Toyota Motor Corporation (ADR) (TM), Honda Motor Co Ltd (ADR) (HMC): Is Ford Motor Company (F) Hypocritical for Lashing Out at Japanese Policy?

If we zoom out from the one-year snapshot of the yen-dollar exchange rate, it becomes clear that the yen has actually appreciated against the dollar over the past 20 years. In other words, Japanese exports have become less competitive vis-a-vis products “made in the USA,” even though Japan’s economy has been much weaker over that time period.

US Dollar to Japanese Yen Exchange Rate data by YCharts

Looking at the past six years, U.S. monetary policy has probably had a bigger impact on the yen-dollar exchange rate than Japanese monetary policy. The yen went into freefall against the dollar from mid-2007 until the beginning of 2012. That movement correlates closely with a dramatic loosening of U.S. monetary policy. First, the Federal Open Market Committee rapidly cut the federal funds rate from 5.25% to approximately 0 between September 2007 and December 2008.

The Fed’s first quantitative easing program came directly on the heels of these rate cuts and continued into 2010. Later in 2010, the Fed initiated a second round of quantitative easing that continued until June 2011. A third round of quantitative easing followed in 2012.

These policy actions helped drive the yen-dollar exchange rate from around 115 in mid-2007 to a low of 76 in early 2012. That drop vastly improved the economics of U.S.-produced autos over Japanese imports. While Ford and GM primarily used cost cuts to return to profitability since the Great Recession, the strong yen gave them a big assist.

Hot air
Ford Motor Company (NYSE:F) has benefited greatly from the Fed’s loose monetary policy over the past six years. Ford executives never expressed concerns that they were profiting from an “unfair” advantage. Now that the yen and dollar are moving back into a more rational equilibrium, it seems pretty hypocritical for Ford executives to complain about exchange rates. Japan is simply following the same strategies the U.S. has used to recover from the Great Recession.

Ford has benefited from monetary-policy driven exchange rate fluctuations more than it has been hurt over the past several years. People who live in glass houses shouldn’t throw stones.

The article Is Ford Hypocritical for Lashing Out at Japanese Policy? originally appeared on Fool.com and is written by Adam Levine-Weinberg.

Fool contributor Adam Levine-Weinberg has no position in any stocks mentioned. The Motley Fool recommends Ford and General Motors and owns shares of Ford.

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