On Friday, the yen hit a 13-year high against the greenback. Year-to-date, the dollar has slumped more than 20% against the Japanese currency.
Economists say the dollar's weakness against the yen is a mixed blessing.
While it makes U.S. exports cheaper, more importantly for consumers, it also makes it more expensive for America to buy products from other countries.
This means retailers who sell Japanese products have to pay more to buy them.
Typically, in a competitive marketplace, merchants will try to absorb any import price increases rather than pass them on to the consumer.
At the same time, a weak economy in the U.S. has already forced retailers to discount heavily this year to offset eroding sales.
Industry watchers say this hasn't left merchants which much more wiggle room to discount further without seriously damaging their bottom line.
"Over the last three to four months, the rate of [retail] price declines has lessened more noticeable," Michael Niemira, chief economist with the International Council of Shopping Centers (ICSC).
This means consumers may not get the juicy holiday deals that they've come to expect, especially on Japanese-made electronics such as TVs and gaming systems.
"If consumers don't get the deals, they won't spend," said Niemira, "If retailers keep discounting, their business will be in serious trouble."
It's a Catch-22 situation that's already hit Sony's business.
Sony Inc (SNE)., the bellwether of Japan's electronics industry, on Thursday blamed the stronger yen and a global economic slowdown for hurting sales of its LCD televisions, compact digital cameras and video cameras.
And Sony's won't be the only company feeling the impact, said Dan Ryan, research director with Global Insight Inc. "Japanese automakers, ship builders, steel producers are struggling too," he said.
But for fans of Nintendo's Wii Fit, which retail analysts expect to be one of the must-have holiday gifts, the dollar weakness offers a silver lining, said Wedbush Morgan Securities Michael Pachter.
The dollar, until recently, was weak against the euro. "So Nintendo was shipping more units of the Wii Fit to Europe than to the U.S. in order to maximize profits," Pachter said.
Now, with the greenback gaining strength versus the euro, he expects Nintendo to up shipments to the U.S. in time for the holidays.
How about deals on Wii Fit?
"No chance," said Pachter. "The profit margin is so slim that retailers just don't make money [on Wii]. There's just no reason to discount."
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