Japanese Companies Move Manufacturing Overseas Amdist Yen Co
- 14 years ago
Japanese companies took heed from their painful first "endaka" experience in the 1990s, shifting production offshore and hedging exposure to the strong yen.
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.
Honda and Nissan went even more international, and since 2006 more Japanese cars have been made overseas than at home.
Japan strategist Naomi Fink says exporters now see the best hedge to a strong yen is being where your market is, making it less necessary for intervention in the currency markets.
[Naomi Fink, Japanese Strategist, Bank of Tokyo-Mitsubishi UFJ]:
"There's no real profit to be gained by intervening. Plus, if you look at Japan's multi-nationals, well, they are diversified. A lot of the manufactures have hollowed out, so they're much more capable to deal with the yen strength than they were, for instance, in the late nineties. So I think, for the real economy, yes, the yen strength matters a lot less than it did before, but for perhaps corporate sentiment, it still matters a lot."
A one yen rise in 1999 was estimated to trim recurring profit for most manufacturers by at least 2 percent, while now the impact is seen as less then one percent.
Some such as Panasonic are increasing Chinese production for export to Japan.
Still, Japan's finance minister late Thursday said he was watching foreign exchange moves closely, and excessive moves would hurt the nation's economy.
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.
Honda and Nissan went even more international, and since 2006 more Japanese cars have been made overseas than at home.
Japan strategist Naomi Fink says exporters now see the best hedge to a strong yen is being where your market is, making it less necessary for intervention in the currency markets.
[Naomi Fink, Japanese Strategist, Bank of Tokyo-Mitsubishi UFJ]:
"There's no real profit to be gained by intervening. Plus, if you look at Japan's multi-nationals, well, they are diversified. A lot of the manufactures have hollowed out, so they're much more capable to deal with the yen strength than they were, for instance, in the late nineties. So I think, for the real economy, yes, the yen strength matters a lot less than it did before, but for perhaps corporate sentiment, it still matters a lot."
A one yen rise in 1999 was estimated to trim recurring profit for most manufacturers by at least 2 percent, while now the impact is seen as less then one percent.
Some such as Panasonic are increasing Chinese production for export to Japan.
Still, Japan's finance minister late Thursday said he was watching foreign exchange moves closely, and excessive moves would hurt the nation's economy.