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Saturday, April 19, 2014  

China row, strong yen hurt Japan auto majors’ growth
TOKYO A Chinese boycott of Japanese goods sparked by a territorial dispute threatens to undermine the healthy recovery the nation’s top automakers made after last year’s quake-tsunami disaster, analysts say.

Despite posting profits in the first half of the year that left their stumbling electronics counterparts in the dust, the auto sector warned that the slump in China sales and a strong yen were putting the brakes on growth.

The bitter row has seen demand for Japan-brand products plunge in China, the world’s biggest vehicle market, while the persistently high yen makes manufacturers’ products less competitive overseas.

“The China factor is still unpredictable as this is politics, not business,” said Shigeru Matsumura, auto analyst at SMBC Friend Securities in Tokyo.

The concerns were highlighted again on Tuesday when Nissan warned that its profit in the fiscal year to March would be 20 per cent lower than earlier forecast, as the unofficial boycott among Chinese consumers hit business. Honda said its earnings would also shrink by one-fifth in the current fiscal year owing to the diplomatic and currency challenges.  

Toyota, less dependent on China than its rivals, raised its annual earnings forecast to $9.7 billion, saying cost-cutting and strong sales outside China and debt-hit Europe helped its performance. But Japan’s biggest automaker still warned that full-year sales would be negatively impacted by the diplomatic row.

The long-standing dispute flared again in mid-September after Tokyo nationalised an East China Sea island chain also claimed by Beijing, setting off huge demonstrations across China and the wide-ranging boycott. Japanese factories and businesses across the country temporarily closed or scaled back operations for fear of being targeted by angry mobs. Nissan’s chief operating officer said this week that visitor numbers to car dealerships in China have been “recovering gradually” and there was no plan to change its growth strategy in the country.

But chief executive Carlos Ghosn earlier warned that Nissan would think twice about making new investments in China amid the row. It has several production plants in the country, with a new factory in the northeastern city of Dalian planned for 2014. Still, the yen — which hit record highs around 75 against the dollar late last year and remains strong — may be the bigger threat to Japan’s automakers, said Eiji Hakomori, auto analyst at Daiwa Securities in Tokyo.

“China is only part of the global market,” he said.

“Japanese automakers are doing well in terms of vehicle sales — revenue in emerging markets is brisk — but if the current forex rate continues, automakers will eventually lose their competitiveness.”

Agence France-Presse
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