Japan's most valuable listed company is shifting to a new phase of
much slower but more stable growth, senior executives said, as the
burst of gains from a weak yen and Prime Minister Shinzo Abe's
stimulus policies fades.
That trend, fed also by an increase in Japan's sales tax and
slowdowns in key overseas markets such as Thailand, could see the
world's largest carmaker eventually losing its crown to an ascendant
Volkswagen AG <VOWG_p.DE>.
"Last year's pace was abnormal in the context of sustainable
growth," said a senior executive, who spoke on condition of
anonymity. "We don't want people to be up on cloud nine just because
we hit a record."
Added another: "We need to be cautious."
A slowdown for the country's biggest manufacturing profit earner
will bode poorly for Japan's economic outlook.
Three senior Toyota executives spoke to Reuters on condition of
anonymity, discussing the company's outlook for the fiscal year from
April 1 ahead of the release of official guidance on May 8. They did
not give any financial details.
Separately, a source close to Toyota said it may project a fall in
profit for this fiscal year, a view echoed by some analysts, who
note its typically conservative stance.
The consensus from a survey by Thomson Reuters I/B/E/S of 26
analysts, however, calls for Toyota's operating profit to rise to
another record of 2.66 trillion yen ($26 billion), albeit with
growth of a much more modest 10 percent after last year's estimated
80 percent surge.
"We cannot rule out the possibility operating profit guidance will
be flat or down year-on-year," Tokyo-based Barclays autos analyst
Tatsuo Yoshida said in a report, though he himself forecasted
growth. Much will depend on currency rates and other assumptions, he
Toyota declined to comment on financial results or forecasts ahead
of the actual announcement.
The dollar has surged more than 25 percent against the yen over the
past 17 months, spurred by Abe's easy-money policies, and the auto
industry has been a big beneficiary, especially export-oriented
Toyota, Mazda Motor Corp <7261.T> and Fuji Heavy Industries Ltd
In 2013, Japan's auto exports jumped 13 percent to 10.4 trillion
yen, while their share of the country's total exports edged up 0.5
percentage point to 14.9 percent.
Currency gains lifted operating profit at Japan's seven car makers
by 1.6 trillion yen in the nine months to December. At Toyota, yen
weakness will account for more than four-fifths of its expected
operating profit rise in 2013/14.
In the current year from April 1, however, Barclays' Yoshida
forecast that currency moves would cut Toyota's operating profit by
20 billion yen.
HIT TO MOMENTUM
The hit to auto-sector profits could sap momentum in what has been a
particularly resilient sector in Japanese manufacturing.
Nagoya and the surrounding region of central Japan, home to Toyota
and its suppliers, is one of the country's best-performing regional
economies, according to a recent Bank of Japan report.
[to top of second column]
Toyota also set the benchmark for a series of wage increases this
spring sought by the prime minister to take his "Abenomics" policies
beyond the initial burst of stimulus into a sustainable cycle of
income, spending and investment growth.
But the Toyota executives interviewed over the past week, with their
guarded outlook, were in no mood to spend freely.
"If we make plans based on the pace of growth we have experienced
over the last few years, things will not turn out well," one
executive said, warning of the risk of over-expansion and
The slow-and-steady pace is consistent with the conservative stance
taken by President Akio Toyoda, the 57-year-old grandson of the car
maker's founder, since he took the helm five years ago.
Toyoda has led a recovery from losses suffered in the global
financial crisis and a hit to the company's reputation from a global
recall after cases of unintended acceleration.
He blamed overly aggressive expansion for the problems behind the
recall and for overcapacity at the car maker, even as it rose to
number one in the global industry.
The company has since stopped emphasising numerical sales targets,
in contrast to Volkswagen CEO Martin Winterkorn's aggressive target,
set seven years ago, of selling 10 million cars a year by 2018.
Both companies now look set to hit the 10 million cars milestone
this year, and Volkswagen could overtake Toyota within the next few
years, said Satomi Hamada, a senior analyst at IHS Automotive.
She said the pace of growth in traditional Toyota strongholds such
as Japan, Thailand and North America would slow. In China, however,
now the world's biggest car market with growth expected to remain
brisk, Volkswagen is a dominant player, outdistancing Toyota and
other Japanese carmakers.
President Toyoda's comments suggest he is likely unfazed by that
"If a tree suddenly grows very fast, the rings of the trunk will be
unstable and the tree weak," he told reporters in December. "Growing
constantly at a steady pace is what helps to build a strong trunk."
($1 = 101.8500 Japanese yen)
(Editing by Edmund Klamann and Alex Richardson)
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