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Economist: Korean U.S. sales to pick up

Weaker yen will help Japanese brands, he says

TOKYO— Korean carmakers will pick up market share in the United States at the expense of their Japanese rivals in the aftermath of the Sept. 11 terrorist attacks, said Jesper Koll, chief economist at Merrill Lynch Japan Securities Co.

But the Japanese will counter by lowering prices when the yen weakens, he added.

The shock of the terrorist attack and uncertainty over the future due to fighting in Afghanistan will cause American consumer demand in general to collapse, Koll said. He predicted "terrible Christmas sales."

As a result, "competition between Japanese and Korean cars and electronics is intensifying" in the U.S. market, Koll told a luncheon audience at the Foreign Correspondents Club of Japan.

"Korean cars are 20 percent to 25 percent cheaper than Japanese cars. People are very much likely to switch to the Hyundai, rather than buying a Toyota or Honda," he said. Japanese carmakers therefore will see their profit margins shrink.

On the other hand, he said Merrill Lynch is predicting that the dollar will strengthen from 120 yen currently to around 128 or 130 yen by Christmas. "Japanese car companies to date have not cut their prices. They will cut their prices, regaining some market share," Koll predicted.

A weaker yen means that Japanese carmakers take in more yen for every dollar they receive from a sale in the United States. That could allow them to reduce prices in dollar terms, and still receive the same amount of yen for each American sale.

You can reach James B. Treece at jtreece@crain.com

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