Toyota Motor Corporation (TM) will enjoy more flexibility on pricing and a low-cost advantage if Japanese monetary policy continues devaluing the national currency; and if Abenomics works effectively, a further rerating of the Japanese market could be expected, says Daisuke Nomoto, Director and Senior Portfolio Manager at Columbia Management Investment Advisers, LLC.
“Toyota has gained market share due to its really high-quality product coupled with generally attractive gas mileage and affordability. Toyota has increased its international production as more sales have been generated away from Japan, including joint ventures in China. Foreign currency does matter on Toyota’s accounting profits, and if this yen decline continues, Toyota will have much more flexibility on pricing and enjoy low-cost advantage,” Nomoto said.
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Nomoto says the Japanese equity market currently behaves in a very volatile fashion, which could create some buying opportunities. He also considers the recent sell-off in the Japanese market to be a healthy correction, and he says that Abenomics are just a first step in a longer campaign to fix the Japanese economy.
“The Japanese equity market is very volatile these days, as you know, but it seems to me that the recent sell-off is a healthy correction after almost 70% share price appreciation since the victory of the LDP, Liberal Democratic Party, in December 2012,” Nomoto said. “Some people say that Abenomics doesn’t work, or too much easing will cause significant problems in the long run. I wouldn’t disagree with that argument, but people will soon find that Abenomics is just at the beginning, it’s just like a first inning in a baseball game, in my view.”
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