TOKYO — The new president of Hitachi Ltd. urged the government to tackle the strong yen, which is squeezing business as he seeks to transform one of Japan’s biggest companies.
Five months into the job, Hiroaki Nakanishi described the Japanese currency, which hit a fresh 15-year high of 83.32 yen to the dollar last week, as creating “big pressure” for his company. A strong Japanese currency is a major issue for big exporters like Hitachi, whose overseas profits take a hit when the yen rises.
His comments today come a day before a ruling party leadership election that will determine whether Prime Minister Naoto Kan stays or goes. Veteran lawmaker Ichiro Ozawa is waging a fierce challenge to replace Kan as Democratic Party president. If Ozawa claims victory, he would be Japan’s third premier in a year.
Whoever wins must find a way to energize an economy facing slowing global growth and a strong yen that threatens to undermine Japan’s export-driven recovery. Authorities so far have been reluctant to intervene in currency markets. The last currency intervention by the Bank of Japan was in March 2004.
Nakanishi said the recent quick turnover of Japanese leadership is problematic, but he does not expect major policy changes or strong action on the foreign exchange front.
“We continuously request (the government) to promote Japan growth policies and also very quick action to stabilize the foreign exchange rate,” he said at the Foreign Correspondents’ Club of Japan.
Hitachi has reduced longer-term currency risks by shifting some manufacturing overseas, and the company can handle a level of about 85 yen to the dollar, Nakanishi said.
But the yen’s rapid, sharp climb has destabilized operations, adding to the Herculean task confronting Nakanishi. When he took over in April, Hitachi was losing money and needed to shift gears amid an onslaught of nimbler Asian competitors. Over the years, it has implemented various turnaround plans with little success.
The 100-year-old multinational conglomerate has 360,000 employees, 900 subsidiaries and $100 billion in annual revenue. Its business spans a vast array of products and services, from rice cookers to elevators to nuclear power plants. Hitachi has a nuclear power alliance with General Electric Co., with the companies operating two joint ventures in the U.S. and Japan.
It is banking its future on a global expansion of its “social innovation” business — a broad category that spans the various elements of city frameworks. Demand for urban infrastructure is growing worldwide, from power plants to data centers to proposed high speed rail projects in the U.S. and Asia.
Tokyo-based Hitachi plans to invest 1 trillion yen ($11.9 billion) in its social innovation businesses over the next three years, and will actively pursue overseas acquisitions.
Japan provides about 60 percent of its current revenue. By 2012, Hitachi wants the rest of the world to make up more than half of revenue.
“We made big progress last year, so this year is really the growth starting point for the next 100 years,” Nakanishi said.