US Recession Sparks Japanese Auto Boom

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High inflation in the US has made Japan an even better investment. The yen is at near record values against the US Dollar. While the US market sputters, Japan is fueled by better currency rates and an overall stronger economy.

For years, the Japanese economy was in shambles. Japan’s central bank was loaning at negative interest rates to keep credit revolving through the system. Years of too much credit and adverse market conditions have led to a healthy Japanese economy. The Japanese automotive sector looks particularly healthy, while the price of the stocks of most Japanese automakers looks beaten down.

Domestic sales turning around

The long slow down in domestic Japanese sales might be turning around. The last time the Japanese yen was valued strongly against the dollar was in the early 1990s, when domestic car sales were setting records. The dropping dollar may be a catalyst to a thriving auto industry set to benefit domestically from lower metal costs.

The price of oil has also spurred demand for small Asian compacts and hybrids. $102 oil means that consumers are finally willing to make the switch from a conventional car to a hybrid. Toyota has an extensive line of hybrid cars and even offers its classic Camry with the hybrid option.

High scores for Asian cars

One boost for Asian automakers might be in the recent Consumer Reports annual rating. Toyota, Honda, and Subaru were on top of the list of the best cars sold in the US. Even Hyundai had two cars on the best of class categories.

Asian automakers are looking forward to strong sales in China and Russia, even as sales in the US and Europe decline. According to forecasts, Japanese automakers anticipate selling five million units to Asian markets in 2008, which will surpass their domestic market for the first time in history.

The emerging middle class in China is looking to Toyotas as a luxury car. In China, a car can be purchased for as low as $4,000, and thus, $27,000 – $30,000 Toyota Camry’s are a car of luxury. The huge market in China should give the big three Japanese automakers a market for their products, even if the world economy slows.

Asian automaker stocks are looking the cheapest they ever have. Honda, Toyota and Nissan shares have all been beaten down on the world markets as a weary public fears recession. This may be a good time to buy shares at a significant discount. Growth in China, India and Russia is likely to continue and boost demand for inexpensive compact cars. Higher gas prices at the pumps should also boost demand for the popular Hybrid series, which are dominated by Japanese automakers.

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