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High-growth markets key to Japan's business recovery

Publication Date : 06-08-2012

 

Despite the increasingly severe export environment because of the yen's soaring exchange rates, the passenger car output of Japanese automakers overseas is booming.

A key to surviving intense global competition lies in capturing high-growth markets such as those of emerging countries.

Foreign output of passenger cars by the nation's eight major carmakers in the first half of 2012 stood at 7.95 million units, an increase of 28 percent from the same period a year before. Toyota Motor Corp., Nissan Motor Co. and Honda Motor Co. all posted record-high production abroad.

As the eight automakers have boosted production in North America, China and Mexico, for instance, their global marketing activities have taken wing, as the sales increase has provided further impetus to an expansion of production.

Toyota surpassed General Motors Corp. of the United States in global sales in the January-June period, regaining the world's top ranking for the first time in two years. Toyota's focus on high-growth markets as a marketing strategy apparently has proved successful.

Export competitiveness waning

While Japanese automakers are strengthening their foreign output, their export competitiveness is declining because of the historically high appreciation of the yen.

It is natural for automakers to avoid foreign exchange risks by ramping up overseas production so as not to lose out to rivals from the United States, Europe and elsewhere.

Many of the Japanese automakers' assumed exchange rates for the period are about 80 yen to the dollar and 105 yen to the euro. The yen's rates recently have exceeded these assumptions, however, threatening to further squeeze the profitability of the automakers.

In an effort to deal with the situation, Toyota will start operating a new factory in Brazil in the near future.

Others, including Nissan and Mitsubishi Motors Corp., have also been expanding overseas production or shifting domestic production operations abroad.

Automakers are certain to accelerate their business priorities to foreign markets by, for example, marketing low-priced vehicles in emerging markets in Asia and other regions.

The main problem to boosting overseas production and marketing operations is the effect it will have on the hollowing-out of the domestic industry.

The auto industry comprises broad sectors of businesses, including a wide range of parts manufacturers.

Extreme caution must be exercised over the danger that the hollowing-out of the domestic market could lead to a large drop in the workforce, which in turn would deal a heavy blow to the nation's snail-like economic recovery.

Market intervention needed

Toyota President Akio Toyoda deserves praise for stressing his resolve to "defend our domestic production level of 3 million vehicles a year at all costs."

All carmakers should make efforts to keep their domestic production bases intact through such means as maintaining key domestic factories for the production of mainstay vehicles and research and development arms.

The problems facing the nation's manufacturers are not limited to automakers. The situation is equally serious for consumer electronics companies such as Sony Corp. and Sharp Corp., which have planned large-scale personnel cuts.

In addition to extremely high yen rates, such problems as electricity shortages, delays in the nation's moves to form economic partnership agreements and high corporate tax rates are weighing down on the industrial world.

It is imperative for the government to come up with steps to help shore up business activities.

First of all, it should consider intervening in foreign exchange markets to stem the appreciation of the yen.

The government also must waste no time in restarting idled nuclear power plants to counter any power shortages.

Besides these moves, Japan must take part in the Trans-Pacific Partnership trade negotiations so the promotion of free trade can act as a tailwind for the national economy.

 

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