Toyota To Japanese Government: If The Yen Gets Any Stronger, We Go

Bertel Schmitt
by Bertel Schmitt
toyota to japanese government if the yen gets any stronger we go

Despite the riproaring profit numbers, there is trouble in Toyota City. The ever appreciating yen is gobbling up ToMoCo’s profits. Message from Toyota to the Japanese government: “Do something, or we leave.”

Reports The Nikkei [sub]: “In comments that appeared to be aimed at Japanese currency authorities, Satoshi Ozawa, Toyota’s chief financial officer, said the carmaker might move more production outside Japan if profits in the six months to March declined further than expected.”

Translation: Bring the stronger and stronger yen in check, or you’ll be writing unemployment checks instead. Koji Endo, an automotive analyst at Advanced Research Japan already says that Toyota’s carmaking business is losing money, while their financing business is bringing in the bacon.

According to The Nikkei, “the warning, delivered at a quarterly earnings briefing in Friday, will add to pressure on the government over the yen’s ascent toward a 15-year high against the dollar. Akio Toyoda, Toyota’s president, last month called the surge a “big problem” that threatened all of Japanese industry.”

Now before the contingent that hasn’t passed currencies 101 yells “currency manipulation,” here a short primer. There is “currency manipulation,” there is “quantitative easing,” and there is “central bank intervention.” Just like with terrorists and freedom fighters, it depends on which side you are on. Maybe the Japanese should ask Bernanke on how to weaken a currency. He’s quite good at it at the moment. Recently, the stronger yen was a function of the weaker dollar.

Join the conversation
6 of 14 comments
  • L'avventura L'avventura on Nov 06, 2010

    There is very little substance for Toyota's threats, primarily because they have already been carried out. Setting up large scale factories overseas isn't a spontaneous decision, and Toyota already has factory plans spanning to 2015 (eye on Mexico and South East Asia). Who knows where the yen will be by the time the factories are built. Expanding Japanese capacity has long been dead, they'll keep their existing capacity, they'll lower the amount of Japanese temporary workers (which is a large portion of their mfg workforce), but they won't layoff their union workers. Japanese made cars will remain Japanese focused vehicles and cars higher on the value chain. This is how they've been for a long time. The fact is Japan has little they can do with the yen, they can intervene in the currency market, and they too can do a massive round of QE. But none of that will have lasting effects as competitive devaluation means it'll be a race to the bottom as much larger countries like the US and China are moving a lot more money then Japan. All parties lose in the end. And its an expensive move that will ultimately yield very little. The yen will stay strong as the US stays weak, and any currency intervention will not happen until it is discussed at the upcoming G20 meeting in Seoul. In October Japanese firms acquisition of foreign companies have jumped 20%, the Japanese have been buying out billions in foreign assets. The Japanese are finally building up their global supply chain, but this can't continue forever. No country can survive long in a world where every country is jumping over-themselves to devalue their currency. What Toyota, and the rest of Japanese business, really care about isn't the high-yen. They are pushing for the US-led Transpacific Partnership (TPP), which will be a free trade agreement for pacific region as well as the US. This is the biggest FTA in memory and Japanese businesses, via the Keireidan, are pushing this issue HARD. Summary: Currency fluctuations are an inevitability as developing nations grow, weakening the yen will only be a temporary solution for Japan. A weak yen won't keep manufacturing in Japan in the long-term, and Japanese companies are already building up their mfg capabilities globally using the strong yen to protect themselves from regional instabilities. Japanese companies are pushing for more FTA agreements to make this global supply chain run efficiently.

  • AaronH AaronH on Nov 06, 2010

    Print and Spend...Print and Spend............ A race to the inflation bottom...What the political terrorists and their voting parasitic retards don't steal in taxes they will steal in inflation. The global monetary system is just one big counterfeit racket.

  • UnclePete UnclePete on Nov 06, 2010

    Just as an aside, it probably would have been more apropos to use one of those old Toyota chassis U-Haul trucks for the picture!

  • J Sutherland J Sutherland on Nov 07, 2010

    Here in Canada the Liberal government managed to keep the dollar artificially low in the 1990s.It was PM Jean Chretien's strategy to keep Canadian manufacturing humming along.It worked for the rest of the 90s, but now we have grossly inefficient productivity thanks to the huge lag in technology that was allowed to occur during this vote buying safari.