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Japan Exporters Seek More Aid After ‘Too Late’ Yen Intervention

Japanese exporters called for more action to weaken a near-record high yen even after government intervention prompted the currency’s biggest drop since March.

“The exchange rate is at a level that has an extremely damaging effect on the Japanese economy,” Osamu Masuko, president of Tokyo-based Mitsubishi Motors Corp. (7211), said yesterday by e-mail. He said he welcomed the intervention, ’’but the resulting exchange rate still isn’t acceptable.’’

The yen yesterday touched 80 to the dollar for the first time since July 12 after the government sold the currency and the Bank of Japan (8301) added to monetary stimulus measures. That still may not be enough for exporters including Mitsubishi, Toyota Motor Corp. (7203) and Sony Corp. (6758), whose overseas earnings have been crimped by the currency’s jump of about 8.6 percent in a year.

“It’s like scratching your foot without taking your shoe off -- it’s not enough at all,” said Atsushi Horiba, president at Kyoto-based Horiba Ltd. (6856), the world’s biggest maker of devices to measure automobile emissions. The government is “too slow and it should have responded much earlier.”

The yen fell 0.4 percent to 79.19 per dollar at 6:53 a.m. in Tokyo, after tumbling 2.3 percent yesterday. That was the biggest decline since March 18, when the Group of Seven nations jointly sold the currency following a jump to a postwar record high of 76.25 per dollar. The benchmark Nikkei 225 (NKY) Stock Average plunged 4 percent as of 9:08 a.m. in Tokyo, after climbing 0.2 percent yesterday, the first advance in three days.

Japan unilaterally sold the yen and the Bank of Japan expanded its asset-purchase fund to 15 trillion yen from 10 trillion yen to arrest a currency surge caused by investors seeking safe havens amid U.S. and European debt concerns. The Swiss central bank also unexpectedly cut interest rates this week to stem gains in the franc.

Companies Waiting

“I believe all companies were waiting for some kind of action from the government,” said Minoru Mitsuda, executive officer at Mazda Motor Corp. (7261), the nation’s second-largest auto exporter. Though the government’s actions are “minimal, any positive moves are welcome.”

Mitsuda said he had “no idea” what impact the intervention would have on the yen in the longer term because a mix of different political and economic factors had caused the yen to strengthen. Mazda, which exports about 80 percent of its cars, based its fiscal-year forecasts on an average exchange rate of 83 yen to the dollar, and 113 yen for the euro.

The government should have acted sooner and done more as companies are also struggling to handle cuts in electricity following the March 11 earthquake, said Hiromasa Yonekura, chairman of Nippon Keidanren, Japan’s main business lobby, and Sumitomo Chemical Co.

“The intervention came too late,” he said. “Important relief measures that won’t accelerate deflation are still necessary.”

Toyota Profits

Toyota, the nation’s biggest carmaker, has said that every one yen gain against the dollar cuts operating profit by 34 billion yen according to its current full-year outlook, which is based on 80 yen to the dollar. Nissan Motor Co. and Honda Motor Co. also expected the same exchange rate.

The strength of the Japanese currency is making it difficult for Toyota to compete with South Korean rival Hyundai Motor Co. (005380), which also benefits from lower labor costs, Senior Managing Director Takahiko Ijichi said Aug. 2.

Toyota will “continue to observe the currency markets carefully,” Keisuke Kirimoto, a spokesman for the Toyota City- based company, said by phone.

Overseas Production

The automaker has already moved domestic production to areas of Japan with lower wages to help cut costs. It has pledged to keep output at home to 3 million vehicles a year. The automaker built 43 percent of its vehicles in Japan last year. Nissan and Honda have cut their reliance on domestic plants to less than 30 percent, reducing the effect of the stronger yen on their earnings.

The intervention may help stop more companies moving production overseas, Tadashi Okamura, chairman of the Japanese Chamber of Commerce and Industry, told reporters in Tokyo. The move was timely and would help stabilize the Japanese economy and markets, he said.

“I think it’s a good thing for Japanese industry as a whole,” Sony Executive Deputy President Kazuo Hirai said.

The weakness of the U.S. and European economies means that the Japanese currency is unlikely to climb above 90 to the dollar for at least four years, even with more intervention, said Yoshiaki Kawano, a Tokyo-based analyst for IHS Automotive.

“For Japanese exporters, it will be difficult for them to maintain their current level of domestic production,” he said. “They will need to continue to restructure and cut costs to cope with the currency situation.”

The strong yen cut Nissan’s operating profit by 55 billion yen in the first quarter. Japan’s second-largest carmaker would have posted a 20 percent gain in profit in the period if not for the currency, Corporate Vice President Joji Tagawa said July 27.

Nissan and Honda couldn’t be reached for comment yesterday.

To contact the reporters on this story: Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net; Yuki Hagiwara in 東京 at yhagiwara1@bloomberg.net

To contact the editor responsible for this story: Neil Denslow at ndenslow@bloomberg.net

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