The domestic auto industry has thrown its support behind the government’s decision to join the Trans-Pacific Partnership negotiations in the hope that a free-trade deal will help them counter the impact of the stubbornly strong yen.
“JAMA welcomes the announcement by the government,” Toshiyuki Shiga, chairman of the Japan Automobile Manufacturers Association and chief operating officer of Nissan Motor Co., said Friday.
“It is anticipated that a TPP agreement, once concluded, will be effective in enhancing the business environment and advancing free trade in (the Asia-Pacific) region,” he said.
Automakers including Toyota Motor Corp., Honda Motor Co. and Nissan have urged the government to join the TPP talks in hopes an agreement can be reached to cut or even scrap tariffs on exports of vehicles and auto parts.
“Japan cannot survive without trade,” Toyota Executive Vice President Satoshi Ozawa said last week.
He said the TPP represents an opportunity to do something about the yen’s steady ascent over the past year, which has hampered auto exports, he said.
“Participating in the TPP negotiations will give us a chance to regain what we have lost,” he said. Automakers have been hit hard not only by fierce international competition but also by the Japanese currency’s strength, which erodes overseas profits when they are repatriated.
In addition, the massive floods in Thailand have interrupted supply lines and production just as they were recovering from the disruptions caused by the March disasters.
Last year, the domestic auto industry paid more than ¥130 billion in customs duties to seven nations in the TPP talks, including the U.S., Australia and Malaysia, according to the Ministry of Economy, Trade and Industry.
Japan paid about ¥70 billion in export duties for automobiles and ¥14.8 billion for auto parts to the U.S., which imposes a 2.5 percent tariff.
Japan also paid about ¥28.4 billion to Australia, which imposes a 5 percent tariff, and about ¥18.6 billion to Malaysia, which charges a 25 percent tariff, METI said.
If these tariffs are removed, car makers will have more scope to lower product prices and boost profits, analysts said.
Last year, Japanese automakers exported 1.57 million units to the U.S., 360,000 units to Australia and 370,000 units to Malaysia.
Although they have gradually shifted a large portion of their production overseas to counter the yen’s rise, they also have made an effort to retain a certain amount of domestic production to preserve jobs in Japan and prevent all of their technology from flowing overseas.