Shinzo Abe was sworn in as Japan’s new prime minister – its seventh in six years – barely a week ago. To count him as the seventh PM is a bit disingenuous, in fact, since he was the prime minister in 2006 and 2007 but had to retire due to medical issues. His return came after a campaign that stressed repairing the nation’s economic issues – a platform that should give you an idea of the issues Japan has had at the top step of its government. Chief among the nation’s woes? An economy still suffering from two decades of deflation and, more recently, a yen that is gaining so bullishly that it’s tearing up the china shop.
Yet even before he took office, Renault-Nissan CEO Carlos Ghosn had a message for prime minister Abe: “Please bring [the yen] back to the neutral territory so that we can do our job without a handicap.” By “neutral,” Ghosn was referring to an exchange rate of one dollar to 100 yen, by “our job” he meant Nissan’s ability to build cars for export on the island nation even though Bloomberg posits that it already produces 75 percent of its units outside of Japan.
Above that neutral territory, production in Japan begins to get massively more expensive with every incremental rise in the yen; right now the 100 yen is about $1.15 – and that’s after a ten-percent drop over the course of 2012 – and Bloomberg calculates that every single-digit increase in the yen’s value against the dollar robs Nissan of $232 million in yearly operating profit. Just down the coast in Toyota City it’s even worse – Bloomberg figures each single-digit increase in the yen costs Toyota $402 million every year.
Nissan is one among all the Japanese makers monitoring tensions in China, too. A territorial dispute last year caused Chinese buyers to shun Japanese cars to such an extent that overall car sales fell in China and Japanese automakers cut production and sales forecasts in the world’s largest auto market. Ghosn was less pointed in his comments on the matter, saying only that if the antagonism keeps up then “obviously we will have to reflect it in our long-term plans.” It was Akio Toyoda’s comments, however, that were probably a good reflection of the private wishes of the new prime minister: “I want it to be a peaceful year where nothing goes wrong.”