Weak Yen Gives Japan a Competitive Advantage

European and U.S. automobile produces are having issues with Japan and its weak currency...the yen. Since Japan has its weak yen, they have a 15% to 20% cost advantage over the U.S. The yen has reached record lows against the euro and is also very low compared to the U.S. Dollar. The U.S. has such problems with this because they can barely keep up with Japanese quality and cost so this extra competitive advantage makes it really hard on these auto makers. The cause of the low yen is said to be the difference in interest rates between these countries. In Japan, interest rates are really low compared to the U.S. and Europe and no one sees Japan going through inflation anytime soon. This means the yen should not change in value anytime soon.

Exporting and Importing is hard enough between countries. The point of trading is so both countries end up happy or at least content. It seems like the European and U.S. auto makers are not happy nor content. Japan holds the competitive advantage in this situation because it costs them far less to make cars simply because their currency is weaker than that in the other nations. Should the Japanese be held responsible for an advantage that is out of their control and should they be penalized?