By on February 6, 2013


Waiting for Godot-san

In my report from Toyota’s quarterly results, there was one thing I forgot to mention decided to keep for later. As long as I have been going to these things, and it has been a while, the first question has always been given to a Nikkei reporter. Old Japanese custom, like AP (and recently Reuters) at the Whitehouse. As long as I have been going to these things, the Nikkei reporter always asked when Toyota wants to make a profit and pay taxes at home. That kabuki dance is disguised as “when can we expect positive results on an unconsolidated basis?” The folks in the room need no translation, they roll their eyes and pens, or check their Brakkubely. That’s a Blackberry for you. This time, it was different.

Read the fineprint

Keeping with traditions, the first question went to the Nikkei reporter. Keeping with traditions, the Nikkei reporter asked about Toyota making profit and paying taxes at home reporting positive results on an unconsolidated basis.  Takahiko Ijichi was prepared for the question.

Answering Mike978’s questions about the currency rate

Ijichi begged forgiveness for having had to book  an operating loss of  46.2 billion yen ($500 million) for the last quarter, because this is “where expenses seem to be concentrated”, but for the nine months, Toyota is in the green to the tune of 21.5 billion yen ($230 million) in at home Nipponese operating income. For the full year, Toyota expects 150 billion yen ($1.6 billion)  in at home operating income, of which 140 billion yen  ($1.5 billion) go on account of an  improving exchange rate, Ijichi said, thereby also answering a question from the ranks of the TTAC commentariat.

Now what?

Ijichi had even better news for folks who feign concern about Toyota making profits and paying taxes at home in Japan, as opposed to raking it in in far-away places such as America or Southeast-Asia, only to dump it into a strong yen-lined black hole at home:

“For the first time in five years, we now have a clear prospect of achieving positive operating income on a non-consolidated basis.”

As long as the yen is going into the right direction, that is.  The way it stands,  the Nikkei will have to re-write the kabuki script and come up with another question to be asked at every Toyota press conference.


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19 Comments on “OMG! Toyota Makes Money At Home! What’s The Nikkei Going To Do Now? Also: Toyota Top Management Answers Mike978’s Questions...”

  • avatar

    All that time they were booking a loss in Tokyo- did they pay out dividends? It’s hard to imagine the stockholders would allow this charade to go on at their expense.

    • 0 avatar

      The Japanese operation ran at a loss while the global operation was profitable. The stockholders look at the bottom bottom line.

      • 0 avatar

        I’m sure there isn’t a simple answer for this, but why was the Japanese operation running at a loss in the first place?

      • 0 avatar


        A lot of it has to do with how money is repatriated for multinationals.

        If you’re a Japanese company making money in dollars or euros, you eventually have to convert that money into yen to book it as a profit. If the yen is overvalued, any money you bring back becomes a massive loss. For a company like Toyota, which is financially stable, they can keep money abroad for an extended period of time.

        However, the strong yen means that you can also spend yen at a bargain overseas. In the case of Toyota, they used the money they had in yen, sent it abroad when the yen was strong to expand.

        Let’s also keep in mind that borrowing costs are incredibly cheap in Japan due to the near zero interest rates. Meaning, a lot of companies borrowed money in yen, carry traded that to dollars, and invested overseas for cheap. A Japanese company doing this is spending large amounts of yen and this is booked as a loss.

        Now that the yen is weakening, Toyota can bring some of the money back home. However, there is an expectation that the yen will weaken further, so they’ll wait until an opportune time. Also, Toyota which has around 40% of its production in Japan (which is still high compared to Honda/Nissan), will eventually want to reduce exposure to future currency fluctuations. A weak/strong yen is a double-edged sword.

      • 0 avatar

        “A weak/strong yen is a double-edged sword.”

        The sword is more bad than good. The most costly component of car making comes from the parts and materials. Those costs for domestic production far exceed the exchange rate savings from foreign plant and equipment investments.

        Likewise, interest expense is a relatively small component of the business and the savings don’t offset the associated exchange rate losses.

        The uncertainty over future exchange rates should prompt some sort of exodus, given the associated risks. (Predictions are hard, especially about the future.) But that being said, I suspect that the yen/dollar exchange rate will head back into the 100-105: 1 range, which will ultimately reduce the pressure to act quickly.

      • 0 avatar

        Thanks for the explanation. It’s interesting to see how a multinational has to manage money.

      • 0 avatar


        Except the yen is not overvalued. The Japanese manipulate the yen-dollar exchange. From 2004-2007, the US trade deficit with Japan widened, yet the yen fell from 103 to 123. Granted, the US Federal deficit was falling which would have strengthened the dollar against all currencies, but Japan now owns about as much US debt as China, and their tactics have been laid bare.

        Japan is basically stuck. Their debt-to-GDP ratio is too high for any real quantitative easing. The trade deficit is too high to make US debt-buying effective. The best they can hope for is a stable short-term appreciation of the yen, which includes inflation saber-rattling and conspicuous reshuffling of central bank executives.

        In the long term, they only have one play. Stop subsidizing domestic industry, and let the Japanese factories do what they should have done a decade ago–move production to the US or NAFTA. When the trade deficit closes, the dollar will strengthen against the yen. Japanese corporations will repatriate profits, Japanese liquidity will increase, and they will have to figure out how to build a domestic consumption economy. Germany, thus most currency-union economies, are in a similar situation.

        In defense of the currency manipulators (but not China), they find US energy policy, US per-beneficiary entitlement spending, and US military spending to be economically apocalyptic. The US is addressing energy and military spending slowly. Entitlements are still the elephant in the room. I have sympathy for countries who wish to protect themselves from the rancor of American ‘socialism’. Our unique blend of entitlements more closely resembles heroine than medication.

      • 0 avatar

        @ TWA, I hadn’t thought our entitlements were that bad – frankly that just reinforces my opinon that along with EXTREME cuts in military spending entitlements should be ended altogether or at least they should end with the boomers with Gen Y and Gen X having to foot their own medical costs and retirement.

      • 0 avatar

        @ raph

        “I hadn’t thought our entitlements were that bad”

        Most Americans have no idea, and they tend to propose irrational solutions that mock the severity of the situation. Our government has an uncanny ability to spend extraordinary amounts of money per recipient. For instance, we spend 25% more per welfare recipient than some of the most liberal European countries. We spend 100% more for public healthcare beneficiaries. We allow seniors to draw social security before utilizing their tax-sheltered 401k’s. These inefficiencies lead to lack of funding for education, public health, infrastructure, etc.

        Foreign nations with competent social bureaucracies are incredulous. In places like Sweden, for instance, they have school vouchers, defined contribution retirement, and strict healthcare cost controls. Foreign nations were once content to make a joke at our expense, but now that US dollar devaluation is disrupting the global economy, and the US middle class (their customers) has been gutted by an imbalance in taxation and benefits, they are not amused.

      • 0 avatar

        @TW4: “Except the yen is not overvalued.”

        Apparently, you haven’t been in Japan for a while. Or maybe not at all. If you were, it wasn’t on your own dime or Eurocent. For your enlightenment, we recommend TTAC’s required course before discussing the value of the yen in relationship to major currencies.

        – Go on a trip to Japan. Enjoy buying the ticket, it will be the cheapest part of your trip.
        – On arrival, take a taxi. You will still be jetlagged and think that it was a bit expensive at $35. After a good day’s sleep, you will notice it was $350
        – Keep the phone number of your credit card company ready. You will be calling them a lot.
        – Resist the urge to visit one of the famous Ginza hostess bars. One drink would cost more than the taxi from the airport. They protect foreigners from heart attacks and bankruptcy by not letting them in.
        – Those ling-alound-the-losie sushi bars are all you can eat, but the price is per sushi piece, not for the meal
        – The bullet trains are called bullet trains because your budget will be shot
        – You will return bankrupt, but you will have visited a beautiful country with polite people.
        – Finally, you understand why the Japanese tourists are all over Manhattan. They think it’s a bargain, compared to Tokyo.

  • avatar

    the Nikkei will have to re-write the kabuki script and come up with another question to be asked at every Toyota press conference.

    If you could decide what the question would be, permanently, that they had to ask every time, what would it be, Bertel?

  • avatar

    A title with “Makes Money at Home” in it is probably going to get you a lot of traffic from lazy people that want large incomes for minimal work…so be warned.

    • 0 avatar

      Times are tough. Anything to hunt the elusive click

      • 0 avatar

        Thanks Bertel for the article.
        Does the site make money per view or is it only if we click on the adverts?

      • 0 avatar

        Honestly, I have no idea. Our overlords told me, clicks don’t matter, and to go on doing, what we are doing.

      • 0 avatar

        While I would presume Nikkei’s motives for the question are more nationalistic- to check if Toyota is paying taxes. The question itself isn’t as ridiculous as it seems.

        Its a very good indicator of where capital is flowing. And if Toyota, as a captain of Japanese industry, is brining capital back to the home market, it means that other companies will be doing that as well.

        Just as importantly, a large influx of profit taking from Japanese industry for their domestic division now, versus later, indicates that they don’t expect the yen to fall much further (it may mean that there would be pressure for the yen to start appreciating again). If we see a massive profit in the Japanese division, it means that Toyota is expecting the yen to rise from its current levels and is repatriating its reserves. We don’t see this, meaning Toyota is expecting the yen to fall even further.

  • avatar

    I see the headline has been rewritten and the comments pruned. That’s disappointing, but you gotta do what you gotta do.

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