1)
In the 1980s, the Japanese carmakers become dominant competitors: They benefit from several factors
? The oil shock gave a competitive advantage to their lighter, more fuel efficient vehicles
? They use labor differences and technical efficiencies to lower prices of vehicles
? The relative undervaluation of the yen is also a determining factor
2) a) As a strong dollar due to high interest rates had led in the early 80s to an increase in the US trade deficit followed by a strong inflow of foreign capital, protectionist theories started developing both in Republican and Democratic camps. Thus, all countries shared a growing interest in lowering the value of the dollar relative to the yen as this movement would eliminate the U.S. / Japan trade imbalance and lessen protectionist demands. This development would suit everyone because it would finally result in higher exports not only for Japan but also for all other countries. In order to make this happen, all countries agreed to coordinate an intervention into their respective foreign exchange markets (Plazza Accord, 1985)
b) With Endaka, it became more and more difficult for Japanese carmakers to profit from cost advantages due to due to labor differences and technical efficiencies. The continually rising yen could mean disaster for Japanese companies and the country's economy as a whole:
? As the yen rises, the cost of manufacturing and research and development in Japan rises, making Japanese -based companies less competitive with off-shore manufacturers.
? As a result, Japanese companies are seeking more off-shore product development and manufacturing and may begin to close Japanese opera ...