By on September 28, 2011

If anyone again mentions that the Japanese manipulate their currency to get an unfair advantage in international markets, then I will strangle him.  Or make him pay my Tokyo restaurant, taxi, and even subway bills in converted dollars. Strangling would be the more humane punishment.

Nissan CEO Carlos Ghosn has an even more painful option in store: He’ll leave the island. “If the Japanese government wants to really safeguard and develop employment, then something has to be done,” Ghosn told Reuters editors Paul Ingrassia and Kevin Krolicki in an interview in New York.

Ghosn is on a worldwide crusade against the “abnormal” yen. Last week in Kyushu, Ghosn announced a rethinking of Nissan’s production presence in Japan if the yen hasn’t returned to an (unspecified) normalcy six months from now. A week later in New York, Ghosn said:

“We have been talking about this as an industry for a while. Unfortunately, it keeps happening. It looks like whatever effort has been done so far has not delivered results.”

“We have to make investment decisions all the time. This is one of the factors that we have to consider when we look at a project and say are we going to do it in Japan or are we going to do it in another country?”

The yen doesn’t seem to listen. A dollar buys you 76 yen, and 76 yen will buy you next to nothing in Japan. Attempts to bring down the yen have failed.

Investment decisions are made on a long-term basis. It appears as if the decisions have already been made at Nissan, and Ghosn is simply softening the blow that is soon to come.

Already, Nissan and other Japanese manufacturers are growing their capacity abroad with no expansion at home. Percentage-wise, the Japanese capacity shrinks. Nissan had made commitments to keep Japanese production at 1 million units. Toyota had committed to 3 million units. Even that is no longer sacred. Both have made noises that either the yen drops or their Japanese production will. At some point, moving production abroad will also mean that engineering follows. Engineering without attendant production is like surgery without a body.



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9 Comments on “Ghosn On Crusade Against Japanese Yen...”

  • avatar

    So…market forces set the price of the Yen. Japan has not,and will not, manipulate thier currency.

    Okay, so what does Ghosn feel he will accomplish with his “worldwide crusade”?

    Will Japan have a sudden awakening?

  • avatar

    You’ve hit upon a crucial question, actually. They need changes right away, but I don’t think there will be enough consensus on how to change for that to happen.

    I wonder if the monetary authorities will change their mind and try inflation if the manufacturing base is severely threatened.

  • avatar

    The reality was that the yen was expected to weaken against the dollar and the euro by the en of 2011. Reason being that QE2 was expected to end, and sovereign debt crisis in Europe was expected to be resolved by now, meaning that there would have been a tightening of monetary supply of the two major currencies.

    Obviously this has not happened. American politics have created a crisis by the debt debate, QE3 is being discussed, and European politics has made the debt crisis much worse than it should have been.

    The yen won’t/can’t weaken unless Japan dramatically expands its monetary supply or the US/Europe fixes its economic problems. At this point, its pissing against the wind. Currency intervention has proved to have little impact for large amount of cost, and that costs is better utilized to repairing quake/tsunami damaged regions. Even China is seeing the futility off a weakened yuan relative to the dollar as the floating peg is allowed to near 6.4 $/yuan range.

    Ghosn is merely using this as an excuse to cut Japanese jobs. Its a red herring, a diversion. This is no warning. Everybody knows, especially the Japanese government, the dangers of a strong yen, but the bigger issue is that dramatically increasing monetary supply for the sake of temporarily weakening the yen is really not an option.

  • avatar

    “How many times do I have to show you people how to milk our new Maxima? Watch my hands! Leetle, itty, bitty finger pulls! Stop grabbing at it like an old farm hand!”

  • avatar

    Carlos looks like a crazy bastard…Maybe he actually is…He is one scary looking dude!

  • avatar
    DC Bruce

    Given that government intervention in currency markets has only a limited and short-term prospect of success, I’m waiting to hear what policy changes Mr. Ghosn would have the Japanese government implement. Are there things that the government could do to increase domestic demand in Japan (which would tend to put downward pressure on the currency)? Are there barriers to imports?

    Obviously, the problem is exacerbated by the Fed’s continuing program to drive US interest rates down, by the sluggish US economy and by the troubles with the Euro.

    Then there’s China . . . hello?

  • avatar

    Ok, I’ll bite.

    The Japanese used to manipulate their currency – Carlos wants them to do it again.

    • 0 avatar

      Ok, I’ll bite too.

      The hypocrisy here is that much of the currency ‘manipulation’ that the US accused Japan of is exactly what the US is doing now. Bernanke deliberately tried to coin the US version of quantitative easing, ‘credit easing’, to distance itself from Japan’s policy, but it hasn’t stuck for a reason. Because its exactly the same.

  • avatar

    Is he describing the wonders of French cuisine with those gestures?

    Anyhoo, he better pray China starts floating her currency so the desperate carry trade whores will have somewhere more stable to park their money. And increase the purchasing power of the mighty dragon. To the detriment of the West. ;)

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