A 9.0-magnitude earthquake and tsunami are no match for the Japanese. Despite the turmoil in Japan, the yen has been gaining strength over the U.S. dollar.
On March 16, the yen reached a 16-year high, closing at 77.42 yen to the dollar. A strong yen and reduced access to Japanese ports will make Japanese cars and other exports more expensive for Americans.
Japan’s exports to the United States totaled $482 billion in 2010, up by 26 per cent from 2009. Vehicles make up around a third of the total, according to the Office of the U.S. Trade Representative. With many Japanese ports closed, including Sendai, Hitachinaka and Kashima, Japanese exports to the U.S. will fall and a rising yen will mean Americans will have to spend more money for them.
Japanese exports to the U.S. “will weaken in the months ahead as the closing of several manufacturing plants, prompted by electricity shortages, combines with severely damaged roads and bridges to hamper production,” said Mario Moreno, an economist for The Journal of Commerce.
Worldwide, 13 per cent of the automotive industry is shut down, Michael Robinet, director of the research firm IHS Automotive, said in a statement, and production is down by 320,000 units since the quake. “And the worst is yet to come because it will begin hitting outside Japan, and the ability to resource components is limited,” he said.
A decrease in quantity and an increase in price will mean that Americans will have to dig deeper in their pockets for Japanese vehicle purchases. According to Roman Shteyn, CEO at Credit-Land.com, an automotive credit card can be an effective tool in getting a discount on priced up Japanese vehicles.
“Automotive credit cards offer rewards and rebates for purchases from a specific automobile manufacturer. For example, the Toyota Rewards Visa allows consumers to earn points for purchases made at Toyota dealerships. There are also cards for Lexus and Subaru,” Roman says.
Japan ranks third as an exporter of containerized goods to the United States. It is also the second largest importer of U.S. goods, according to data from The Journal of Commerce/PIERS. In 2010, 28 per cent of car parts imported to the U.S. came from Japan. In 2010, increasing auto sales in the U.S. allowed Japanese imports of auto parts to rise 22 per cent. But with the slowdown in Japan, the journal predicted, that rise is unlikely to continue.