ECON 230 Milestone 2

Christian Bering

ECON 230

November 21, 21021

Milestone 2

Milestone 2

Section 1

Toyota’s headquarters and home country is based out of Japan. Inflation affects the overall price at which the company produces and sell their vehicles. However, fortunately enough Toyota is internationally very successful in North America, Europe and Asia which creates less risk if one there is inflation in one country and not as much in others. Inflation in Japan has been a varying every year but in smaller increments that are not heavily severe. As seen in the graph provided by Trading Economics (2021), in the past two years inflation has 1.4 percent. For the past year inflation has not been the biggest cause for the shift the vehicle market. Between Covid, shipping delays, and parts shortages there has been a shortage of used cars not just Toyota but for 90 percent of car manufacturers. Due to this market shift, the price of used cars has skyrocketed between 30-40 percent because no new cars are in circulation. Toyota dealerships are able to stay afloat by selling used cars, but the manufacturers are affected the most because of stagnate production.

Section 2

As mentioned in the last section, Covid has had an array of affects not the least of which has hit the unemployment rates in most countries. The employment rate it Japan has shockingly gone up 0.5 percent in the last year. Japan managed to keep their workforce employed during the 2020 which helped their stay relatively strong. According to Dooley and Ueno (2020), Japan’s overall unemployment rate is still a mere 2.6 percent. Toyota’s total number of employees has dropped in the last year from 370,00 to 361,000. Over the last year Toyota has consolidated vehicle sales totaled 8,958,423 units, a decrease of 18,372 units compared to the previous fiscal year. On a consolidated basis, net revenues for the period totaled 29.9299 trillion yen ($274.586 billion), a decrease of 1.0 percent (2020).

Section 3

Given that there has been a shortage in new inventory for Toyota manufacturers, the demand for the used Toyotas has increased, in turn causing the price for used cars to increase.

Section 4

In Toyota’s current situation, there isn’t much room for intertemporal substitution. They are a successful and one the most popular vehicle manufacturers in the world but the shortage in micro chips has their manufacturing at an all-time low. The second transmission mechanism that has affected the economy and Toyota directly is the labor adjustment costs. As mentioned earlier, Toyota lost over 9,000 employees last year because of declining production. Obviously, letting go of employees not only is negative for the company but is costly to the employees as well. The newly unemployed workers have to make choices on their careers that could be risky. Lastly, time busting plays an important role in tracking the sales patterns for Toyota. In the U.S. from at the start of the new year car sales are slow after the holiday boom. In the spring sales tend to pick back up with tax returns coming in. During the summer is when sales are the busiest for a few reasons, one being that the weather is the best for looking, and people have time off in the summer months. At the start of fall sales decline sharply due to school starting and much household income is directed at education. The business and sales cycle in the automotive industry has mimicked this pattern for the past 25 years which allows other parts of the industry to know when economic activity will strike.

References

(2021). “Japan Inflation Rate”. Trading Economics. https://tradingeconomics.com/japan/inflation-cpi.

Dooley, Ben. Ueno, Hisako. (2020). “Why Japan’s Jobless Rate Is Just 2.6% While The U.S.’s Has Soared”. The New York Times. https://www.nytimes.com/2020/06/20/business/japan-unemployment.html.

(2020). “TMC Announces Financial Results For Fiscal Year Ended March 31, 2020”. Toyota Newsroom. https://pressroom.toyota.com/tmc-announces-financial-results-for-fiscal-year-ended-march-31-2020/.