The retreating yen allowed Honda and Mazda to report bigger profits for the last quarter of their April to March fiscal year. Now the two are faced with a new problem, one that will also be shared by its Japanese peers: Higher costs of badly needed foreign investments.
“We are investing a huge amount, especially in new plants … the reality is that such costs related to growth are eating into our vehicle volume growth,” Honda Executive Vice President Tetsuo Iwamura told Reuters today.
The strong yen made exports expensive, but turned foreign investments into a bargain when they hit the books in Japan. In September 2012, the obscenely strong yen took a turn and lost about 30 percent of its value compared to its highs. Suddenly, exports make money, at the price of suddenly expensive investments.
Honda plans 700 billion yen of capital spending in the current financial year, and this money now buys 30 percent less bricks, mortar and assembly lines abroad. Mazda wants to double capital expenditures to 130 billion yen. Honda and Nissan will announce results in two weeks, but will see themselves faced with the same conundrum.