Ghosn To Japan: Do Like Switzerland, Or Become Like Switzerland
For quite some time, Carlos Ghosn had been the booh-leader against the strong Japanese yen. At the sidelines of the Tokyo Motor Show, he launched into his so far strongest worded tirade against the “abnormal” yen. He told the Japanese government to learn from the Swiss, and to basically peg the yen to another currency.
Currently, about half of the Japanese auto production is exported. At a loss or at the very least at no profit. No sane business person will invest into a country with no return, says Ghosn. Investments and jobs will go elsewhere:
What the strong yen does is strengthen the industries of Thailand, China, Mexico, or other emerging export bases. Ghosn had said this for quite some time. The answer was that the Japanese government is helpless, that no amount of quantitative easing seems to be able to stem the strengthening of the yen. This time, Ghosn says what should be done:
If the Japanese government will not listen to the plight of its carmakers, carmakers won’t suffer, Japan will:
“Japanese car makers will survive this. They already are global. What we are saying is this: If there is nothing that is done, don’t blame us for the consequences.”
In other words: Follow the example of Switzerland, which had a similar problem with its rising currency, until it was effectively pegged against the Euro. Or watch the Japanese industry collapse to Swiss size.
Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.
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Say I am Japanese and to make profit I take low interest loan in Japanese bank, exchange it to $$ and deposit it in bank in country with higher interest rate, basically making money from nothing. To solve this paradox - when I exchange $$ back to yens - I have to buy yens back at higher rate. Therefore yen inevitably becomes stronger over time.
Been away for awhile, Japan can't do anything to change it's future (neither can the US or Europe (with the possible exception of Germany, Switzerland, Austria and Netherlands) for that matter, Goto the finance professor web page and watch the parts on LTCM (how to turn $3 billion into a half trillion $ bet that goes bad) and the asian financial crisis of 97' and 98' and it's like a 35mm negative that the US and Europe turned into a freaking IMAX feature, they can devalue and pump money right now, Japan's problem is it started that process 30 years ago and has run it's course, devalue you're people or industry (real industry, not finance or medical that just sucks wealth without creating) or government and in the end it's all three.