By on October 19, 2010

Did we mention that there is a steady drumbeat by Japanese companies that openly think about, or deny (with huge qualifications) moving more and more production outside of Japan? Did we imply that a lot of this noisy thinking might be targeted at the current Japanese administration with which the carmakers are as much at odds as a carmaker can be with an administration that comes with full union backing and is full of former union officials? (Oops, never mind.) Anyway, Japanese carmakers are accusing their government of losing the war of the soft currency (led by the U.S. that lets its dollar slide while accusing others of  manipulating their currencies – a good offense beats any defense.) Now the rhetoric is getting less circumspect.

Today, the Yen stands at 81 against the dollar. And Japan is hitting back on all fronts. “Although Washington has long criticized Beijing for not revaluing the yuan quickly enough, many countries now consider the recent sharp fall of the dollar more of a problem than the Chinese currency,” said Yuji Kameoka, chief foreign exchange strategist at the Daiwa Institute of Research to The Nikkei [sub].

The biggest broadside however is fired against Japan’s own government. Under the (for Japan) highly unambiguous headline “Govt Must Stem Carmaker Exodus,” The Nikkei [sub] runs a long editorial that demands (imagine that, in Japan)  that “the Democratic Party of Japan-led government should take immediate steps to slow the exodus of Japanese car production to other countries as the trend bodes ill for Japan’s manufacturing sector.”

The Nikkei praises places like Thailand, because “it offers such attractive inducements as promising corporate-tax exemption for eight years to those producing fuel-efficient models. It has also signed free-trade agreements with other ASEAN members and Australia, making it a strategic location from which to export to these markets.”

“In contrast, Japan is increasingly portrayed as the country least suited to host factories for a number of reasons. Its domestic market has shrunk amid a falling population while its corporate tax rate is among the highest in the world. Its government has signed few free-trade or economic partnership agreements. In addition, it appears to be toughening labor regulations at a time when the yen’s value is rising.”

The Nikkei reminds its own government of other industries that are long gone, and that the car industry may soon follow:

“Japanese carmakers used to be less willing than textile and consumer electronics makers to move production to these countries because manufacturing cars requires much larger capital outlays. But they have begun to do so as demand is growing sharply in emerging economies. Their moves overseas are inevitable and cannot be halted given these circumstances.”

The Nikkei makes (by Japanese standards) very blunt demands:

Additional auto production, equivalent to an aggregate 2 million units or so annually, is forecast to be moved overseas from Japan over the next two to three years. In light of this, the government must immediately intensify its efforts to sign economic partnership agreements and significantly trim the effective corporate tax rate if it wishes to slow the outflow.

The Kan government must be alert to Japanese carmakers’ moves because the fate of the auto industry — the largest component of Japan’s manufacturing sector — has far-reaching implications for the sector as a whole.

The Nikkei has always been the voice of the industry. The message is clear: Do something, or we are out of here. Do nothing, and you will be out of here. In Japan as in  the U.S.A., the Democratic Party is supposed to be the party of jobs, not the party of jobless. Don’t do that job, and you’ll be out of a job. You are worried about high unemployment? We can give you much higher unemployment, if that’s what you want.

Get the latest TTAC e-Newsletter!

6 Comments on “Japanese Automakers To Japanese Government: Want More Jobless? No Problem, We Can Deliver...”


  • avatar
    John Horner

    ” … (led by the U.S. that lets its dollar slide while accusing others of  manipulating their currencies – a good offense beats any defense … “
    “China on Tuesday set the mid-point of the dollar-yuan (USDCNY 6.6405, -0.0101, -0.1519%) exchange rate at 6.6553, higher than Monday’s parity level of 6.6541 yuan. The currency pair is allowed to move up to 0.5% in either direction from that level. In Tuesday’s currency trading, the dollar was changing hands at 6.639 yuan, compared with 6.644 yuan the previous day.”
    http://www.marketwatch.com/story/chinas-yuan-gains-are-likely-limited-this-year-2010-10-19?reflink=MW_news_stmp
    It isn’t a matter of accusation to say that China very actively manages the Yuan-Dollar exchange rate.
     
    Long term, no nation can be a permanent net exporter or net importer of goods and services. Japan is going to have to adjust to this reality, and it is going to be painful. Japan has been a significant net exporter during the entire post-WWII period.

    The sacred trade theories of Adam Smith, et. al. only work when the net value of trade between the various nations is roughly equal. The primary reason for the US Dollar’s ongoing weakness is that the US has long been importing a greater value of goods and services than it has been exporting. The world’s appetite for those excess US dollars isn’t limitless.

  • avatar
    L'avventura

    The ‘Currency Wars’ will be the major topic at the G20 meeting in Seoul next month.
     
    Unless Japan follows China and the US’ lead in massively devaluing their currency (a tactic pioneered by Japan themselves) there is no way for Japan to stop the yens rise.  The current issue of the Economist, where the Currency Wars is the cover story, has Japan’s Yen overvalued based on Purchasing Power Parity (PPP).
     
    The last time we had a global currency war was during the Great Depression, which ended with the US passing the Smoot–Hawley Tariff Act, which tariffed 20,000 foreign goods, and resulted in a tariff on all US goods abroad; international trade came to a halt with a 60% drop in international trade. Currency wars are inheritly unstable, and usually end with trade wars if they are not resolved.
     
    Currently there are talks for a new ‘Plaza Accord’ for China, similar to the deal struck with Japan during the 80s when the world ganged-up on them to revalue their currency.  Trade wars can be effective if you gang-up on a single country. The US Congress is already progressing with the China Tariff Bill.  The Chinese are already screaming ‘hypocrisy’ at the US as they are seen as a major motivator of global competitive devaluation of currency.
     
    So the astronomically high-yen is an temporary one, and the Japanese would be wise to use this strength in overseas expansion and acquisitions.  However, long-term production decisions shouldn’t be made on the yen at current levels, since global currencies should stabilize or Japan themselves will enter this currency war.

  • avatar
    chuckR

    Demographics. Interesting side note – the average age of Japan’s farmers is around 60. Yikes. The Japanese  population is aging and as inevitably happens is therefore dwindling through attrition.
    Meanwhile in the US, we’ve been on a twenty year tulip bulb craze over real estate. A lot of the housing stock is fine for raising families, but as Boomers downsize and the logical purchasers of their homes are fewer in number and already burdened with obscene levels of college debt – all against a backdrop of CRA-induced alt A liar loans and Ninja loans – everyone has to look elsewhere for sustainability and growth in any market category. OTOH, when the Chinese real estate bubble bursts, it ain’t gonna be pretty either.
    As a sixty year old boomer, I look forward to my Buick with design inspired by their primary market in China.
     
     

  • avatar
    Trend-Shifter

    Japan has a double edged Samurai sword to deal with.    They not only need to worry about the Dollar being weak against the Yen, they need to worry about a Chinese Yuan getting weaker because it (is pegged) follows the dollar and a basket of currencies. 
      

  • avatar
    obbop

    Whatever the outcome of currency valuation or trade wars or whatever I remain firm in my believe that USA dumpsters will continue offering the finest dining among the world’s trash receptacle.
    USA!!!!!!!
    We’re Number One!!!!!!!!

  • avatar
    Steven02

    The US imports so much that its currency won’t be that high forever and it currently falling.  Japan does much of the same, but also for many years kept the yen artificially low.  Now China is doing what Japan did.  Go figure, when you can export everything and keep jobs, people are happy.


Back to TopLeave a Reply

You must be logged in to post a comment.

Subscribe without commenting

Recent Comments

New Car Research

Get a Free Dealer Quote

Staff

  • Contributing Writers

  • Jack Baruth, United States
  • Brendan McAleer, Canada
  • Marcelo De Vasconcellos, Brazil
  • Vojta Dobes, Czech Republic
  • Matthias Gasnier, Australia
  • W. Christian 'Mental' Ward, Abu Dhabi
  • Mark Stevenson, Canada
  • Cameron Aubernon, United States
  • J Emerson, United States