By on August 14, 2012


The Japanese car industry found a way to soften the impact of the crushingly high yen on its books. It does what U.S. and European automakers have practiced for a long time: Import low-cost parts from abroad. It is a stop-gap measure while large parts of the Japanese car industry is packing.

After studying recent trade statistics, The Nikkei [sub] learned that Japanese “parts imports rose to approximately 324,000 tons in the first six months of the current calendar year, the highest level recorded since 1998.”

The abnormally strong yen quickly turns the export of cars from Japan into a loss-making endeavor. By the same token, it makes imports from softer currency markets cheaper. Not surprisingly, parts imports from China to Japan rose 40 percent in the first six months, The Nikkei says.

Nissan is leading this drive, the Nikkei says:

“A number of Nissan Motor Co. factories throughout Kyushu now buy more parts from South Korea and China than they did in the past. About 40 percent of the parts for Nissan Shatai Kyushu Co.’s new NV350 Caravan, launched in June, were procured from overseas markets, for example.”

Map, drawn last year in September

Well, if The Nikkei would have paid attention last September at the trip to that same Nissan plant in Kyushu, this development could have been anticipated, now it needs to be ex post facto reported.

There, Nissan CEO Carlos Ghosn announced that “as a first step to ward off high yen denominated costs, Nissan will increasingly import parts and components from South Korea and China.” Ghosn also gently put his finger on a possible pitfall of the operation:

“Importing from China does not automatically mean that we stop buying from our Japanese suppliers. Many Japanese companies have plants in China. What is better than Japanese supplier? It is Japanese suppliers with the benefit of competitive production.”

In this case, the domestic supplier probably would like to pocket the new exchange rate windfall, if he not already has outsourced most of the work to a subsidiary in China. Interesting discussions with purchasing will ensue. Also, let’s not forget that the big automakers  have their own or affiliated parts makers in low cost countries.

However, widgets are only a, well, part of the total cost, and that still is in the grossly overvalued yen. Let’s recall what Ghosn said last September:

“Given the choice, we stay in Japan, This is our home, this is our base. If we go, then because we are forced out. If in six months down the road we are still in this situation, then this will provoke a rethinking of our industrial strategy. Personally, I don’t think this will be the case – but  I may be wrong.”

He was wrong, and he knew it. On September  20, 2011, a dollar bought 76 yen. Six months late, a greenback bought 83 of the Japanese currency. Now, nearly a year later, a dollar buys only 78 yen.

Ghosn does not make idle threats. On Saturday, Derek reported that “Nissan is leading the exodus from Japan.” Ghosn is not leaving by himself. Toyota opens factories everywhere, except in Japan. A few days ago, we reported that even the Japanese government is helping its hard hit companies with the moving abroad expenses.

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23 Comments on “Japan Blatantly Copies America, Europe, Imports Cheap Parts From China...”

  • avatar

    Japan blatantly copying???

    I can’t believe this…

    • 0 avatar

      Japan copies but (usually) improves.

      Korea copies and maintains.

      China Copies and cheapens.

      As explained to me by an Asian engineer

      • 0 avatar

        Then I wouldn’t call this person an engineer. A technician maybe.

        An engineer needs to understand that every piece of engineering is about delivering the most product for the given budget.

        In the case of low price Chinese products in Walmart, it’s the buyers unwilling to increase their budgets. With the given budget set in stone, Chinese manufatures provided the best engineering possible and beat their competitors. If you think a $10 kettle made in China is “cheap”, build us a $10 kettle that’s of higher quality and get our business. If you can’t, you might as well shut up and admire the best $10 kettle offered by someone else.

      • 0 avatar

        Actually the engineer understands:

        “Better, Faster, Cheaper; Pick any two.”

  • avatar

    I hate those stupid plastic fasteners.

    • 0 avatar

      I logged in to say the same thing. ARGH!

    • 0 avatar

      Amen. Those are from the devil hisself.

    • 0 avatar

      Those plastic fasteners make putting stuff together easy. They don’t work loose, like screws, and cause interior rattles. The problem is that they are generally one time use and can’t be reused if you remove them. This wouldn’t be a such a problem if they were available from the local parts store for cheap. The reality is that there are so many types and sizes, that parts stores can’t carry them all, which makes any type of interior repair extremely difficult.

      • 0 avatar

        And if you got to the dealership to buy them, they’ll rape you with something like $3.00 a piece. I’d be willing to bet the manufacturers buy them for $3.00 a barrel.

      • 0 avatar

        So don’t be cheap. Spend the whopping $30 or whatever so you replace the one-use fasteners. It’s all part of doing a job properly.

      • 0 avatar

        Do you like overpaying for things?

        If you have to make a simple repair like say taking off a door panel, I don’t like shelling out $30.00 for 5 cents worth of plastic fasteners just to put a simple panel back in its place.

  • avatar

    Wow. Local auto industry sends sourcing offshore because locals aren’t competitive. Where have I heard this before?!

    • 0 avatar

      Funny thing about all manufacturers; they go where the parts and suppliers come cheaper.

      That could be just one reason why US domestic manufacturers find Mexico such an irresistible place to set up production, as do the foreigners and transplants.

      But as far as China is concerned, it was the US that helped China get into the WTO, and it was the US that became China’s best trading partner, albeit with China exporting more of its goods to the US than importing US-made goods for China-consumption. It’s called a trade imbalance.

      Japan knows a good thing when it sees it, and even these cheap parts from China can mean significant savings for the manufacturers in Japan.

      The name of the game is to stay in business, even if it means outsourcing. Now, where have I heard THAT before?

      • 0 avatar

        What’s wrong that? Our family outsourced our food supply roughly 80 years ago.

        Most people here don’t grow their own food, don’t build their own house, don’t make their own clothing. It’s the same on a national level. Japan doesn’t have its own crude oil supply and has to import. China doesn’t build its own commercial jets and has to buy from Boeing or Airbus. If free trade is so annoying to you, you might as well move to North Korea.

      • 0 avatar

        wsn, did I say this was a bad thing? I’m all for it! Outsourcing has been great for most Americans. It made things affordable from where otherwise they could not afford it.

        Outsourcing also focused on the actual worth of something that could be produced cheaper elsewhere and it drove the overpriced sources that could not compete out of business.

        Some people lost their jobs, true. But things evolve. We’re no longer the same America we were in the 19th century. We evolved. Our industries evolved. We all have a better standard of living as a result of that. For the most part, change is good.

        I’m somewhat more reserved about Obama’s hopey-changey thing though, since I’m not better off now than I was during Bush and Clinton.

        Japan is no different. If something can be made cheaper elsewhere, I say go for it!

      • 0 avatar

        I simply see this as further decontenting of Japanese products.

        I’ve heard many comments to the effect of “I drove my $1,000 Camry 500,000K with only a water pump change and a rebuilt alternator” and the truth is I could believe them when they drive a model built by Japanese workers using parts sourced from Japanese suppliers.

        Maybe this good fortune with Japanese products will continue using Chinese parts and various plants for assembly, but I won’t be holding my breath.

      • 0 avatar

        28-Cars-Later, I agree!

        the vehicles that were at one time Japan-built and now built elsewhere are just not of the same level of quality (or value) as they once were.

        At the risk of boring the self-appointed industry experts, our 2008 Japan-built Highlander is the perfect example. It has been problem-free in over 85K miles. All I did was change the oil, filters and rubber whenever it needed changing.

        Now compare that to my wife’s sisters’ US-built Highlanders with all their recalls and warranty issues………

      • 0 avatar

        ……I’m all for it! Outsourcing has been great for most Americans. It made things affordable from where otherwise they could not afford it……

        Yeah, its been great for that 50 year old dad who’s income has been eliminated and who got to retrain for an IT job that was then outsourced to India. Outsourcing gives with one hand and takes with another. With certainty you would not be buying $40 DVD players if they had to be made in the US or for Japan for that matter. So, many consumer goods did in fact become cheaper. But when that model expands too much the backlash becomes a detriment. I don’t care that somebody chooses to buy a Mercedes. But when I go to a store and commodity building blocks are being made abroad, all that does is drive thousands out of work and now there are less and less people to buy goods. Same thing with services. Fat cat companies that outsource simple things like call centers when they rake in record profits rot out the core of the country they are making their money from. Eventually, as the middle class begins to collapse those profits will have to come from someplace else. So called comparative advantage only works when there is reciprocity in the marketplace If one country trades planes and the other microprocessors, that’s a fair deal. But if one tries to offer good wages, fair treatment, health care and responsible treatment of the planet, people and resources and the other only offers cheap prices, there is no advantage for one side. That is just a recipe for destroying the American standard of living. Right now that is already under way. Wealth in America is ever more concentrated in the hands of the few. A whole generation is facing a near certainty of living worse that the previous generation. The bright side is there are more wealthy folks than there were before, but the equation is grossly lopsided. America’s slide from preeminence is well under way. And since you brought politics directly into it, that vice presidential candidate has a blueprint to accelerate this process tenfold. It is such a shame that the folks who made their money in this country see no problem in not returning anything back to those who helped make their wealth possible.

      • 0 avatar

        golden2husky, I truly enjoy reading your comments. Concise, to the point and well developed. Your thoughts exactly. I have no difficulty understanding exactly what you mean to communicate.

        But we all must take in consideration that it is America’s national economic and tax policies that drive business in America, and the direct or indirect outsourcing of labor, parts and jobs.

        Without getting political and laying the blame on any one, America’s government enacted legislation that made it more advantageous to have things made outside of America, and NAFTA pretty much was the icing on the cake for free trade across our borders and with favorite nations.

        And when it comes to cars and trucks, parts and labor, someone once wrote, “Why would you choose to buy a domestic product when there is better to be had?” That’s why them fur’ners are doing so well in America!

        I believe the same fellow also wrote, “Why would you reward the domestic manufacturers for the crap they made for decades by buying another vehicle from them?” Many Americans joined the mass exodus and voted with their feet AND their wallet.

        But what really got my attention was, “If you got ptomaine poisoning at a restaurant where you ate, why would you want to eat there again?” That applies to any brand you had a bad ownership experience with.

        I remember those quotes exactly because I copied them from the comments the person made and saved them in my document for quotable quotes. But I don’t remember who wrote them or where I extracted them from. It was a long time ago.

        So, my point is that if we Americans keep electing our representatives who enact legislation that makes it more advantageous for American businesses to outsource to elsewhere while at the same time slapping a hefty tax on businesses who choose to stay here, than we as a nation get exactly what we voted for and what we deserve. We are the ones to blame for the outsourcing. Everyone of us who voted!

        And as far as the upcoming national election is concerned, as an Independent I am open-minded enough to understand that it all depends on the view of the voters who choose to turn out on election day, who will win the election.

        Those who benefit from Obama’s policies will want to continue them, and those who pay for Obama’s policies will want him replaced.

        But I don’t see Romney as a viable candidate to replace Obama because Romney, too, has issues that rub many voters the wrong way.

        That said, no self-respecting Independent is going to vote for either Obama or Romney because one is as bad as the other. Just ask the folks paying the taxes in Massachusetts. My wife’s mom is from there and still has family there.

        In a nutshell, the election and America’s national economic policy will be determined by the people who actually care enough to vote in the upcoming election, and it all depends if they are collecting the welfare and bennies or paying for them so others can enjoy them.

        IMO, Obama has his re-election in the bag. No majority will form behind Romney and we should brace ourselves for four more years of Obama, even though the only thing Obama cares about is keeping his own job.

        We should not condemn businesses, here or in Japan, for choosing to outsource work because it is more advantageous to do so. Businesses have an obligation to their share holders to make money for them.

        An employee is just an employee. For every one on the payroll there are many more who want to be. If an employee wants a stake in the business, let them buy stock and vote. A business has no obligation to an employee other than a fair day’s pay for a fair day’s work, in a safe environment. Laws have seen to that.

        And aren’t Ford and GM, the only American-owned automakers left, doing the same thing that Japan-auto is now doing? If Ford and GM cared about their American employees, why do they outsource so much work to Canada and Mexico?

      • 0 avatar

        I enjoy your comments as well, and have respect for them even if they often run counter to mine. I, too, and an Independent, though I certainly consider myself a bit left of center. I do feel that Romney will fairly easily take the election. Certainly the margin will be well beyond hanging chad/butterfly ballot close. Why? Because most voters will assume that everything they need to know about Obama they already know. In my opinion he took a gamble that voters would not fuss about a massive deficit if he could crow that the economy was on a solid recovery path. And had that happened he would have easily pulled in a second term. But he spent so much energy on his healthcare plan (his mandate) that he lost key opportunities to work on a better economic plan, one that was more than pump priming. He should have realized that so many people lost so much wealth – real or imagined – and that with vast losses in real estate values, that it would take years to regain the “lost” dollars. Since consumer spending drives 70% of economic activity, there would be no recovery without rejuvenating consumer spending. But people are not going to spend without a good job and confidence – two things that are still lacking. And with so many folks looking for work, there is a constant downward pressure on wages, which in turn keeps confidence down, and spending down. Romney can point to these things and say he will do better. To date he has not laid out any read detail about what his plan will be, and he is likely to try to avoid doing for as long as he can. His choice of VP *might* foreshadow what is on his mind. Time will tell…

  • avatar
    Nitro Cory

    I generally understand references to exchange rates. But I keep seeing these stories about Japanese auto manufacturing and they keep not making sense to me. The yen is low compared to the yuan and the dollar. By what logic is that “crushingly high”? Relative to where it used to be? It remains low compared to other currencies, isn’t that the primary measure? Can someone explain it like I’m a 4 year old?

    • 0 avatar

      Sure. Imagine Japan as John and Europe as Erik and The Us as Usama.

      One day John goes to Erik and trades his 10 potatoes for 1 of Erik’s Rhubarbs, on the same day John trades 11 of his potatoes for 1 of Usama’s figs. This same thing goes on every day for years. Nominally you could say that potatoes are cheap (as the yen) and that Rhubarbs and apples are expensive (like dollars and Euros) and that might be true, but in reality that’s just the going rate for apples, figs and rhubarb.

      One day John goes to deal with Usama, this time John wants 2 figs for 10 potatoes and Usama – grunting – agrees. Later the same day John meets Erik and they trade 10 potatoes to two rhubarbs. This is all down to a growing demand for potatoes making potatoes more expensive. Nominally you could argue that potatoes are still cheap as chips (yes bad pun intended), but in reality potatoes are twice as expensive as the used to be, making other foods (such as Rhubarb and Figs) relatively cheaper.
      That was pretty much the 4 year old explanation for it.

      In reality it doesn’t matter if 1 fig/dollar equals 10 or 10 000 potatoes/yen, what does mater is what 1 fig use to buy in potatoes. Now this explanation is heavily flawed as potatoes are an actual good, they can provide nourishment as they are, whereas Money has no value in itself. If I would have explained it to a six year old i would have opted for Baseball cards as they actually has very little actual value (less then a cent in paper and inc).

      I hope that helps, ;-)

      TL;DR what numbers the dollar vs. yen shows now is pretty much meaningless unless you know what a dollar and a yen will buy and what it used to be able to buy.

  • avatar

    The Japanese used up all of thier QE options in the 90’s, we just started using ours (it won’t end well either) in 2008, Japan has no ability to manipulate the Yen anymore.

    As the Yes decrease in value to $, that means every $ earned in US converts into less Yes in Japan (its the opposite that the Japanese companies want)

    Worse we used QE to keep the financial institutions alive, Japan used it to keep everything alive (sometimes referred to as the land of zombies, companies that have been bankrupt for years, but the banks just lend more money to pay the princple and interest). We let the Steel industry die, Japan wasn’t willing to let anything die, there’s a price to pay and they’re paying it now, they have no control of currency valuation to make thier goods artificially more competitive (same as Euro countries, they can’t print to depredciate currency).

    The G8 (+) Switzerland and Norway need to come up with a number and apply a encompassing tariff on China to make it currency value what it should be. That would begin to correct alot of problems.

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