High yen –> hollowing out?

New yen headache hits Honda Accord in U.S.: Ohio factory to do double duty for export units
Hans Greimel, [link:] Automotive News — December 3, 2012 – 12:01 am ET

… the strong Japanese yen threatens to undercut U.S. sales of the Accord in another way….The Ohio factory that makes Accords will soon churn them out for export to places such as Russia and South Korea, possibly restricting product flow to American dealers….Normally those cars would come from Japan, but Honda has suspended Accord output at home so it won’t lose money on exports.

So … the yen’s strength will mean fewer exports from Japan and more from the US. This surely affects suppliers, too: Honda closing capacity has a multiplier effect inside Japan.

Now I’ve argued that from a long-term perspective Japan has too much manufacturing and will need to shift its labor force composition towards services such as healthcare. But while the economy is in the midst of a modest recession and continues to feel the effects of modest deflation … well, not now, can’t we wait a couple more years?
Apparently not.

3 thoughts on “High yen –> hollowing out?

  1. reed

    If the yen stops appreciating against other advanced currencies, which should occur if the BOJ is successful in increasing the inflation rate by monetary easing, some of these factors will be alleviated. Specifically, the BOJ has committed to increase the supply of yen by 5% of GDP this year. Although the IMF is predicting that these efforts will only cause modest inflation, as the BOJ tackles inflation, Japan’s export situation should improve with a relatively cheaper yen

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  2. savas

    I do not if you did any further research, but do you know what the employment implications are for Japan due to the suspended output of Accords domestically. I would assume that this suspension would cause the unemployment numbers to rise in Japan.

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  3. wilburns

    I find it highly ironic that after all the criticism (wrongly) Japanese car companies have received for “stealing” American jobs and killing our exports, we now find ourselves in a situation where they make up a decent part of what little manufactured goods we still export. I remember there was a study that asked Americans what they considered an “imported” car: (a) a car made outside the country (b) a car made by a company that is based outside the country but in a factory based in the US (c) any car made in America is an American car. Personally, I feel that any car made in America is a win.

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