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OK, the yen matters

Posted by: David Welch on January 8, 2007

If there’s one subject that gets a General Motors executive snarling, it’s the yen-to-dollar exchange rate. They have been bleating for years that Japan’s central bank manipulates the currency, making it cheaper for the Japanese to export their cars and parts here. They get a cost and pricing advantage that makes it tough for Detroit to compete. The UAW quotes a study by Detroit-based Harbour-Felax Group that says yen manipulation gives the Japanese a $2,760 subsidy on small cars and as much as $8,280 on a luxury vehicle.

Not surprisingly, the Japanese auto makers deny that they have an advantage. They say the central bank hasn’t touched the yen for two years. And they make most of their cars in the U.S. anyway. Toyota Motor Sales U.S.A. Executive Vice President James E. Lentz points out that when the Japanese juggernaut finishes building a couple of new plants, it will be building 2 million of the 2.7 million vehicles it sells in North America right here on the continent. Nissan and Honda will make a similar claim. They have been building factories and hiring lots of Americans, too.

That’s all true. But GM has a point. In an interview here at the Detroit auto show, Nissan Motor Co. Chief Operating Officer Toshiyuki Shiga told me that the 60 billion yen increase in materials costs (about $500 million) was offset in large part by favorable currency exchange in the first half of the year. That’s a nice little assist for Nissan. That doesn’t explain all of the gains made over the decades by Japanese auto makers. They have made some good cars. But it’s clear that currency is helping them out.

Reader Comments

Jeseph O'Donnel

January 9, 2007 4:22 PM

So are we out to make excuses for "Detroit" or take aim at the "imports"??? What is even the point of this article??? Articles like this that try to stir the pot and look for excuses is an example of why "Detroit" is in trouble. The last time I checked, I (and most people) bought a vehicle because of the quality, reliability, and value, which is the real problem for "Detroit". They should be focusing on the product, not what they THINK they aren't getting. I highly doubt $500 million would save GM while $500 million is a drop in the profit bucket for Toyota. What's GM's next excuse????????


February 11, 2008 6:11 PM

Toyota attributed 15% of their profits in the fall to exchange rates. not Revenue, profits.

This is not an excuse for the spot the domestics are in.

It is a manifestation of a one sided currency bet that has potentially disastrous global consequences which patently lines the pockets of the japanese. anyone with a brain can figure that out.

While Toyota parades itself as all but american and imports 40% of their vehicles and untold parts (see the camry fall off the most american list because it is less than 65% made up of domestic american content) apologists love to shout down the issue of currency as nothing more than window dressing.. lol.

The domestics have a product problem which is being remedied, but this nugget is the cherry on top of a tough playing field.

Gary Cheek

December 11, 2008 5:50 AM

Mr. O'Donnel,
Step in to the 21st century. The American car makeres have indeed caught up and have in fact surpassed the Japanese makers. This is in areas of quality, reliability, as well as fuel economy. They have made huge strides , in SPITE of the advantages given the Japanese makers by manipulation of the Yen.


May 11, 2009 10:42 AM

“Money never made a man happy yet, nor will it. The more a man has, the more he wants. Instead of filling a vacuum, it makes one.”



May 11, 2009 10:44 AM

“Money never made a man happy yet, nor will it. The more a man has, the more he wants. Instead of filling a vacuum, it makes one.”


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Want the straight scoop on the auto industry? Our man in Detroit David Welch, brings keen observations and provocative perspective on the auto business.

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