MAZDA FOLLOWS

e government and the Bank of Japan have intervened in the currency market by buying yen and selling the dollar for the rst time in 24 years in a bid to correct the historic depreciation of Japan’s currency against the greenback.

Amid the increasing burden on households and businesses due to rising import prices caused by the weak yen, the central bank and the government have played the one card up their sleeve.

But the possibility speculators will try to test the seriousness of the intervention by selling o yen looms, meaning the battle of nerves between the government, the BOJ, and the market is likely to continue.

On Sept. 22, at midday, Vice-Minister of Finance for International A airs Masato Kanda gave a blunt response to a question on the timing of an intervention to contain the sharp uctuations in the yen against the dollar. “We are on standby,” he said.

Four hours later, the government and the BOJ intervened by buying yen.

The intervention began following a depreciation of about ¥1 after the Federal Reserve announced a decision to raise interest rates significantly and the Bank of Japan announced that it would continue its massive monetary easing program.

Since Fed Chairman Jerome Powell expressed a positive view on raising interest rates in late August, dollar buying has gained momentum in anticipation of a rate hike and the yen has weakened.

e government has been nervous about responding to the yen’s depreciation since the beginning of September. A er meeting with Prime Minister Fumio Kishida on Sept. 9, BOJ Gov. Haruhiko Kuroda expressed his concerns to reporters. “Moves of ¥2 or ¥3 a day are drastic changes,” he said.

e government has repeatedly stated it would “take appropriate measures when necessary” in response to sudden uctuations.

When the BOJ conducted a “rate check” on Sept. 14, asking major banks about the appropriate exchange rate for transactions, the market took this as a sign of preparation to intervene.

In the market, the move was interpreted as “the ultimate verbal warning.” However, a verbal intervention alone was not enough.

From Sept. 21 to 22, when Japan and the U.S. each set monetary policy, the yen weakened signi cantly in the foreign exchange market.

Obtaining consent from the United States to intervene by buying yen and selling the dollar was thought to be di cult as the United States is prioritizing measures to combat in ation, and a weaker dollar could lead to higher prices in that country.

Meanwhile, the market was aware of the widening interest rate gap between Japan and the United States, and the Japanese government was seen as unlikely to intervene in the foreign exchange market.

erefore, the timing of the intervention just a er a press conference by Kuroda following the BOJ’s monetary policy meeting shocked the market.

“e intervention was a surprise because it came at a time when most of the yen selling by investors was over and trading volume had declined,” said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management.

e yen appreciated temporarily to the ¥140 level as a result of the intervention, but it is unclear whether the move will have a lasting e ect.

As of the end of August, the government held $1.292 trillion (about ¥190 trillion) in foreign currency reserves. Of this amount, only about ¥20 trillion is in “foreign currency deposits” that can be spent immediately.

Selling U.S. Treasury bonds, which account for the majority of foreign exchange reserves, to increase the resources for intervention could lead to a rise in U.S. interest rates, which would cause further depreciation of the yen.

Most interventions in the past have involved dollar-buying and yen-selling to correct sharp appreciations of the yen, triggered by events such as the Great East Japan Earthquake.

When the previous yen-buying intervention was conducted in April-June 1998, about ¥3 trillion was spent buying yen and selling the dollar, but against the backdrop of an Asian currency crisis, the yen depreciated to the ¥147 level against the dollar. (Sept. 24)

Toyota Motor Corp. has announced plans to terminate production at its St. Petersburg plant and suspend sales in Russia.

Seven months into Russia’s invasion of Ukraine, the automotive giant has decided there is no prospect of resuming operations in the country.

Toyota plans to begin the process of selling buildings and land instead of transferring operations to other entities, the company announced on Sept. 23.

Toyota suspended operations at the plant in March because it was unable to procure parts due to disruptions in the supply chain but it has “ensured the facility was ready to restart production if the circumstances allowed.”

e automaker has retained its workforce and continued to pay salaries, but now plans to start organizing severance pay and o ering assistance for reemployment while the local subsidiary has su cient funds.

“Even if we were to continue, we wouldn’t be able to produce vehicles as Toyota,” the automaker’s operating o cer Jun Nagata said in an online interview.

“Regarding nancial support for our employees, this was the right time to [halt operations]. It was a really hard decision.”

Toyota has operations around the world, including in Europe and North America.

With global condemnation of Russia growing, it is possible the company took its corporate image into consideration when making the decision to halt production.

Toyota is the rst Japanese auto giant to announce such plans. Nissan Motor Co., Mazda

Motor Corp. and Mitsubishi Motors Corp. will likely also face decisions on whether to continue operations in the country.

Toyota will withdraw from production and sales, but will provide repair and other services to Toyota and Lexus vehicle owners if parts can be procured in Russia.

Its operations in Moscow will be reduced and restructured.

Toyota began production of the Camry model in Russia in 2007. In 2021, the St. Petersburg plant was producing about 80,000 units, less than 1% of Toyota’s global production. (Sept. 25)

Mazda Motor Corp. has decided to end production in Russia, following Toyota Motor Corp.’s exit from the country, due to di culties in procuring parts.

Mazda suspended its operations in Russia in spring due to supply chain disruptions caused by Russia’s aggression in Ukraine.

e automaker made the decision to fully withdraw as there was no prospect of being able to resume operations.

Mazda considers Europe to be one of its major markets. As condemnations continue to mount against Russia, the automaker is also believed to have taken the impact on its corporate image into consideration.

Mazda plans to hold practical discussions regarding its withdrawal with the Russian company that it cooperates with in a joint venture.

e automaker had produced the CX-5 sports utility vehicle and other models in Vladivostok in eastern Russia since 2012 for the local market. (Sept. 26)