japan

Japan 's Automakers Face Endaka Due to the Arab oil embargo, oil shock was raised in 1970s. The global economy faced a period of recession. The sluggish economy also affects the automobile market. Japan 's automobiles prevailed for its cheaper cost, fuel efficiency, and exquisite design. In the early Eighties, dollars appreciated against major currencies including the Japanese yen. It boosted the expansion of Japan 's exports, U.S. government faced successive years of trade deficits against Japan, protectionist coalitions claimed that measures shall be taken to reverse the present trade situation. As such, a new agreement called the Plaza Accord was brought onto the agenda. Instead of controlling domestic demands, U.S. government exerted pressure on the Japanese yen, since they thought yen was underrated. The adoption of the 1985 Plaza Accord improved the value of the Japanese yen against dollar. Prior to the Accord, the dollar had traded at 240 yen; one year later it was down to 150 yen (HBScase). Japan faced a sharp exports crisis after the Accord. The backbone of Japan 's GDP growth, the automobile industry, also suffered the pain from a strong surge of yen 's value. They faced several problems: (1) The Japanese government made a concession of voluntary reduction of exports to the U.S. market under the pressure of protectionism. Meanwhile, few improvements can be seen on the issue of trade deficits, the policy to restrain Japan 's automobile expansion in U.S. will be more rigid; (2) Due to the rise of Japanese yen 's value, original cheaper cost, fuel efficient car brands will not have their previous price advantage, purely for the sake of exchange rates float, despite of the impact on cost of goods sale and the other factors; (3) Japan 's automakers obtain relatively lean profits compared to the booming period, they are compelled to reduce their cost to maintain their market share with caution. Some of the executives

Bibliography: BloombergBusinessweek. (April 9, 1995). Source: http://www.businessweek.com/stories/1995-04-09/what-the-strong-yen-is-breeding-japanese-multinationals businessinsider. (2012). Source: http://www.businessinsider.com/why-the-china-bubble-could-be-far-worse-than-japan-in-the-1980s-2012-4 HBScase. Japan 's Automakers Face Endaka. The New York Times. (August 30, 1992). Source: http://www.nytimes.com/1992/08/30/business/a-lower-gear-for-japan-s-auto-makers.html?pagewanted=all&src=pm The World Bank. Source: http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?page=1