Weak yen and US demand mean increased profits for Japanese automakers

By Peter Brieger, AFP

TOKYO–Japanese automakers are stepping on the profit accelerator as a weak yen, recovering U.S. demand and the fading impact of a consumer boycott in China boost their bottom line. The sector’s buoyant half-year results underscore a firm recovery after the 2011 quake and tsunami devastated sales and production, and highlight a rebound in demand from some key markets. However a sharp decline in the yen over the past year was the key driver behind bumper profits.

Toyota acknowledged the currency’s impact Wednesday as it said net profit in the six months to September soared 82.5 percent. Japan’s most valuable company also raised its annual earnings forecast. Toyota, the world’s biggest automaker, was the last of Japan’s major carmakers to publish half-year earnings after Honda last week said its net profit soared on the weaker yen and stronger U.S. demand. Smaller rivals Suzuki and Mitsubishi Motors also reported upbeat numbers. Nissan meanwhile said its half-year net profit rose 6.5 percent while sales rose 14.7 percent from a year earlier.

However shares in Japan’s number two automaker plunged more than 10 percent Tuesday after Nissan slashed its full-year profit forecast, blaming a sluggish European market and expensive product recalls. Nissan said sales to China, which accounts for about one-quarter of its revenue, were also down in the wake of a Tokyo-Beijing territorial dispute that sparked a consumer boycott of Japanese brands. Toyota did not specifically address the issue of China, the world’s biggest vehicle market, on Wednesday. However Japanese automakers’ sales in the country were dented in the wake of the diplomatic row, which flared again last year after Tokyo nationalized part of a small East China Sea archipelago also claimed by Beijing, setting off demonstrations across China and the damaging boycott. Toyota and Honda were less affected by the China sales downturn than Nissan, while the pair benefited more from a slide in the yen, which boosts their competitiveness overseas and inflates the value of repatriated foreign income. All three have said the damage from the territorial row is fading. “Japanese automakers have largely benefited from a cheaper yen,” said Tatsuya Mizuno, head of Tokyo-based Mizuno Credit Advisory.