Japan – GDP – exports – manufacturing – autos – Toyota
Forget the Eurozone for just a minute. Japan’s problems are big: Toyota is a major exporter/employer. Last year 48% of all new standard passenger vehicles sold in Japan were Toyota (or its Lexus brand). The WSJ article describes Toyota’s status in Japan as the following:
In short, Toyota is to Japan what General Motors Corp., in its heyday, was to America. And for a beleaguered country that has suffered a series of institutional blows in recent months—the collapse of the long-ruling political party, the bankruptcy of its champion national airline, a renewed bout of deflation— the global humiliation of Toyota may be the most psychologically damaging blow of all.
Psychological blow, what about an explicit economic blow! Toyota is certain to drag the only Asian G7 economy down due since auto exports are big in aggregate export income.
Japan’s single largest export category in December was, of course, manufacturing: 22% of total exports. And a huge 14% of the total value of exports in December came from motor vehicles (auto sales, that is – separate from parts).
The Japanese economy grew 1.14% in Q4 2009 with a huge 0.67% contribution from exports. The second major contributor was private consumption, which added 0.39%. Going forward, consumption and export contributions are likely to wane from the major Toyota recall campaign that is underway.
First the direct export channel will probably crumble as demand for Toyota cars derails. Second, there will be a lagged labor market effect. Sure, workers will be needed to address the recalls; but the the loss in hours stemming from a drop is sales is likely to be much larger, and the net jobs effect negative.
Toyota is a major employer in Japan that currently has 320,808 employees and has already shuttered doors (at least temporarily) in other countries. It’s only a matter of time before the effect hits the home labor market.
This is big. I wouldn’t be surprised if the IMF downgraded their forecast of Japan based solely on Toyota’s misstep.
Yes, humiliation is the word – JAL, Toyota, etc. – and the fact that “losing face” is such a large factor in how the Japanese define themselves. Thanks for bringing this up. I think you are right. aj
In 2005 I bought a Saab 93 and before that I was driving a Camaro Z28. Toyota’s were probably better cars but I was never attracted to the brand. Now with their daily recalls it looks like they’ve closed the quality gap. Unsexy and low quality is no way to run an auto company.
An yes, our politicians are piling on.
I drive a Saab 93 – no problems to date. Honda to fill the quality gap? Who knows?
I took a more eclectic look at the Toyota recall and linked it to the use of mercantilism by both the United States and Japan and how Japan used mercantilist policies to protect Toyota in the 1950s and 60s.
That’s too bad for Toyota Motors. The company really took a hard blow after much controversies regarding the safety of their cars. It’s an opportunity though for GM which also had their fare share of hard blows because of the recession. The Large Three have been trying to re-energize the consumer base. For the last few years, domestic automakers have been trying to recapture the formerly enjoyed market share within the United States of America. Since the recession began, all three firms have been trying to boost the bottom line and get more people getting American again. The auto rebate offered by the government for buying more fuel efficient cars helped. After a spike, helped by the Cash for Clunkers program, General Motors profits began to slump, as did revenue for brands besides those of General Motors. The consumer confidence just doesn’t exist; look at the real estate market.