August 2nd, 2011
09:57 AM GMT
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Tokyo (CNN) - Imagine your paycheck gets slashed by 99.4%.

That would make me, and pretty much everyone I know, weep with sadness.

Well, that’s essentially what Toyota says has happened to its net income for the period between April and June this year - the first full quarter after the catastrophic earthquake and tsunami in Japan on March 11.

Dressed in a dark business suit and detailing the even darker financial storm the world’s largest automaker faces, Toyota’s Senior Managing Officer, Takahiko Ijichi, blamed the income and revenue challenges on the continued supply chain and energy problems in the aftermath of the disaster.

But he says there’s a bigger problem facing all Japanese corporations: a surging yen and weak dollar.

Ijichi, in unusually blunt fashion, says 77 yen, which is where the yen stands versus the U.S. dollar as I write this blog, is too strong for companies to make money.

With every 1 yen move up versus the U.S. dollar, Toyota estimates it loses approximately U.S. $385 million. In the last month, the yen has ticked upwards of 4 to the dollar, eating out more than a billion dollars out of Toyota’s books.

Toyota, as one of Japan’s largest exporters, feels the currency and domestic disaster problems acutely, though its misery certainly has company.

Honda this week announced its net profit for the last quarter fell by 88.3%. Nissan last week said its net income fell by 20.3%. And it’s not just the automakers.

Corporate Japan overall, estimates JP Morgan’s head of Japanese equity research, Jesper Koll, has lost about 5% in profits in just the last six weeks, as the U.S. dollar has fallen on uncertainty over the debt deal in Washington.

“The overall credibility of the U.S. is taking a serious dent,” said Koll. “You’ve got that reflected in global markets, not so much equity markets, but primarily the currency. Because at the end of the day, trust and faith in America, for the rest of the world, is reflected in the value of the dollar. And the dollar is going down.”

Toyota’s executives, at their quarterly earnings announcement, preferred not to focus on government intervention with the yen – the Bank of Japan meets on Thursday – or talk about the global status of the U.S. dollar.

But the harsh financial realities shone out on their PowerPoint display.

The dollar world is dropping and it’s taking the profits of Japanese exporters with it.



soundoff (4 Responses)
  1. jesse

    Grim times are grim all around. If analists thought that interest rates and such were going to jump, wait till they start seeing the price of cars in the next year or two.

    August 2, 2011 at 11:24 am |
  2. velorico

    Every cannibal gets his turn in the pot. Now, Toyota finds itself in the same situation as US-based manufacturers for the first time. US Fed has devalued the dollar, the same as the BOJ had kept the Yen depressed for decades to give Zaibatsu like Toyota an unfair trade advantage. TRULY "free trade" is a tough thing to practice, as the Japanese are now finding out.

    August 2, 2011 at 1:59 pm |
  3. gdog

    HCL to by Honda?

    August 9, 2011 at 12:14 am |
  4. David Turner

    "Weep with sadness." Weeping is almost always associated with sadness, so there's no need to point it out. Lazy writing.

    March 19, 2014 at 4:10 am |

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