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Yen Grows Stronger, Threatens Financial Health of Auto Makers

Usually, when a crisis of some kind hits a country, its currency depreciates. Proving, once again, that it is an economy like no other, Japan and its big automotive players are faced, one week after the devastation quake-triggered tsunami, with financial meltdown because of the strenghtening yen.

According to analysts, the yen is strengthening because usually, during crisis, it is considered a safe currency and the behavior of the traders following the devastation enhanced the power of the yen over the dollar. On Thursday, the currency smashed through the 80 yen-to-the-dollar barrier, reaching the highest level since World War II.

What does that mean for the automotive industry? According to CNN, Toyota is set back 30 billion yen ($380 million) for every one yen shift against the dollar. Over time, the losses to be experienced by the industry are expected to be huge.

"Companies can absorb gradual changes no matter what the range, but this sudden change in just one night, and if it continues to the end of March, will be very bad news for exporters including Toyota," Yuuki Sakurai, Fukoku Capital CEO was quoted as saying by Reuters.

The losses are a direct result of the fact that Japan is predominantly an export country, meaning that, contrary to what happens in most of the countries, a stronger national currency will do more damage than good.

The hope is now that the jolt the yen is experiencing is purely speculative. Even so, at one point, a government intervention might be needed to help the dollar in its fight against the national currency.
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About the author: Daniel Patrascu
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Daniel loves writing (or so he claims), and he uses this skill to offer readers a "behind the scenes" look at the automotive industry. He also enjoys talking about space exploration and robots, because in his view the only way forward for humanity is away from this planet, in metal bodies.
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