Japanese Automakers Slash Export Prices to the U.S. Amid Tariff Concerns

According to Bloomberg, Japanese automakers are reducing their export prices to the U.S. at a record pace, indicating that they are sacrificing profits to remain competitive in the wake of President Trump's tariffs on imported vehicles. The Bank of Japan's report on corporate goods prices released on July 10 revealed that the price index for cars exported to North America in June fell by 19.4% year-on-year in contract currency, marking the largest monthly drop since records began in 2016. This data suggests that despite Trump's imposition of a 25% tariff on imported cars starting in early April, Japanese car manufacturers are striving to avoid significant price increases to maintain competitiveness in the U.S. market. However, this move raises concerns about corporate profitability and the potential for continued wage growth, which is a key pillar for the Bank of Japan in achieving sustainable inflation targets. The report also indicated that Japan's producer price index rose by 2.9% year-on-year in June, a slowdown from 3.3% in May, primarily due to declining oil and steel prices. Kazuo Ueda, the Governor of the Bank of Japan, stated last week that he is closely monitoring whether a virtuous cycle of wages and inflation can be maintained in the context of the U.S. tariffs. In addition to the existing tariffs on imported cars and steel, Trump announced on July 7 that the U.S. would increase the tariff rate on all categories from Japan to 25% beginning August 1, which will directly impact the automotive industry. Following this announcement, shares of Japanese automakers listed in the U.S. fell, with Toyota's stock dropping 4.1% during afternoon trading and Honda's shares declining by 3.8%; the dollar surged against the yen on the same day. Although manufacturers like Subaru have announced price increases for some models, the cautious pricing strategy of Japanese automakers is evident in other data: Japan's car exports to the U.S. in May (accounting for about 25% of Japan's total exports to the U.S.) fell by 24.7% year-on-year, but the export volume only declined by 3.9%.