September 14, 2012

JAMA Comments on the Sustained Strength of the Yen

Akio Toyoda, Chairman, Japan Automobile Manufacturers Association, Inc.

Foreign exchange-rate movements have now seen the yen appreciate to 77 yen to the U.S. dollar and close to 100 yen to the euro, amid continuing credit uncertainty in Europe and the announcement yesterday by the U.S. Federal Reserve of its plan to implement additional quantitative monetary easing measures in the United States.

The steep appreciation of the yen against those major world currencies is not a true representation of the strength of the Japanese economy. Moreover, the yen’s strength presents extremely stiff challenges for the Japanese automobile industry: The yen’s current level far exceeds the capacity of corporate initiatives to effectively control management and labor costs and otherwise deal with the conditions at hand. As a result, Japan’s manufacturing sector is facing increasingly dire prospects—including the threat the present state of affairs poses to employment—even as the sector continues to struggle to overcome the effects of the earthquake and tsunami on March 11 last year.

These concerns are worsened by the apprehension that political and economic trends and developments in Europe and the United States could cause even further appreciation of the yen on foreign exchange markets—a prospect that is creating a sense of crisis among Japan’s automakers.

JAMA strongly favors swift, concerted and highly effective action by the Japanese government and the Bank of Japan to address this unprecedented sustained surge in the value of the yen.