Carmakers in Japan Get Boost as Yen Drops

Toyota came close to doubling its net profit during the most recent quarter ending in June despite selling fewer cars. The cause was a weaker currency in Japan that caused the foreign earnings of the carmaker to increase.

The biggest volume automaker in the world said Friday that its profit during its fiscal first quarter had jumped by 94% in comparison with the same reporting period in 2012, to end at $5.62 billion.

The increase comes even though the carmaker’s unit sales fell by 1.6%, mainly due to the green car subsidy ending in Japan, which helped to quash demand domestically.

Like other carmakers in Japan, Toyota was benefited from the yen plunging by nearly 25% in its trade value versus the dollar and euro compared to last year during the same quarter.

Earnings at Mazda, Suzuki, Nissan and Fuji Heavy Industries, which produces Subaru, also increased during the quarter.

The drop in the value of the yen, which was driven mostly by the Bank of Japan’s monetary expansion to end prolonged deflation in consumer prices, has allowed the country’s carmakers to earn more profits while for some trying to get greater market share through the cutting of price to its customers in foreign countries.

U.S. sales for Nissan were up by 20% during the past quarter after it lowered prices on seven of its models including the Altima saloon, its top seller.

The positive effects from the yen were magnified by the cuts in costs implemented by carmakers in Japan during the relentless climb by the currency from 2007 through 2012.

This in turn has caused carmakers from other countries to become more defensive. In July, Ford’s top executive attacked the economic policies in Japan that have deflated the yen and said the Japan should not be able to join the Trans-Pacific Partnership, which is a regional trade pact that has been proposed and began talks in early July.