Toyota Motor Corporation (ADR) (TM), Honda Motor Co Ltd (ADR) (HMC): Is This Japan’s Turnaround?

Sony was able to return to profitability recently, due to the weaker yen, making 46.4 billion yen, or about half a billion U.S. dollars in its latest quarter. Sony’s CFO said that if the weak yen persists, then there is big upside ahead. Toyota Motor Corporation (ADR) (NYSE:TM) and Honda Motor Co Ltd (ADR) (NYSE:HMC) are much better ways to play this, as they are witnessing strong sales growth.

Toyota Motor Corporation (ADR) (NYSE:TM) saw its U.S. sales increase 27% in 2012, and 22.6% overall auto sales growth in 2012. Honda Motor Co Ltd (ADR) (NYSE:HMC) saw U.S. sales increase 24% in 2012 and overall sales increased 19%. Domestically, Honda Motor Co Ltd (ADR) (NYSE:HMC) and Japan were huge winners. As the Japanese economy recovers from the tsunami, consumers were more willing to go out and spend.

Toyota Motor Corporation (ADR) (NYSE:TM)’s domestic sales increased 35.2% and Honda Motor Co Ltd (ADR) (NYSE:HMC)’s was up 48%. When compared to their South Korean rival, Toyota Motor Corporation (ADR) (NYSE:TM) and Honda’s sales growth was significantly larger than Hyundai’s 11.9% sales growth in Japan.

Final thoughts

While there are some draw backs to a weaker currency, such as higher input costs due to higher relative energy prices, in the long run, this export-based economy has much to gain. As Japan’s economy turns itself around, domestic auto sales will rise, which will benefit Toyota and Honda, and consumers will have more money to spend on Sony products.

Internationally, all three companies will benefit due to higher sales volumes and market share gains. I think that the BOJ will be able to get the yen to 100-110 for 1 USD within the next 3-6 months, that Japan’s corporate sentiment reading will be positive in the next 2-3 months, and that exports will begin to see a meaningful rise within the next 3-6 months. The BOJ is definitely worth watching over the next few months.

The article Is This Japan’s Turnaround? originally appeared on Fool.com and is written by Callum Turcan.

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