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Yen turmoil hits car makers

The damage done to Japan's exporters by the high yen was underlined yesterday when the country's powerful car industry warned of big production cuts this year.

Mazda has announced a cut in output of 20 per cent, while Japan's car manufacturers' trade body said that production this year may fall to a 15-year low because of the currency turmoil.

Since the beginning of the year the value of the yen has increased by nearly 20 per cent against the dollar. On 1 April Mazda raised prices by 2 per cent in the US, the world's biggest and most competitive car market.

The company, 25-per cent owned by Ford, said it would halt production on selected days at two plants in western Japan that produce vehicles for export to North America. It means production for the April-June period will be reduced by 45,000 vehicles to 155,000.

Earlier this month, Mazda had said it would cut output by about 20,000 cars from its original plans during April and May. A spokesman said Mazda expected production to recover in July. Unlike Mazda's larger rivals, it has no overseas manufacturing plants and cannot switch production overseas.

Japan's car output fell for the fourth straight year in the 12 months to 31 March, said the Japan Automobile Manufacturers Association. Japan produced 10.62 million vehicles to end-March, a 2.1 per cent drop on the previous year. It has been 14 years since Japan last produced so few automobiles and a fall this year is likely.

Hiroshi Suemasa, a senior analyst at Kankaku Research Institute, predicted the volume of Japanese auto exports would drop at least 10 per cent in 1995/96 if the dollar stayed at around 80 yen. It is now just below 83 yen.

The appreciating yen has been a powerful bonus to US negotiators trying to get the Japanese to open up its car and components markets. Jeffrey Garten, US Undersecretary of Commerce for International Trade, yesterday called on European Union countries to publicly back the US in negotiations. He said that he had received private support, but wanted the EU to understand that the talks were also vital for Europe.