Japan’s auto industry is going back to tried-and-tested plays to ease the pain of yen strength as Toyota Motor Corp.’s prediction for a 37-percent plunge in earnings threatens to end the era of record profits.
A resurgent yen wiped almost half a trillion yen ($5 billion) off the operating income of Japan’s seven automakers in the first quarter, with Toyota alone taking a 235 billion yen hit. The industry, which accounts for about one in 10 jobs in Japan, is responding by cutting costs, dialing back expenses and turning to Prime Minister Shinzo Abe for help.
Japan’s automaker association asked Abe’s reshuffled cabinet this week to take action in response to seesawing foreign exchange markets, Britain’s decision to leave the European Union and slowdowns in emerging markets. Without the tailwinds of a weak yen boosting export profits, cost-cutting measures by Toyota such as shutting down elevators, bathroom hand driers and air conditioning may prove futile.
“Carmakers including Toyota, Nissan and Honda are the driving force for Japan’s GDP,” Koji Endo, a Tokyo-based analyst with SBI Securities Co., said by phone. “The Japanese economy depends on the car industry a lot, so they have strong bargaining power with the Abe administration.”