Zacks
The Zacks Analyst Blog Highlights: Toyota Motor, Honda Motor, General Motors, Ford Motor and Montpelier Re Holdings
Zacks Equity Research


For Immediate Release

Chicago, IL – April 15, 2013 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Toyota Motor Corp. (TM), Honda Motor Co. (HMC), General Motors (GM), Ford Motor Co. (F) and Montpelier Re Holdings Ltd. (MRH).

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Here are highlights from Friday’s Analyst Blog:

Will Falling Yen Cut U.S. Automakers?

Japan seems to have joined the bandwagon. Last week, Bank of Japan (:BOJ) announced a major quantitative easing (:QE) program in an effort to revive the economy out of deflationary pressure that lasted more than a decade. The credit goes to Shinzo Abe – the new prime minister of Japan – and certainly his so-called Abenomics.

BOJ has decided to purchase ¥7 trillion ($71 billion) of long-term government bonds, a drastic move that will double Japan’s monetary base (cash circulating in the economy plus commercial banks’ reserves with the central bank) to ¥270 trillion ($2.7 trillion) from ¥135 trillion ($1.4 trillion) within two years.

With ample cash being injected into the economy, consumer spending will increase pushing price and wage levels upwards. Based on this radical Abenomics principle, BOJ’s newly-appointed governor Haruhiko Kuroda intends to achieve an inflation rate of 2% per annum within 2 years.

Japanese yen has already been falling due to the government’s devaluation. Since last June, the yen has dipped by more than 20% against the U.S. dollar. The falling yen has been helping the Japanese economy very well in boosting exports.

Exports in Japan went up 6.4% on a year-on-year basis in January for the first time in eight months. Exports to the U.S. grew 10.9%, including a 10.5% and 29.9% rise in exports of automobile and auto parts, respectively in the same month. Higher exports mean lower trade deficit in medium-to-long term as well as higher GDP.

The recent QE measure by the BOJ delivered another blow to the falling yen. Since the announcement on Apr 4, yen depreciated sharply by 5.6% against the dollar, ending its short-term gain following the Cyprus crisis. It also led the Nikkei index go up by 5.1% for the week, the second strongest since November last year. Kudos to Abe!

The Pain of U.S. Automakers

A falling yen certainly boosted the confidence of the Japanese automakers operating in the U.S. and, on the other hand, inflicted pain to the U.S. automakers. Toyota Motor Corp. (TM), being the largest among the Japanese auto manufacturers, is expected to be the biggest gainer from the currency tailwind.

According to a Deutsche Bank report, Toyota exports more than 2 million vehicles from Japan and about 27% of the vehicles sold by it in the U.S. are imported compared with 10% by Honda Motor Co. (HMC). The report also revealed that 15%–35% of the parts in models built by Toyota’s North American facilities are imported from Japan. As a result, Toyota is believed to be very well positioned to take advantage of the falling yen compared to other automakers in its home country.

Last year, Toyota recaptured the sales crown from General Motors (GM) by selling 9.75 million vehicles globally, which exceeded GM’s sales of 9.29 million vehicles. The falling yen could further help the company in achieving its goal of selling 10 million cars and trucks globally by 2015.

In the third quarter of the fiscal year ended Dec 31, 2012, Toyota saw its operating income dip 16.7% to ¥124.76 billion ($1.54 billion). Further, the company continues to struggle with a series of safety recalls, costing it millions of dollars for fines and penalties.

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