Yen dip, particularly to a 34-year low, could have significant impacts on India’s automotive industry.
The Japanese yen dip at 34-year low after the Bank of Japan ended negative interest rates. Typically, rate hikes strengthen the currency by drawing investors into debt.
However, the central bank’s dovish message signals a continuation of accommodative monetary policy, which is weighing on the yen. The statement suggests that wage inflation is set to pick up strongly, indicating that this is not the start of an aggressive rate hiking cycle.
The Yen’s weakening, particularly to a 34-year low, could have significant impacts on India’s automotive industry.
The Japanese yen hit a 34-year low after the Bank of Japan ended negative interest rates. Typically, rate hikes strengthen the currency by drawing investors into debt. However, the central bank’s dovish message signals a continuation of accommodative monetary policy, which is weighing on the yen. The statement suggests that wage inflation is set to pick up strongly, indicating that this is not the start of an aggressive rate hiking cycle.
A weaker Yen could benefit auto-ancillary companies and Indian banks with yen exposure, while also lowering import costs for Indian businesses reliant on Japanese goods and services.
The Yen’s recent 34-year low could significantly impact India’s automotive industry, according to CA Krishnan R, Director & CEO of Unimoni Financial Services.
The weaker yen could make Japanese products cheaper in international markets, benefiting the Indian automotive industry, particularly Maruti Suzuki, as many Indian companies collaborate with Japanese companies for technology exchange and components.
Maruti Suzuki paid 3.6% of its net total income to its parent company, Suzuki Motor Corporation (Japan), in FY21. Imports in yen also contribute to 7-8% of the company’s annual income. Following a yen slump, Maruti Suzuki shares rose 3% to a record high of Rs 12,722 on NSE.
Lumax Industries and JTEKT India are expected to benefit from a yen depreciation, as their collaboration with Stanley Electric Company and transactions with JTEKT Corporation are denominated in yen.
This reduction in costs improves operational efficiency and financial performance, positively affecting stock values in the automobile and related sectors.