Nissan (Green) Friday: About Dollars And Yen
Finally, a chance for Ghosn to speak about his favorite topic: The value of the yen. Two years ago in Kyushu, Ghosn said that its valuation against the dollar and other major currencies was a crime against nature, a perversion. Back then, you got 77 yen to the dollar, and I assure you that 76 yen buy next to nothing. Ghosn called a high. The rise of the deviant was arrested. In the following year, the yen turned around, fainthearted first, then, with honest Abe getting behind the wheel in Japan, a dollar now buys 100 yen.
Ghosn does not want to hear talk of a “low “ yen.
“The yen is in neutral territory. The headwinds have been removed. But there are no tailwinds. I don’t want anybody to think that we are getting tailwinds from the yen. Before the financial crisis of 2008, the yen was on average at 110. But 100 yen is better than where we were at 76.”
One yen more to the dollar helps Nissan’s books to the tune of $150 million, but Ghosn warns that it won’t all translate into profits. All Japanese manufacturers, competing with Nissan, gain from a lower yen. “Part of the lower yen goes to the consumer,” says Ghosn. Meaning that it can be invested into lower prices, or better value.
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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It is a very dangerous game they are playing with the Yen. There is a good reason it was so low. The deflatinary pressures put on the yen served a very good purpose. It gave the Japanese government the ability to service their debt by making their currency a safe haven and keeping treasury yields very low. Japan has the highest debt to GDP ratio of any industrialized country (I believe around 2/1) The recent inflationary policies of the Bank of Japan may be great for exports, but it will produce capital flight from Japanese treasuries leading to upward pressure on debt yeilds. I dont know the exact figures but something like a one percentage point rise in treasury yields and Japan will not collect enough in taxes to service its debt. I believe the theory is that increased tax revenue from economic growth would hopefully offset this, but Japan Inc is perilously close to economic disaster it would seem. I am no economist, but that is what I have taken away from the situation.
I don't know the history of the yen vs dollar but I do know my suzuki bike, NEW msrp was like $8700 or something in 05. I think the same bike new in 2011 was $11,600. Up 33% in 6 years. I know my salary hasn't increased 5%/year compounded....