Carmakers fear yen devaluation call
JAPAN'S Finance Minister today sparked fears of a wave of cheap exports to Europe and America as he declared that he would like to see the yen standing at 150-160 to the dollar. Masajuro Shiokawa said the yen should fall to reflect the present state of the Japanese economy.
If the yen were to fall to within the range Shiokawa has suggested it would mean, in effect, a 23% devaluation and would have a devastating effect on Britain's carmakers. They have seen Japan's market share in Britain rise from 11.61% to 12.79% in the first 10 months of this year.
The last time the yen fell to 160 to the dollar was in 1990. Five years later it was at 80 and earlier this year it was trading as high as 112 before falling back. A Finance Ministry official today refused to comment on Shiokawa's remarks but agreed that the yen should be devalued to take into account current purchasing power parity.
Such a heavy fall would mean huge windfall profits for Japan's major exporters such as Sony, Toshiba, Toyota and Honda. Their repatriated profits are boosted heavily by a weaker yen, while at same time prices in overseas markets tumble, boosting sales.
The possibility of a 150 yen rate will cause anguish among US and European motor manufacturers, which have seen Japanese imports and locally manufactured vehicles making big inroads into their market share. In July US automakers blamed a weak yen for a 6.5% jump in the Japanese market share in the US.
