By on April 26, 2013

The retreating yen allowed Honda and Mazda to report bigger profits for the last quarter of their April to March fiscal year. Now the two are faced with a new problem, one that will also be shared by its Japanese peers: Higher costs of badly needed foreign investments.

“We are investing a huge amount, especially in new plants … the reality is that such costs related to growth are eating into our vehicle volume growth,” Honda Executive Vice President Tetsuo Iwamura told Reuters today.

The strong yen made exports expensive, but turned foreign investments into a bargain when they hit the books in Japan. In September 2012, the obscenely strong yen took a turn and  lost about 30 percent of its value compared to its highs.  Suddenly, exports make money, at the price of suddenly expensive investments.

Honda plans 700 billion yen of capital spending in the current financial year, and this money now buys 30 percent less bricks, mortar and assembly lines abroad.  Mazda wants to double capital expenditures to 130 billion yen. Honda and Nissan will announce results in two weeks, but will see themselves faced with the same conundrum.


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8 Comments on “Where Is Currency Manipulation When We Need It: Japanese Complain About A Weak Yen For A Change...”

  • avatar

    It might be the dumb luck kind of thing to guarantee Mazda survives.

  • avatar

    Couldn’t happen to a more deserving country.

    Japan could never have crushed the US industry without the tailwinds of a weak yen (back in the 70s 80’s).

    We have now witnessed Korea pulling the same stunt on Japan.

    Nothing like an artificially weak currency to make your engineers look like geniuses.

  • avatar

    It seems Ben Bernanke has a long-lost cousin in the BOJ. Just when investors started rumoring that the Fed was going to end the easing, Japan opens the doors for those dollars. Long the DOW, even Longer the Nikkei, it looks like the end of this race is still years away.

  • avatar
    Big Al from Oz

    The Japanese should have done this 10-12 years ago. If most of you don’t realise the Japanese economy has beenstagnate for the past 20 years.

    You also don’t want to see the Japanese economy end up with problems, it would create a global depression because of the state of the US/Euro economies.

    If most don’t realise the Japanese industrial culture used to promote ‘job for life’. That wasn’t sustainable and in the mid 90s that has been slowly changing.

    Also, it must be remembered that since the GFC the US has depreciated it’s currency as well. Also the USD was able to buy up to 200 yen at one time.

    The Japanese need to allow for more immigration to expand. It’s population is getting older faster than Europe.

    As for the comment that the Japanese haven’t successfully taken on the US industrial might, what about Nissan/Renault, Toyota, and all of the electronic industries that are set up globally. You have to look at Japan’s current population which is roughly 1/3 of the US and then value it’s investments.

    The Japanese have massive foreign investments. Don’t write them off, not yet.

  • avatar

    Rubbish excuses.
    They could insure the risk by doing FX swaps, buying currency futures or options while yen was historically strong.

    • 0 avatar
      Big Al from Oz

      What significant influence is on a currency’s valuation and how it is indexed.

      It’s status as a reserve currency. The Yen has been a global reserve currency for years.

      Now with the government intervention in devaluing the Yen, what has occured?

      It is sold off. Reducing value.

      Japan needs to boost inflation, it might cost the Japanese public a little but most tradeable Japanese goods will become more attractive and the non-tradeables will only rise marginally.

      But Japan is heavily reliant on imported commodities. What the Japanese have done is good for commodity economies like Australia, Canada, SA, etc.

      I hope it works out as it will benefit the global economy.

  • avatar

    Sorry for my narrow opened eyes, but here is what we see here in Japan.
    I am an employee of foreign financial firm operating in Tokyo.
    At the high peak of JPY, whatever profit we booked was converted to quite a few USD, but transactions was not that high.
    After the series of inflate Japan policies, yes our contribution per each yen are not that high, though the transactions had came multiple times higher with hot stock market.
    What we need is this confidence that the economy is rolling, rather than idling at so so OK status.

    For this article, I just wanted to say FX was at certainly unusual and non sustainable level, that anyone should be ready for the reverse movement.
    Hedging the yen depreciation was fairly easy at the time being, excuses not been prepared doesn’t sound smart.

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