Japan Blatantly Copies America, Europe, Imports Cheap Parts From China

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.