Yen Strengthening Determines Honda to Switch Production Overseas

The Japanese yen looks to be strengthening after all the forecasts which predicted such a major change. As a consequence of the strengthening yen many Japanese businesses which made exports were affected. Among the most affected businesses there can be spotted Honda Motor Co. The manufacturer is considering a possible “immigration” overseas. More exactly Honda Motor Co. considers the option of possible manufacturing facilities overseas to invert the export effect in Japan.

Top executives have forecasted the strengthening of yen. Since now no significant steps have been made, but Honda’s move might be the first alarm signal for others to fallow. Also Honda Chief Financial Officer Fumihiko Ike explained that important steps are being studied in order to reduce production in Japan.

"We currently have a three-year plan under which we are assuming a rate of 80 yen to the dollar," Ike told a small group of reporters at Honda's headquarters in Tokyo. And under that assumption, the discussion to look for an alternative production base is inevitable." Fumihiko Ike was quoted as saying by MSNBC.

Honda faces full exposure to yen strengthening followed by Toyota and Nissan. The three automakers conceived a strategy, in order to survive the economical changes, which involves producing as many cars as they can as close as possible to where they are sold.

"At these exchange rates we lose competitiveness on these exports, and that leads to a fall in sales, triggering a vicious cycle. And when that happens, the natural consequence is for that production (in Japan) to disappear." Fimihiko added for the aforementioned source.