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Yen drives up trade debt
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November 18, 1996: 7:26 p.m. ET
Weak Japanese currency triggers sharp increase in auto exports
From Correspondent Bill Dorman
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TOKYO (CNNfn) - For the first time in 20 months, Japan's trade surplus with the United States increased in October, rising 31 percent to more than $3 billion.
The main culprit? A weak yen.
It was just 16 months ago when the U.S. dollar was yielding only 80 yen. Although the Japanese currency has recovered some, it has remained down enough to sparked a huge increase in auto exports to the U.S.
The ministry of finance said the number of Japanese cars bound for the U.S in October shot up more than 44 percent from a year ago.
Not surprisingly, U.S. automakers are pushing for a stronger yen.
"If we don't find that happening, all of the progress expected under the trade agreement could disappear," Andrew Card of the American Automobile Manufacturers Association said. "So an excessively weak yen would jeopardize success under the auto agreement."
Complaints about the yen are also coming from some Japanese companies. The president of Matsushita says an ideal range would be 95 to 100 yen to the dollar.
In general, Japanese exporters benefit from a weak yen. But many firms have moved production to other countries. And the corporate view of currency rates has shifted in some board rooms.
"Even the Japanese are not that happy with the yen constantly weakening," Jason James, James Capel Pacific strategist, said. "Apart from anything else, it makes the management look rather silly if they've invested a great deal of time and money in overseas production. Suddenly, they don't need it two or three years later."
Ask most senior managers about Japan's currency, and they'll tell you their main desire is the same as for Japan's government -- stability.
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