The yen’s outrageously low level reached in the past few months has given the Japanese automakers a competitive boost compared with foreign automakers.
Although Ford, GM and Chrysler have reported increased share in the growing domestic market so far this year, the pressure is to be felt over time. If a year ago the dollar bought around 80 yen, now it buys 100. The Bank of Japan said it will continue to invest in Japan in 2014, which means the yen will further decrease. Ken Mayland, president of ClearView Economics, predicts that in about two years the dollar might fetch 120 yen.
“More cheapening of the yen probably gets you over time a more competitive Japanese automaker and that probably puts fire to the feet of domestic producers,” said Mayland, who follows the U.S. auto industry.
A weak yen means lower costs to manufacture parts and vehicles in Japan compared with the US. Nissan, Honda and Toyota could use this advantage to reduce costs and boost market share or invest them into new products. Analysts believe that it could take more than two years for the competitive market to evolve in response to the weak yen because many Japanese vehicles that are sold in the States are built here, cutting costs savings.
“We’re in an economy that gets a little bit stronger each and every month,” said Kurt McNeil, GM’s vice president of U.S. sales operations.