A weak yen is throwing a lifeline to Japanese carmakers struggling in China

Japan's falling currency is boosting profits for Nissan, Honda, Toyota, Mazda and Yamaha—for now

We may earn a commission from links on this page.
A Toyota Tacoma
Photo: Andrew Kelly (Reuters)

Japanese carmakers have been struggling mightily in China. Sales are declining, their market share is being whittled away, and the competition has grown cut-throat as Chinese electric vehicle upstarts establish dominance where foreign automakers once held sway.

There is one temporary relief, though: a weak yen.

Converting a weak yen into strong profits

A declining currency has the effect of boosting the price competitiveness of exporters, helping them sell products for cheaper abroad and juicing profits at home. In the US, for instance, big tech companies gained mightily from the slide in the dollar this year, because so much of their revenues come from overseas.


To be sure, a weakening yen is a mixed blessing— particularly because it drives up import costs for manufacturers and exacerbates the impact of volatile commodity prices—but it is still helping blue-chip Japanese automakers at present.

Nissan, Honda, and Toyota have all cited the currency as a factor for their forecast-topping earnings in the three months through June, according to Reuters.


Last month, Nissan raised its full-year operating profit forecast by 30 billion yen ($206 million), or nearly 6%, to 550 billion yen. Of that improvement, 20 billion yen originates from a weak currency, while the remaining 10 billion came from increased sales outside China, Stephen Ma, the CFO of Nissan, said in a briefing.

This month, Honda reported an operating profit of 394 billion yen in the April-June quarter, 90 billion higher than its original forecast. In a briefing last week (pdf), Fiji Fujimura, Honda’s CFO, credited “about half” of that increase to exchange rate impacts.

Similarly, last week, Mazda cited a weaker yen (pdf) for boosting the company’s operating profit in the three months through June. However, the yen’s fall against the Thai baht and Mexican peso also increased costs for the company’s local production operations in Thailand and Mexico, said Osamu Kawamura, Mazda’s managing executive officer.


Yamaha, which makes motorcycles and and scooters, also sees the weak yen as providing “a tailwind for a large increase in profit,” its CEO Yoshihiro Hidaka said last week.


A falling currency is no panacea for Japanese Big Auto

Still, the soft yen will by no means solve fundamental problems of product ranges, technology, and supply chain competitiveness. And the yen could yet strengthen, particularly as Japan’s central bank eventually moves away from its ultra-loose monetary policy.


Japan’s legacy auto giants know the stakes are existential. With remarkable bluntness, Japanese executives are openly talking about how to survive in China.

“[T]he determiner for our survival in China,” Makoto Uchida, Nissan’s CEO, said in a briefing last month, will be the competitiveness of its new EV and hybrid lineup. Tatsuro Ueda, Toyota’s CEO, echoed that sentiment days later, saying the company would double down on EV technology development in order to “survive in China.” Weak yen or strong, Japanese Big Auto still faces a formidable challenge in competing against its Chinese rivals.