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CNBC
3 days ago
- Automotive
- CNBC
Trump's tariff deal offers scant relief for Japan automakers as bigger threat looms
Japanese automakers may have sidestepped crushing U.S. tariffs, but the reprieve is offering little comfort as Chinese automakers erode their long-held global edge, complicated by persistent structural challenges at home. On July 22, U.S. President Donald Trump announced that auto tariffs on Japan-made vehicle imports to the U.S. were lowered to 15% from the current 25%. However, the light isn't at the end of the tunnel just yet, industry experts cautioned. "The trade deal struck with the U.S. is certainly a relief in that it offers some certainty that U.S. tariffs on Japan-made cars won't rise to punitive levels," said Stefan Angrick, head of Japan and Frontier market economics at Moody's Analytics. "But I'd hesitate to call it good news. A 15% U.S. import tariff is still significantly higher than where Japan started. And a 15% tariff is certainly a higher rate than most had expected." The larger challenge, analysts say, comes from China's meteoric rise in the global automotive industry. Once an important growth market for Japanese brands, China has transformed into a dominant competitor. A key challenge for Japanese producers is the intensifying competition from China, Angrick said. China's push into advanced manufacturing has transformed it into a formidable competitor just as domestic demand for Japan-made cars began to soften, he added. Seconding his view is Karl Brauer, executive analyst at iSeeCars, who noted that lower-cost Chinese vehicles remain the "single biggest threat" to Japan's auto industry and economic outlook. China is the world's largest car producer and exporter, particularly of electric vehicles. The country's growing dominance in critical components and EV innovation is increasingly squeezing foreign automakers. Chinese automakers have also been making significant inroads into Southeast Asia — a region long dominated by Japanese brands like Toyota, Honda, and Nissan — making it an uphill battle for Japanese automakers to maintain their once-unassailable global market share. According to a 2025 report by PwC, the market share of Japanese auto manufacturers in Indonesia, Malaysia, Thailand, the Philippines, Vietnam and Singapore, commonly referred to as ASEAN-6, fell from 68.2% in 2023 to 63.9% in 2024. "[China autos] are expanding into markets where Japanese firms used to have a strong foothold. Thailand is one example," said the Moody's Analytics' expert. Beyond Southeast Asia, Japan's second-largest car export market is also being contested by China: Australia. A recent study commissioned by the Australian Automotive Dealer Association predicts that China is poised to surpass other countries as Australia's leading source of vehicle imports within the next decade. By 2035, 43% of all imported vehicles in Australia are expected to be manufactured in China, up from the expected 17% in 2025, the report suggested. By contrast, Japanese imports are expected to fall from 32% in 2025 to 22% by 2035. Besides external competition, Japan's automotive sector is contending with domestic economic challenges, including high inflation and weak consumer spending — similar to other developed large automakers like Toyota continue to find success domestically, Nissan is especially vulnerable due to the growing threat from China's automotive industry, Brauer explained. Earlier missteps by the management and planned plant closures are compounding its woes. Nissan plans to shut down seven of its 17 plants by fiscal 2027 and reduce its global workforce by around 15% as part of a restructuring plan. "All in all, the outlook for Japan's car industry is very challenging," Moody's Angrick said. While Toyota's global scale and diversified manufacturing footprint give it a relative advantage in maneuvering said challenges, smaller automakers such as Subaru and Mazda are under more pressure, noted Mio Kato, founder of Lightstream Research. While Subaru and Mazda do face a "significantly higher burden," they do have an advantage in having strong ties to Toyota, said Kato. Mazada, for one, shares a joint plant with Toyota, while Subaru is teaming up with Toyota to manufacture a co-developed electric vehicle slated for a 2026 debut. In the long term, Kato believes that these partnerships could deepen, potentially leading to a more formal consolidation under Toyota's umbrella. "I wouldn't expect [a consolidation] to happen on a short-term timeframe. However, it is certainly something for them to consider when you start looking towards the end of the decade, perhaps," he said. Still, analysts acknowledge that Trump's finalized tariff rate brings at least one benefit: some predictability. While it is still too soon to fully infer the long-term impact of the new trade agreement between the U.S. and Japan, having a confirmed tariff agreement will allow Japanese automakers to know their pricing and cost structures going forward, experts echoed. However, it remains unclear what tariff rates other automakers will face. "I think the absolute case for Japan is now understood relatively well, but in terms of how their competitiveness shifts, versus say, autos manufactured in Korea and exported or from Mexico and Canada, that could still impact the profit outlook for Japanese auto companies," Kato said.
Business Times
30-06-2025
- Business
- Business Times
Japan factory output rises, but slower than expected as US tariffs threat looms
[TOKYO] Japanese factory output rose at a slower-than-expected pace in May, government data showed on Monday (Jun 30), as sweeping US tariffs were threatening to derail the country's already fragile economic recovery. Industrial output rose 0.5 per cent in May from the previous month, data from the Ministry of Economy, Trade and Industry (METI) showed, less than a median market forecast for a 3.5 per cent rise. Manufacturers surveyed by METI expect seasonally adjusted output to rise 0.3 per cent in June and fall 0.7 per cent in July. 'It's necessary to pay close attention to the worsening trend in sentiment (among manufacturers on) production planning,' a METI official said. Tokyo is scrambling to find ways to get Washington to exempt its automakers from automobile industry-specific tariffs of 25 per cent, which are severely impacting the country's manufacturing sector. Japan also faces a 24 per cent 'reciprocal' tariff rate starting on July nine unless it can negotiate a deal with Washington. Motor vehicle production went up by 2.5 per cent and shipments jumped 10.5 per cent in May from a month prior, the data showed. Some manufacturers had moved up their shipments because of the tariffs, the METI official said. BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up The number of firms mentioning that the tariffs had an impact on their production or shipment increased slightly from April, the official said. 'Exports are likely to remain sluggish and production indices are expected to continue show weakness in response to the global economic slowdown,' said Yutaro Suzuki, an economist at Daiwa Securities. The hit from US tariffs could derail a lacklustre recovery in Japan's economy, the world's fourth largest. The economy shrank in January-to-March quarter, the first contraction in a year, due to subdued private consumption. The US tariffs also complicate the Bank of Japan's efforts to raise still-low interest rates and reduce a balance sheet that has ballooned to roughly the size of Japan's economy. 'The poor run of data will keep the central bank on hold for the time being,' said Stefan Angrick, head of Japan and Frontier markets Economics at Moody's Analytics. 'Until there's progress on US-Japan trade, Japan's manufacturers will remain in the doldrums, with few clear sources of support.' REUTERS
Time of India
30-06-2025
- Automotive
- Time of India
Japan factory output rises, but slower than expected as US tariffs threat looms
Japanese factory output experienced a slower-than-expected rise of 0.5% in May, raising concerns about the country's fragile economic recovery. U.S. tariffs on automobiles are significantly impacting Japan's manufacturing sector, prompting concerns about potential reciprocal tariffs. Economists anticipate continued weakness in exports and production due to the global economic slowdown, complicating the Bank of Japan's monetary policy efforts. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads Japanese factory output rose at a slower-than-expected pace in May, government data showed on Monday, as sweeping U.S. tariffs were threatening to derail the country's already fragile economic output rose 0.5% in May from the previous month, data from the Ministry of Economy, Trade and Industry (METI) showed, less than a median market forecast for a 3.5% surveyed by METI expect seasonally adjusted output to rise 0.3% in June and fall 0.7% in July."It's necessary to pay close attention to the worsening trend in sentiment (among manufacturers on) production planning," a METI official is scrambling to find ways to get Washington to exempt its automakers from automobile industry-specific tariffs of 25%, which are severely impacting the country's manufacturing sector. Japan also faces a 24% "reciprocal" tariff rate starting on July 9 unless it can negotiate a deal with vehicle production went up by 2.5% and shipments jumped 10.5% in May from a month prior, the data showed. Some manufacturers had moved up their shipments because of the tariffs, the METI official number of firms mentioning that the tariffs had an impact on their production or shipment increased slightly from April, the official said."Exports are likely to remain sluggish and production indices are expected to continue show weakness in response to the global economic slowdown," said Yutaro Suzuki, an economist at Daiwa hit from U.S. tariffs could derail a lacklustre recovery in Japan's economy, the world's fourth largest. The economy shrank in January-March, the first contraction in a year, due to subdued private U.S. tariffs also complicate the Bank of Japan's efforts to raise still-low interest rates and reduce a balance sheet that has ballooned to roughly the size of Japan's economy."The poor run of data will keep the central bank on hold for the time being," said Stefan Angrick, head of Japan and Frontier markets Economics at Moody's Analytics . "Until there's progress on U.S.-Japan trade, Japan's manufacturers will remain in the doldrums, with few clear sources of support."
New Straits Times
30-06-2025
- Business
- New Straits Times
Japan factory output rises, but slower than expected as US tariffs threat looms
TOKYO: Japanese factory output rose at a slower-than-expected pace in May, government data showed on Monday, as sweeping US tariffs were threatening to derail the country's already fragile economic recovery. Industrial output rose 0.50 per cent in May from the previous month, data from the Ministry of Economy, Trade and Industry (METI) showed, less than a median market forecast for a 3.50 per cent rise. Manufacturers surveyed by METI expect seasonally adjusted output to rise 0.30 per cent in June and fall 0.70 per cent in July. "It's necessary to pay close attention to the worsening trend in sentiment (among manufacturers on) production planning," a METI official said. Tokyo is scrambling to find ways to get Washington to exempt its automakers from automobile industry-specific tariffs of 25 per cent, which are severely impacting the country's manufacturing sector. Japan also faces a 24 per cent "reciprocal" tariff rate starting on July 9 unless it can negotiate a deal with Washington. Motor vehicle production went up by 2.50 per cent and shipments jumped 10.50 per cent in May from a month prior, the data showed. Some manufacturers had moved up their shipments because of the tariffs, the METI official said. The number of firms mentioning that the tariffs had an impact on their production or shipment increased slightly from April, the official said. "Exports are likely to remain sluggish and production indices are expected to continue to show weakness in response to the global economic slowdown," said Yutaro Suzuki, an economist at Daiwa Securities. The hit from US tariffs could derail a lacklustre recovery in Japan's economy, the world's fourth largest. The economy shrank in January–March, the first contraction in a year, due to subdued private consumption. The US tariffs also complicate the Bank of Japan's efforts to raise still-low interest rates and reduce a balance sheet that has ballooned to roughly the size of Japan's economy. "The poor run of data will keep the central bank on hold for the time being," said Stefan Angrick, head of Japan and Frontier Markets Economics at Moody's Analytics. "Until there's progress on US-Japan trade, Japan's manufacturers will remain in the doldrums, with few clear sources of support."
France 24
20-06-2025
- Business
- France 24
Rice prices double in Japan as inflation accelerates
The vote for parliament's upper house, due next month, is crucial for Ishiba after public support for his government tumbled to its lowest level since he took office in October, partly due to frustration over the cost of living. In May, Japan's core inflation rate, which excludes volatile fresh food prices, hit 3.7 percent -- its highest level since January 2023 -- interior ministry data showed. The figure narrowly beat market expectations and was up from a 3.5 percent year-on-year rise logged in April. Rice was more than twice as expensive as a year previously -- despite the government releasing its emergency stockpile of the staple grain to try to bring its price down. A supply chain snarl-up has caused a shortage of rice in shops, with the grain's price up 101 percent on-year in May, compared to the eye-watering 98 percent rise in April. The government began releasing stockpiles in February in an attempt to drive down prices, something it has only previously done during disasters. Electricity bills were 11.3 percent higher in May, and gas fees rose 5.4 percent, according to Friday's data. Excluding energy and fresh food, Japan's consumer price index (CPI) rose 3.3 percent, compared to April's 3.0 percent. Cash handouts To help households combat inflation, Ishiba has pledged cash handouts of 20,000 yen ($139) for every citizen, and twice as much for children, ahead of the election. The 68-year-old leader's coalition was deprived of a majority in the powerful lower house in October as voters vented their anger at rising prices and political scandals. It was the worst election result in 15 years for the Liberal Democratic Party (LDP), which has governed Japan almost continuously since 1955. Earlier this week the Bank of Japan kept its interest rates unchanged and said it would taper its purchase of government bonds at a slower pace, as trade uncertainty threatens to weigh on the world's number four economy. "Policy flip-flops and delayed pass-through from producers to consumers mean inflation will slow only gradually in the coming months," said Stefan Angrick of Moody's Analytics. "This will keep a sustained pickup in real wages out of reach, and with it a meaningful uptick in consumption." Factors behind the rice shortages include an intensely hot and dry summer two years ago that damaged harvests nationwide. Since then some traders have been hoarding rice in a bid to boost their profits down the line, experts say. The issue was made worse by panic-buying last year prompted by a government warning about a potential "megaquake" that did not strike. Going forward, US tariffs are expected to weigh on Japan's growth, with economists predicting a slowdown ahead. Intensifying fighting between Iran and Israel was also adding pressure for energy prices to head north, posing a further risk to the Japanese economy.
