TOKYO—The chairman of the Japan Auto Manufacturers Association said Wednesday that he hopes the government will take measures to deal with the strong yen, which he said is hurting Japanese exports and could hamper the country's economic recovery.
"If the yen's strength continues, there will be a negative impact on Japan's economy," said Toshiyuki Shiga at a regular press conference. "If there are any steps (the government could take), then we would like to ask" for such measures, said the chairman, who is also chief operating officer of Nissan Motor Co.
A strong yen squeezes profits Japanese auto makers earn overseas when translating them into their home currency. It also makes Japan-built vehicles more expensive abroad and so discourages domestic players from shipping them overseas. About half of the vehicles produced in Japan were exported in the last fiscal year ended March, according to JAMA.
This is the latest warning from an auto industry executive regarding the potential damage of the strong yen. The euro plummeted to an eight-and-a-half-year low of 107.30 yen and the dollar sagged to a seven-month low of 86.96 yen last week. Mazda Motor Corp. Chief Financial Officer Kiyoshi Ozaki recently said his company is considering raising vehicle prices and cutting incentives in Europe, and is aiming to sell bigger and more profitable vehicles there to help offset the negative impact of the euro's decline.
The dollar and the euro are currently hovering around 87.40 yen and 110.00 yen, respectively, weaker than 90 yen and 120 yen to 125 yen at which major Japanese car makers are basing their earnings forecasts for this fiscal year through March.
Japanese car makers are having to deal with a strong yen just as their domestic production is set to decline when government subsidies to spur auto demand expire at the end of September, the chairman said.
"My biggest concern is that there will be a reverse impact on sales when government subsidies expire at the end of September," Mr. Shiga said.
Government subsidies, designed to encourage consumers to scrap vehicles older than 13 years and buy new fuel-efficient ones, were extended from their original March expiration to continue supporting demand.
Mr. Shiga said his association isn't planning to ask the government to further extend the program, adding that car makers need to think about how to minimize a drop in auto demand after the buying incentives end.
Mr. Shiga's comments come a few days ahead of Japan's Upper House election on Sunday. A big election issue is whether the country's 5% consumption tax rate should be increased—something that could discourage consumers from buying cars.
The chairman said the government should consider raising the rate as part of a review of the entire tax system.
He added that he hopes the government will discuss reducing auto-related taxes when it eventually does review the tax system.
Write to Yoshio Takahashi at yoshio.takahashi@dowjones.com
