Japan's automakers face Endaka

Topics: Automotive industry, Japan, Economy of Japan Pages: 3 (1661 words) Published: October 29, 2014

Japan's Automakers Face Endaka
Case Analysis
Beatrice Galet

1) What happened to Japan's Big four automakers in 1985, and then again in 1993-1995? Since the end of World War II, Japan's economic strategy for growth was based on exports, that allowed the development of its powerful industrial sector. During the 1980s, Japanese automakers in particular were enjoying an unprecedented and largely unexpected period of prosperity. They managed to establish a successful domestic automobile industry and to gradually sell their products abroad. Thanks to their competitive advantage in producing cars with respect to foreign competitors, due to labor differences, technical efficiencies (lighter and fuel-efficient cars), better designs, and of the low exchange value of the Yen, they were able to make the Japanese auto industry one of the most export-reliant manufacturing sectors in the world. However, with the onset of Endaka in 1985, the so-called yen appreciation compared to the dollar, the situation started to become problematic for Japan's economy. While, before endaka, the dollar had traded at 240 RMB, it was worth only 150 RMB in 1986. Many large companies started suffering big exchange losses from 1985, and small and medium-sized exporters started losing ground abroad. In particular, Japanese automakers were facing a big challenge: not only these companies lost the piece of cost advantage due to the low exchange value of the Yen, but also they had to comply with the strong protectionism in the US, by reducing their sales in that profitable market. After years of fighting for surviving to the Endaka, just as the worst seemed over, Japan's Big Four had to cope with a new "round" of Yen appreciation. With the so-called "Super Endaka" in 1995, the yen hit the record level of 80.63RMB to the dollar. This made Japanese cars more and more expensive in terms of dollars, consequently caused sales to decrease even more -above all in the US market-, largely reduced...
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