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Japan, Inc.

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Japan, Inc. From the "Here We Go Again" File comes word that Japanese authorities intervened in the foreign-exchange market today, launching the dollar up sharply against the yen. They say the move is Japan's first foreign-exchange market intervention in more than six years. Really? We find that hard to believe. It may have been the first official move in six years, but when foreign currency manipulation is part of the standard operating procedure of the government there, we're not buying that explanation. At any rate, this will be a giant rice bowl of Not Good for the U.S.-based auto manufacturers in no time. Count on it.

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By Drew Johnson

The rising value of the yen has greatly eroded the profits of the Japanese automakers over the last several months, but the Japanese government intervened in the matter on Wednesday, investing an untold sum into the currency markets.

In an effort to keep the value of the yen from ballooning out of control, the Japanese government dove into the currency markets on Wednesday, marking the country’s first such foray since 2004. So far this year, the yen’s value versus the dollar has increased by about 10 percent.

The Japanese government failed to reveal how much it plans to invest into currency markets over the next few months, but the country’s last effort saw about $320 billion pumped into the market during a 15 month period.

While it remains to be seen if Japan’s efforts will curtail the yen’s rise, it’s an important step for the country’s domestic automakers. Toyota says that for every 1-yen increase versus the dollar, the company loses $351 million in earnings, due mostly to the unfavorable exchange rate between the yen and other foreign currencies. Honda, Nissan, Mitsubishi and Suzuki suffer from the same circumstances, resulting in substantial losses from every incremental rise in the yen’s value.



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