The head of Japan's auto lobby warned on Thursday the current dollar/yen rate was not strong enough to prevent job losses at home, calling on authorities to keep taking decisive steps after intervening in the currency market a day earlier.
The dollar has recovered to about 85 yen now after the government and Bank of Japan intervened yesterday, and we want them to continue taking strong action to reverse the yen's strength, Toshiyuki Shiga, chairman of the Japan Automobile Manufacturers Association, told a regularly scheduled news conference.
Shiga, also chief operating officer of Nissan Motor Co, declined to specify what dollar/yen level would be appropriate for the auto industry.
But he noted that many companies were not profitable in Japan even at the 90 yen rate at which they had set their current business plans.
A dollar of 85 or 90 yen is not a level at which job losses can be prevented in Japan, he said. He added that while car makers could maintain current domestic vehicle production levels, suppliers may naturally be forced to shift more work abroad.
Prime Minister Naoto Kan, who won a hard-fought ruling party leadership race on Tuesday, had made jobs the centerpiece of his campaign against party powerbroker Ichiro Ozawa.
The surprise intervention, however, drew criticism from a U.S. lobby representing General Motors Co, Ford Motor Co and Chrysler, which accused Japan of unfairly propping up its exports.
In a highly integrated and competitive global economy, everyone has to play by the same rules: no intervention, no gimmicks that would give exporters in one country an unfair leg up on their global competitors, said Stephen Collins, president of the American Automotive Policy Council.
Everyone needs more exports and more jobs, including the United States, he said in a statement.
Shiga applauded the timing of the government and Bank of Japan's intervention in the currency markets, which came as a surprise so close on the heels of Kan's victory.
But he warned that auto sector companies were now in a position to shift more production outside Japan to avoid currency risks.
We've experienced a strong yen before -- the dollar fell to the 79 yen range in 1995 -- but this time the situation is totally different because the business is much more global now, Shiga said.
A stronger yen makes exports from Japan less competitive, while reducing companies' earnings when repatriated.
Still, Japanese automakers all expect earnings to improve in the business year to March 2011 as sales growth in the United States and emerging markets make up for currency-related losses.
The dollar jumped 2 yen on Wednesday from a 15-year low after Japanese authorities intervened in the currency market to sell yen for the first time in six years. The weaker yen in turn pushed shares in automakers and other exporters higher.
The dollar was trading around 85.50 yen on Thursday. Toyota Motor Corp and Nissan are assuming an average dollar rate of 90 yen for the business year to next March, while Honda Motor Co sees the dollar at 87 yen.
(Editing by Edwina Gibbs)