Blog: Will G-7 demand higher yen?
Dave Leggett | 6 February 2007
Toyota’s latest financial results are pretty impressive. Every time Toyota issues its results, there’s a big sense of déjà vu. Yet more record profits, expanded sales and market share across the world. But there is one very minor sting in the tail this time – the results could actually be just a tad too good. The markets are apparently concerned that the strong results make it more likely that the Group of Seven (G-7) nations will press for interest rate rises in Japan to move the yen higher.
A G-7 summit is planned for this Friday and Saturday, in Essen, Germany. One or two under fire politicians might be almost begging for something positive to return home with. And some Japanese politicians and business leaders have already showed themselves to be sensitive to rising profits in the automotive business that contrast so graphically with Detroit’s ongoing struggles.
But how much would Toyota suffer on its bottom line? Toyota’s international spread of operations acts as something of a hedge against a higher yen. Plus there’s also the fact that Toyota seems near invincible at the moment; you'd put money on it being able to adapt pretty well to whatever is thrown at it. If Toyota took a cold shower, you’d expect it to come out tougher. Anyone remember the Plaza Accord in the 1980s which sent the yen dramatically higher? Japanese companies responded by further squeezing cost and investing more abroad.
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