Japan Auto Firms’ Foreign Output Damps Yen Effect – Real Time Economics

Toyota Motor Corp. vehicles.
Bloomberg News

If you are wondering why Japan’s exports are languishing despite the yen’s weakness, take a quick look at monthly production data released Thursday by top auto makers.

Domestic output by Toyota Motor Corp. declined 3.7% from a year earlier in July, while its overseas output rose 9.5%. Rival Nissan Motor Co. said its production volume tumbled 22.5% in Japan but rose 4.8% overseas.

Mazda Motor Corp. cut its domestic production by 5.9% but rolled out 69% more vehicles outside of Japan. Bucking the trend was Mitsubishi Motors Corp., whose result was up 1.3% in Japan but was down 3.2% abroad. Hollowing out of Japan’s manufacturing continues unfazed by the yen’s weakness.

For decades, policy makers could count on weakening of the yen to push up exports by making Japanese products cheaper and more competitive overseas.

This time it hasn’t happened. The volume of Japan’s overall exports declined year-on-year in five of the 12 months through July and rose only modestly in the other months, according to the finance ministry.

Weak exports have weighed on growth even as Tokyo took steps to stimulate the economy. And that’s in large part a reflection of the extent to which Japanese auto makers and other companies have moved production offshore, especially China and Southeast Asia.

That’s putting increased pressure on Prime Minister Shinzo Abe to find a domestic way out of the impasse. One hope is that big companies will further raise wages, undergirding consumer spending and feeding back into stronger business investment.

Others are hoping the Bank of Japan will open the spigots of monetary easing again. This would weaken the yen further, and give a kick to exports in the short-term. But with so many factories offshore, such gains are likely to be limited.



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28 August 2014 | 6:20 am – Source: blogs.wsj.com

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