Toyota gains a pricing advantage over U.S. competitors due to the weak yen.
American carmakers are complaining that the Japanese government’s deliberate manipulation of the yen is giving Japan’s carmakers an unfair advantage.
Matt Blunt, president of the American Automotive Policy Council, which represents the interests of General Motors, Ford and Chrysler in Washington, D.C., said Japan is taking unfair advantage of the global trading system after the value of the yen dropped to a new low relative to the U.S. dollar.
“The depth of Japanese currency manipulation has reached a new low,” Blunt said in a statement.
U.S. makers are protesting Japan's efforts to keep the yen low, making cars like the Nissan Altima less expensive.
Blunt made the statement when the yen was on par with the penny: 100 yen equaled one U.S. dollar.
However, the yen weakened beyond 101 per dollar this morning for the first time since April 2009 after a government report showed Japanese investors boosted holdings of overseas bonds, ending the longest streak of sales since January 2010, according to a Bloomberg News report.
Japan’s currency will be at 104 per dollar at year-end, according to the median of more than 50 economist estimates compiled by the news service.
“Japan’s monetary policies aimed at weakening the yen continue to boost Japan’s economy and exports at the expense of its trade partners, especially the United States,” he said.
“With reaching the milestone of 100 yen to the dollar, it’s time for U.S. lawmakers to say they have had enough. Every increase in the yen results in fewer American exports and jobs and is a further reason why Japan should not be included in the Trans-Pacific Partnership.”
“The market setting the currency exchange rate is just really, really important to global free trading rules,” Alan Mulally, Ford’s chief executive officer, said after the automaker’s annual shareholders’ meeting in Wilmington, Del. “Any time you don’t, that’s distorting the market. It’s not good for anybody around the world.”
The decline in the value of the yen to a four-year low also came the same week that Toyota predicted higher profits for current fiscal year that began April 1. The forecast came after the company posted a substantial increase in profits for fiscal 2013.
The yen has fallen 13% this year, the worst performance out of 10 developed-nation currencies tracked by Bloomberg Correlation Weighted Indexes. The British pound is the second-worst performer, with a 2.5% slide. The euro increased 1.8%, while the Canadian dollar climbed 1.4%, according to Bloomberg.
Morgan Stanley estimates the currency boost at $1,500 per car for Toyota. Japanese automakers will probably use the weaker yen to add better components or accessories. However, the impact has been blunted somewhat by the changes in the industry over the past half decade.
(Toyota doubled profits in Q1 with help from weak yen. Click Here to read more.)
Japanese automakers now build more vehicles in the U.S. not only to blunt the cost of rise in the value of the yen, but also to shorten supply lines that had been taxed by rising shipping costs and natural disasters in Asia.
Nonetheless, Japan’s Big Three, Toyota, Nissan and Honda, still import more than 1 million vehicles annually into the U.S. and in theory at least all of those vehicles are now less expensive.
(Click Here to read about Nissan cutting prices on seven U.S. models.)
The first place the impact of the falling yen may be felt is likely to be in the mid-sized car segment where Toyota, Honda, Nissan, Ford, GM, Volkswagen and Hyundai/Kia are battling for customers.
The crossover, compact and sub-compact segments are likely to see new price pressures if the Japanese government and central bank continue to exert downward pressure on the yen.