As Toyota faces the challenge of staying committed to domestic production, it announced on May 11 that it may scale back its production in Japan, resulting to the loss of tens of thousands of jobs.
Satoshi Ozawa, executive vice president, said that he has advised the president to reconsider its policy as it can’t keep producing in Japan at the yen’s current level.
He said that the situation is partly due to a strong yen, the expensive labor costs in Japan, and the lack of progress in the discussions on Japan's participation in the Trans-Pacific Partnership, a free-trade deal involving Pacific Rim nations.
If Japan chose to participate in the Trans-Pacific Partnership, this would have reduced the tariffs on trade among members.
The major automakers in Japan have been eagerly waiting for Japan’s inclusion; however, Prime Minister Naoto Kan’s administration has not yet decided whether it will join talks on the trade pact.
Before the March 11 disaster, Toyota had predicted that its global output in 2011 will be 7.7 million units, of which 3.1 million were to be built in Japan. More than 50% of those cars were meant to be exported, making them susceptible to the yen's increase against other major currencies.
Toyota has kept its domestic vehicle production higher than 3 million units. This level is considered important for Japan's economy and job situation for over 30 years. An exception is 2009, when its output plunged to 2.79 million due to the global recession.