Export-dependent Japanese automakers – and other companies – have become alarmed at the yen’s steep rise to a 14-year high against the US dollar, media reports said on Thursday.
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The US dollar fell to 86.29 yen, the lowest since July 1995, at one point on Thursday in Tokyo due mainly to persistent speculation about the low US interest rate policy.
”The current level of the yen is extremely problematic,” Shoji Muneoka, chairman of the Japan Iron and Steel Federation, told a news conference. ”A stronger yen could serve as a trigger for double-dip recession.”
Muneoka, president of Nippon Steel, urged the government to take aggressive measures, indicating market intervention may be necessary to stem the dollar’s further fall.
”Unless (the yen) is brought back to a certain level in some form, there will be severe damage to the Japanese economy,” he said.
Toyota has assumed the dollar will trade at the JPY90 level in the second fiscal half, compared with Nissan Motor and Honda Motor which both assume a JPY85 level. A rise of JPY1 would erase about JPY25bn yen from Toyota’s operating profit on an annual basis, according to the automaker.
”There will be a huge impact so we hope this (current level of the yen versus the dollar) is temporary,” an official at Subaru maker Fuji Heavy Industries, which assumes JPY88 versus the dollar for the same six-month period, told Kyodo News.
“Carmakers that issued big profit warnings last year have set cautious forex assumptions this time, so roughly speaking the current rates are within expectations,” Aizawa Securities auto analyst Toshiro Yoshinaga told Reuters.
“But there are views that the dollar could sink even further in 2010, to the 70s (yen), and in that sense Honda and Nissan, which are relatively strong in emerging markets, are in the winning camp,” he said.
