4 reasons the falling yen won’t lead to cheaper cars

4 reasons the falling yen won’t lead to cheaper cars

The Japanese yen may have hit a 24-year low, but don’t expect Japanese cars to see reduced prices too.

With a global recession potentially on the horizon, the Japanese yen has also taken a dip and has hit lows not seen in 24 years.

But despite this, don’t expect the price of Japanese cars to start falling too. In fact, here’s four factors why the falling yen won’t necessarily lead to cheaper cars.

Microchip prices

Yes, the famed microchip. With demand high and supply low, microchip prices are rising. To compensate for this, car manufacturers pass this on to the freight charges that go into bringing your car into the country. 

This in turn causes the open market value (OMV) of cars to also rise to compensate for the chain effect. 

Open market value of your car is derived from the cost of purchase from manufacturers, cost of shipping, and insurance for the shipping process.

For example, the OMV of a Toyota Camry Hybrid climbed from $29,776 to $31,430 between March and May of 2022.

Pre-agreed prices

The price you pay for your car is often agreed upon between distributors and car companies months before production. 

And from the time it takes for a car to go into production, undergo homologation here, and be available for sale, it might take a while before you see prices of Japanese cars sold here affected. 

Not all cars are bought in their home currency

Your car may come from Japan, but that does not necessarily mean it’s bought by the distributor in yen. 

For example, the authorised dealer for Toyota and Lexus in Singapore – Borneo Motors – buys some of their cars from Toyota Motor Asia Pacific in Singapore dollars. 

Some parallel importers get their stock from wholesalers in Japan, who are also affected by the microchip shortage, thus keeping prices high by the time the cars reach Singapore. 

Rising COE prices

Earlier this month, COE crossed the $100,000 mark for the first time since the 1990s. 

With final car prices dependent on COE, some dealers might not want to sell their cars cheap because of the unpredictable COE – despite the falling Yen.

ALSO READ: Here's how much more expensive cars got in 2022

This article was first published in CarBuyer.

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