Which car to buy when the Japanese Yen gets stronger?

As you know, starting with the US subprime mortgage crisis, there was news of one of the largest investment banks in the US, Lehman Brothers’ collapsing and another of rescuing American International Group, Inc., an insurance company with taxpayers money; currently all share prices are rapidly dropping. It seems the same in Europe where financial institutions are in trouble and amid mounting concerns about the future of subprime investment, the stock markets are down probably for a long time and world investment funds are quickly being pulled out of the US and Europe.

In Japan too, our stock market keeps falling and it has started casting dark clouds over the performance of individual business. We, car traders, are hoping it will not bring an adverse knock-on effect going from one to another like from “bad business performance” to “reduction in wages and bonus” , to “decline in personal consumption” then to “not buying a car”.

However, although Japan’s economy is not looking good, the impact in the US & Europe is even bigger. Looking at the issue worldwide, Japan has relatively no effect from subprime lending and people started buying Japanese Yen as their investment outlet. As a result, Yen is getting stronger & stronger not reflecting the current financial situation of the country. Because we are in export, a high Yen means a “rise in price” for our customers and especially for people who usually buy the expensive range of cars from overseas, they will be making no profit at the current exchange rates and will want to wait until the Yen starts dropping.

Fortunately for us, this rapid increase in the value of our currency does not seem to have much effect on the numbers of cars ordered from overseas. From here, it is some juicy information only for our mail magazine readers.

There are cars which are not much effected by the exchange rates and they are popular at the moment. You might wonder “Are there any cars which price doesn’t get affected by a strong Yen?”. Well, there are cars you can get “cheap” at auction.

For example, say you bought a car at auction for JPY100,000 and the FOB price for it is JPY190,000. The freight will be US$1,000. The exchange rate went up by 10%, from JPY110 to JPY100 per US$1. From your side, it is a 10% rise in the FOB price. However, when you calculate the freight in Yen, US$1,000 was JPY110,000 before and now it is JPY100,000 with a 10% rise in the exchange rate; which is a 10% drop in the price you will have to pay for freight. So in such a case, it is a 10% rise in the FOB price but a 10% drop in the freight; although the rise in FOB is slightly bigger, as long as you can get a car at auction cheap, you can still bring it without too much difference in total price. This only applies when the FOB price is similar to the freight cost or lower, and when the FOB price is more than the freight, you need to buy a car cheaper at auction to make it worthwhile. (May not apply to all foreign currencies.)

So is it really possible to buy a car cheaper at the moment? From our experience, when the Yen gets stronger, importers get worried and stop buying cars for a while. This affects auctions and cars in the lower price range (around JPY200,000), which normally attract foreign bidders but due to the change in exchange rate there are less overseas buyers in the market. These cars have no market in Japan, so without importers bids, they have nowhere to go. This can be a chance for you! I am sure that if you keep bidding a few times, the chance of getting these cars cheap should increase. As I told you above, when the exchange rate does not affect the total price much, maybe you should try it now while no rivals are around.


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(Editor)
JPC TRADE CO.,LTD.
Kato building 4F, 1-1-2 Furuishiba, Koto-ku, Tokyo
Japan Used Motor Vehicle Exporters Association (JUMVEA)
TEL : +81-3-5245-7731
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