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Bank of Japan Actions Could Weaken Yen
The Bank of Japan's aggressive new plan to ease monetary policy is good news for the country's automakers and other exporters because it is expected to further weaken the yen.
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The Bank of Japan's aggressive new plan to ease monetary policy is good news for the country's automakers and other exporters because it is expected to further weaken the yen.
The central bank aims to end Japan's 15-year deflationary spiral by doubling both the amount of money in circulation base and its purchases of government bonds.
As a result, economists expect the yen to decline against the dollar, thus making it cheaper for carmakers to sell Japan-built vehicles in the U.S. The weak yen also benefits automakers by increasing the value of their repatriated profits.
But the impact of currency changes is blunted by the companies' expanded production to North America. Toyota and Honda say that 70% and 90%, respectively, of the cars and truck they sell in the U.S. are now made in North America.
The Bank of Japan's new policy worries U.S. carmakers. General Motors Co. CEO Dan Akerson tells cable network CNBC that the bank's actions will give GM's Japanese rivals a price advantage in the U.S.
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