Japan’s economy, the third largest worldwide economy after the U.S. and China, will shrink 0.5 percent this year, the Organization for Economic Cooperation and Development said, mostly because of yen’s rise.
Nikkei reports that an auto industry group official said Monday that the yen’s appreciation could result not in a mere hollowing out of the Japanese car industry , but a full collapse, as the yen is far too strong for companies to endure just by cutting costs.
But now the Japanese bank intervened – Japanese authorities said last Monday’s intervention was prompted by the need to take measures against speculative market moves, with Finance Minister Azumi saying authorities would continue to intervene until they were satisfied, Reuters reports.
Jun Azumi, Japanese finance minister, argued that the continued rise in the yen had been “speculative” and did not reflect the “fundamentals of the economy”.
Japanese companies have become more cautious since the value of the yen has gone up, causing the prices of exports to increase. In 1995, Toyota built 1.3 million vehicles abroad, but by 2009, that number had reached 3.7 million — with production in Japan shrinking to 3.5 million cars.
But now the largest Japanese automaker is considering moving production of the Korean-market 2012 Camry to its plant in Georgetown, Ky. This move would allow Toyota to sidestep costly import taxes, while also spending less to build the car, despite the longer shipping distance.
Akio Toyoda, vice chairman of the Japan Automobile Manufacturers Association, said Monday that Japan’s auto production could collapse with the yen’s continued strength.
“It’s not just a hollowing out, Japan’s production could collapse,” Toyoda said at a joint press conference held by JAMA and other auto-related associations in Japan.
Honda, based in Tokyo, said Oct. 5 it will reduce exports to as little as 10 percent of domestic production, from 34 percent last year.
“Business people, when they make a decision about where to source a new project or where to source new parts or where to source a new car, well, at 76 yen to the dollar it’s very easy to come to the conclusion that Japan is not a good place to source that,” Ghosn said.