Why did Honda move part of the production to the United States?

In 2012, a Honda Motor Company executive announced that the company would move a larger portion of its automobile production from Japan to the United States. A newspaper article said:

"The move, fueled by the strength of the Japanese yen, will also result in Honda significantly reducing the number of vehicles it imports into North America from plants in Japan."

Question

a. What does the article on the strength of the Japanese yen mean?

Response

b. Why would a strong yen cause Honda to produce more cars in the United States and fewer cars in Japan?

Response

Japan rides the yen roller coaster

Headquartered in Tokyo, Japan, Bridgestone is the world's largest tire manufacturer. A 2013 headline in the Wall Street Journal read: "Weak Yen Boosts Bridgestone Earnings." The headline was not unusual. Many large Japanese companies, including Toyota, Sony, and Nintendo, rely heavily on sales in the United States and other foreign countries. As a result, your earnings depend on the exchange rate between the yen and other currencies.

As the figure below shows, the long-term trend has been for the yen to gain value against the dollar. The value of the yen rose from 360 = $1 in 1971 to less than 100 = $1 in 2013. However, there have been substantial swings in the exchange rate around that long-term trend. For example, the value of the dollar soared against the yen by more than 70% between 1995 and 1998. Between 2007 and 2011, the value of the dollar fell by 60% against the yen, before rising by 25% between 2012 and 2013. As a result of these exchange rate movements, the late 1990s and 2012-2013 were good years for Japanese exporters, while 2007-2011 were bad years.