As the yen surges, is Toyota right to play down expectations?

Posted by: Ian Rowley on March 21, 2008

Toyota didn’t get where it is today by over-promising and under-delivering. Yet according to Toyota executive vice president Tokuichi Uranishi yesterday, the automaker may struggle to reach its annual sales target. “Frankly speaking, sales in the U.S., Europe and Japan are showing signs of slowdown. It will be difficult to meet the group’s sales target of 9.85 million, although emerging markets such as China and Russia are active,” Tokuichi Uranishi, executive vice president of Toyota, told reporters in Seoul.

The same day chairman and former CEO Fujio Cho expressed concerns over high commodity prices. And the yen, which has touched 12 year highs against the slumping dollar this week, also has Japan’s big exporters, including Toyota, concerned.

For all that, I’d still bet that come December Toyota achieves its sales target just like it does every year. For one thing, 9.85 million is only 5% up on last year. For another, sales in emerging markets, and especially China, are still soaring, as Uranishi acknowledged. Third, despite the yen’s surge against the dollar being front page news in Japan, this isn’t 1995. Toyota’s U.S. factories help offset a chunk of the currency losses (and gains) which means it should be more insulated against yen-dollar gyrations than the last time the dollar was this weak. What’s more, against other currencies, such as the euro, the yen hasn’t strengthened a great deal.

Perhaps more interesting will be what difference the strong yen will have on Toyota’s rivals in the U.S. market. If the sub-100 yen dollar is here to stay, it’s going to be a lot harder for critics to complain that the success of Japanese automakers is down to currency manipulation in Tokyo—unless, of course, sales really do take a pounding.

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