Automotive Industry in Japan

Automotive Industry in Japan

Some of the cars by Japanese carmakers built overseas are exported back to Japan.

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Japan's vaunted automakers may soon stop building cars in their homeland for export as a soaring yen combines with Mother Nature's mood swings and an aging population saps the strength of the Nipponese domestic market, driving the companies across the oceans and far from their birthplace.

Nissan Motor Company Ltd. (Tokyo: 7201) CEO Carlos Ghosn said that the automaker was seeking to minimize exports from Japan. The very same day, Honda Motor Company Ltd. (NYSE: HMC) announced that it planned to stop exporting hybrids and instead produce them solely in the markets where they are intended to be sold. In 2011, Honda discontinued the production of Civic model cars in Japan in favor of international production. And even Mazda Motor Corporation (Tokyo: 7261), which has been slow to set up plants outside of Japan, has recently broken ground on new factories in Mexico to produce Mazda 2 and 3 cars as well as engines.

These moves are a bitter pill for Japan and its foundering economy - and also a peek into Japan's future. Just a few decades ago, when Japanese companies were audaciously acquiring such international icons as Pebble Beach Golf Course and Rockefeller Center, Burberry, Aquascutum, Sun Chemicals, and Columbia Studios, fears were rife in the West that Japan was going to dominate the global economy, eclipsing the U.S. in importance and innovation.

Nobody raises those concerns anymore. As Japan's automakers begin the process of closing the door on their domestic operations, they will leave a bedraggled economy that last year fell behind China to No. 3 in Gross Domestic Product and offers little reason for optimism. By all accounts, Japan's GDP will continue to shrink inexorably as its population ages and the dynamism of its domestic market weakens.

Partly it's a hedge against currency; it's also to be closer to customers, said Robert Cole, Professor Emeritus at the University of California Berkeley Haas School of Business and visiting researcher at Japan's Doshisha University. And the domestic market is not growing anymore. They (automakers) must go global.

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