Takao Motoyama, chairman of the Shipbuilders' Association of Japan, has pointed out in the recent local interview that both exchange rate and a trend of steel prices are the main issues regarding an outlook on Japan's shipbuilding industry of 2011.

Japanese shipbuilders have seen almost no new orders since the beginning of the fall last year due to a high yen, and are still struggling in a high yen.

Plus, uncertainty over a forecast of steel prices makes this situation worse.

Mr. Takao said, luckily, since most of the vessels counted up between 2010 and 2012 were contracted based on the yen, the current high yen situation would less affect balancing accounts than the past despite doubled fluctuation risk due to exchange rate and steel prices.

However, the high yen situation takes a heavy toll on new order intake, so the 80 yen level per dollar makes it difficult to create profit.

According to the chairman, 2011 would see a depreciation of yen since this excessively high yen situation has seldom happened in the history of exchange fluctuations.

Miyahara Koji, chairman of the Japanese Shipbuilders' Association, also prospected that the yen would enter into the 90 yen level against dollar around in the summer of the year and gradually approach the 100 yen level.

Regarding the steel prices, Mr. Takao said that shipbuilders and steel suppliers are to be at tug-of-war over the prices from now on.

He added that steel producers are asserting that raw material prices have increased as they always do.

Most of Japan's shipyards are insisting that steel suppliers should adjust the prices, and each of them is individually negotiating the steel prices with suppliers, converting a rise in dollar-based raw material prices into the yen, according to him.

However, a progress of the negotiation so far seems to favor steel producers, he said.

Meanwhile, Mr. Takao remarked that Japan's shipbuilding power based on advanced technology is leading the development of eco-friendly ship types and engines.

In this sense, Japanese yards are facing a new business opportunity, he added.