Japanese, Toyota Go Postal as Dollar Sinks
Executives from the old Big Three are scheduled to meet with President George W. Bush soon, and one likely item on the agenda is Japanese effort to suppress the value of yen. The meeting is particularly timely because, according to the wire service reports out of Tokyo, the Japanese finance minister apparently had a major hissy fit last week because the yen's value had drifted up as the value of the dollar declined.
Executives tied to the American manufacturing sector have argued for years that the U.S. dollar was overvalued and a drop in the dollar's value would help boost American exports and start to reverse the huge trade deficit. However, executives in the finance, retail, and resource sectors, which benefit from a strong dollar, have never been as keen on the idea of reducing the value of the U.S. dollar. A weaker dollar also contributes to the threat of inflation. Moreover, the stated policy of the Bush administration has been in favor of a strong dollar.
Last week, however, commentators suggested there were signs that administration was now tilting in the direction of a cheaper dollar. A cheaper dollar would make it more expensive for Asian and European carmakers to import vehicles and pieces of vehicles into the United States. The shift also has made it more expensive for American carmakers to build vehicles in Canada; the value of the Canadian dollar is at its highest level in nearly two decades.
Executives at GM have complained for years that Japanese automakers have benefited from their government's systematic interventions in currency markets that help drive up the value of the dollar and drive down the value of the yen. The Japanese government's intervention is the equivalent of direct subsidy to companies such as Toyota, which has benefited also from government-run health and pension plans.
The debate over the value of the dollar also has short-term consequences. Stocks faced a second day of steep losses Friday, as the dollar weakened when a jump in import prices heightened fear of inflation. -Joe Szczesny
Hattip: The Car Connection
(bold and italics my emphasis)