Japanese Automakers Gas Up on the Weak Yen
Investors have quickly forgotten about the pessimism surrounding Japan's rise just a month ago. The Nikkei had a splendid week, jumping 4.3% over the past five days. The weak yen's fueled the Nikkei's rise alongside the country's unprecedented stimulus, and a falling currency helped again this week, particularly after the European Central Bank indicated it would keep borrowing costs low for the foreseeable future. That was good news for Japan's top exporters that do business in Europe, but how have your stocks been faring? Let's check out what's happening across the Pacific.
Japan's economy charges forward
Credit the U.S. jobs report for some of the yen's gains this week. A better-than-expected release helped fuel the dollar's surge against Japan's currency to a five-week high. It's questionable whether or not the American economy has advanced to the point to where the Federal Reserve will begin tapering down stimulus bond buying later in the year, but if quantitative easing is relaxed, it'll be another jolt to the yen's weakening -- and a huge bonus for exporters.
Prime minister Shinzo Abe's stimulus plan has worked so far -- and the government and economists alike are now expecting the Japanese economy to continue growing in the near future. Until inflation catches up with the economy's growth, however, don't expect stimulus to let up.
The weak yen's been a gift for automakers. Toyota's stock jumped another 3.3% this week, part of their 30% gain year to date. The company's sales have done well in the U.S. and Japan, but Toyota's Chinese sales - along with many Japanese automakers - took a hit in China after the two countries sparred over the disputed Senkaku Island chain. The company's sales have recovered more in southern China, prompting leadership to consider shifting attention to picking up sales there. A weak yen will help in the U.S. and Europe, but it won't be able to overcome a sales slump in the world's second-largest economy.
The situation's particularly concerning for Toyota considering the success other auto manufacturers have had in China recently. Ford posted a 44% gain in Chinese sales in June according to the firm, and Ford's May sales jumped by a similar percent. With General Motors still leading the way in China -- its sales jumped 11% in the country -- and right on Toyota's heels in worldwide sales, Toyota will need to keep its sales growth strong in order to keep its lead on its international rivals.
Still, the weak yen should help the company's foreign revenue mean that much more to its bottom line, and so far, it's worked out great for investors. Smaller Japanese automakers have revved up recently even more, however. Nissan posted overall sales growth of 12.9% in June, the company's best June ever. Nissan's stock hasn't performed as well as Toyota's this year -- shares have only gained around 7% in 2013 -- but if the company can keep up its financial performance, investor patience looks like it will be rewarded.
Japanese automakers will need to pick up the pace in China after their sales slump in the country. China is already the world's largest auto market -- and it's set to grow even bigger in coming years. A recent Motley Fool report, "2 Automakers to Buy for a Surging Chinese Market," names two global giants poised to reap big gains that could drive big rewards for investors. You can read this report right now for free -- just click here for instant access.
The article Japanese Automakers Gas Up on the Weak Yen originally appeared on Fool.com.Fool contributor Dan Carroll has no position in any stocks mentioned. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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