Three of Japan’s biggest carmakers said on Thursday that output in China slumped again last month as they continue to feel the effects of a bitter territorial dispute between Tokyo and Beijing.
Toyota, the world’s best-selling auto maker in the first six months of the year, produced 61 per cent fewer cars in China year-on-year in October, it said, while Nissan cut output by 44 per cent and Honda by 54 per cent.
The figures follow earlier data showing all three companies had seen large falls in sales in China over the month as a consumer boycott of Brand Japan lashed two-way trade.
Although in per centage terms Nissan was the least badly affected of the three, its exposure to China is greater, meaning its absolute production fell further. Toyota made just 30,600 vehicles over the month, Honda produced 26,302 and Nissan 61,360.
Last month, Nissan CEO Carlos Ghosn told the Financial Times his company would think twice before making new investments in the country.
“Certainly beyond what we have decided, before going for further decisions in China, we will be very careful in assessing how much of an impact (the political situation) has on consumers’ minds,” Nissan’s top executive said.
Beijing and Tokyo have disagreed for decades over the sovereignty of an uninhabited archipelago in the East China Sea.
The Senkaku Islands are controlled by Japan, but claimed by China, which calls them the Diaoyus.
The Japanese government’s move to nationalise three of the islands in September sent relations tumbling, with sometimes violent protests erupting in cities across China.
Japanese businesses were frequently targeted in demonstrations commentators said must have had at least tacit state backing. Factories and shops were shuttered either because of actual damage or because of threatened violence. Numerous Japanese cars were wrecked by mobs, another factor that could have led to a fall in sales.
But despite the gloom from China, Toyota and Honda logged rises in total overseas production, with Toyota seeing a 13 per cent uptick in output at plants excluding those in Japan. Honda’s overseas production jumped 20 per cent.
Nissan said its overseas production total fell 1.7 per cent. All three companies saw output fall in Japan.
Bank of Japan board member Sayuri Shirai warned of looming risks to the economic outlook that could keep price growth lower than the central bank’s forecasts, keeping alive market expectations of further monetary loosening as early as next month.
Shirai, a former IMF economist, repeated the BoJ’s view that consumer inflation will steadily approach the central bank’s target of 1 per cent in the year ending in March 2015.
But she said the risk balance for price growth was “tilted to the downside,” warning that the widening pain from Europe’s debt woes, slowing Chinese growth and the looming US fiscal cliff may delay Japan’s progress in overcoming deflation.
“While both upside and downside risks to the economy exist, I personally see the downside risks as greater,” Shirai told business leaders in Kumamoto, southern Japan, on Thursday. The risks have not heightened beyond what the BoJ projected in its twice-yearly outlook report issued last month, although vigilance was needed on whether they could materialise and further hurt the world’s third-largest economy, she said.
“Capital expenditure and private consumption are among key risks I’d like to look out for,” she told a news conference after the meeting, pointing to signs that some companies were starting to delay investment due to weakening sales overseas. Aside from overseas risks, Japan’s economic outlook is also clouded by an expected sales tax hike in 2014 that could dampen consumer spending, Shirai said.
Japan’s economy shrank 0.9 per cent in the quarter to September and analysts expect another contraction in the final three months of this year, a sign that weak exports and output were nudging the economy into recession.
The BoJ eased policy for two straight months in October to ease the pain from weakening global demand, and many market players expect it to expand stimulus again as early as its next policy-setting meeting on December 19-20 in the face of heightening political pressure for bolder action to beat deflation.