing to pay a premium for high-end products compared with U.S. consumers.

Last year, for the first time in the company’s 62-year history, Europe became the largest consumer of Sony products, surpassing the domestic market and even the U.S. It is now targeting European consumers by creating new products specifically for the region, such as the Bravia EX1 LCD television, which has a built-in high-speed wireless link to allow it to double as a large-screen digital picture frame.

Earnings revisions from the biggest names in Japan’s electronics industry have been rolling in over the past few weeks, and all have placed some blame on the yen’s rise. Toshiba Corp. lowered its earnings forecast in September, followed by Canon Inc., Hitachi Corp. and Panasonic. Sony, which already issued a profit warning in October, said last week it would shutter as many as six factories and cut its electronics division work force by 16,000 workers.

Even though most Japanese companies hedge a lot of their yen foreign-currency exposure and lock in an exchange rate at three-month intervals, a sudden move by the yen often wreaks havoc on an exporter’s earnings estimates.

Sony has plants in Slovakia, Spain, Hungary and Wales to supply the European market, but many of its parts come from outside the euro zone, leaving the company’s production costs vulnerable to currency shifts.