Ghosn To Japan: Do Like Switzerland, Or Become Like Switzerland

by Bertel Schmitt

December 4th, 2011 2:18 PM

ghosn to japan do like switzerland or become like switzerland

For quite some time, Carlos Ghosn had been the booh-leader against the strong Japanese yen. At the sidelines of the Tokyo Motor Show, he launched into his so far strongest worded tirade against the “abnormal” yen. He told the Japanese government to learn from the Swiss, and to basically peg the yen to another currency.

Currently, about half of the Japanese auto production is exported. At a loss or at the very least at no profit. No sane business person will invest into a country with no return, says Ghosn. Investments and jobs will go elsewhere:

“The main problem we are facing today is the uncompetitive value of the yen. The yen is not so much a problem for the Japanese carmakers. The yen is a problem for Japan. Japanese makers are moving production little by little outside of Japan. The car industry employs between four and five million people in Japan, and more than half of the industry works for export. If the car industry goes, a substantial part of employment is going to go with it.”

What the strong yen does is strengthen the industries of Thailand, China, Mexico, or other emerging export bases. Ghosn had said this for quite some time. The answer was that the Japanese government is helpless, that no amount of quantitative easing seems to be able to stem the strengthening of the yen. This time, Ghosn says what should be done:

“People say there is no solution. Wrong! Wrong! Look what the Swiss have done. Switzerland is a great benchmark of how a small country has drawn a line in the sand. They said: Enough is enough, we will not allow the Swiss Franc to rise above a certain level against the Euro. Everybody laughed, but they stuck with it. What we are encouraging is that the government of Japan takes the same stance. If Japan draws a line in the sand, the market will listen.”

If the Japanese government will not listen to the plight of its carmakers, carmakers won’t suffer, Japan will:

“Japanese car makers will survive this. They already are global. What we are saying is this: If there is nothing that is done, don’t blame us for the consequences.”

In other words: Follow the example of Switzerland, which had a similar problem with its rising currency, until it was effectively pegged against the Euro. Or watch the Japanese industry collapse to Swiss size.

#BertelSchmitt #Ghosn #Japan #Nissan #Yen

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2 of 33 comments

Inside Looking Out on Dec 04, 2011

Say I am Japanese and to make profit I take low interest loan in Japanese bank, exchange it to $$ and deposit it in bank in country with higher interest rate, basically making money from nothing. To solve this paradox - when I exchange $$ back to yens - I have to buy yens back at higher rate. Therefore yen inevitably becomes stronger over time.

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Rnc on Dec 06, 2011

Been away for awhile, Japan can't do anything to change it's future (neither can the US or Europe (with the possible exception of Germany, Switzerland, Austria and Netherlands) for that matter, Goto the finance professor web page and watch the parts on LTCM (how to turn $3 billion into a half trillion $ bet that goes bad) and the asian financial crisis of 97' and 98' and it's like a 35mm negative that the US and Europe turned into a freaking IMAX feature, they can devalue and pump money right now, Japan's problem is it started that process 30 years ago and has run it's course, devalue you're people or industry (real industry, not finance or medical that just sucks wealth without creating) or government and in the end it's all three.

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