The shipbuilding industry is facing a worldwide capacity surplus. Although Japan currently controls about 50% of the world market, it is facing severe competition from the South Koreans. Japanese shipyards are extraordinarily productive, but at current price levels were just about breaking even with an exchange rate of 240 = $1. What are the likely effects on Japanese shipbuilders of a yen appreciation to 180 = $1? The South Korean won has maintained its dollar value.