Japanese used car dealers struggle as weak yen favors foreign buyers

Japanese used car dealers struggle as weak yen favors foreign buyers

Japanese used car dealers are facing a significant challenge in the current economic climate, as the weak yen is benefiting foreign buyers and contributing to an increase in bankruptcies. According to Teikoku Databank, 50 used auto dealerships filed for bankruptcy in the first five months of 2025, marking a 56% rise compared to the same period last year [2].

The weak yen has made Japanese used cars more affordable for foreign buyers, leading to increased competition in the market. This trend is particularly evident in auctions, where foreign dealers are buying automobiles at lower prices due to the depreciation of the yen. The Bank of Japan's (BoJ) ultra-loose monetary policy, which includes extremely low interest rates and aggressive asset-buying programs, has contributed to the yen's weakness [1].

The economic recovery and stability of Japan are crucial for the U.S., making it unlikely that the U.S. will exert significant pressure on Japan to strengthen its currency. Instead, the focus remains on broader economic and geopolitical concerns, such as trade negotiations and global economic stability [1].

The recent Producer Price Index (PPI) reading in Japan, which dipped to a 10-month low of 2.9% year-on-year in June 2025, has sent a clear signal to markets: core inflationary pressures are easing at the producer level, and this could delay the BoJ's policy normalization. This slowdown in producer prices is likely to continue, favoring a weaker yen as the dollar benefits from higher U.S. yields [3].

The U.S. election in November 2025 introduces another layer of uncertainty, which could further impact the yen's value. A Democratic victory could accelerate fiscal stimulus, boosting U.S. growth and the dollar, while a Republican win might reignite trade tensions with China, affecting global supply chains and further depressing commodity prices—hurting Japan's import-dependent economy [3].

In conclusion, while Japanese used car dealers face challenges due to the weak yen, the broader economic and geopolitical context suggests that the U.S. will not put significant pressure on Japan to strengthen its currency. The focus remains on economic recovery and stability, with the yen's value likely to remain a secondary concern.

References:
[1] https://www.investing.com/analysis/why-japan-is-unlikely-to-face-us-pressure-to-strengthen-the-yen-200663443
[2] https://asia.nikkei.com/Business/Automobiles/Japan-used-car-dealers-suffer-as-weak-yen-benefits-foreign-rivals
[3] https://www.ainvest.com/news/japan-cooling-producer-prices-signal-yen-weakness-bearish-trade-setup-2507/