The gloom and doom hanging over the Japanese auto industry gets worse by the day, especially as financial analysts calculate the damage a post-Brexit world might inflict on No. 1 Toyota (TM - Get Report) and its smaller rivals from the island nation.
Japan's auto stocks have gotten smashed since the United Kingdom's vote to leave the European Union on June 23. Toyota shares are down nearly 10% in the past two weeks, double the rate that Japan's Nikkei 225 index has fallen. Goldman Sachs cut the operating profit forecast for the country's automotive group an average 18%.
A stronger yen means that dollars, euros and other currencies translate into fewer yen for the purpose of income statements, even if sales and profits in foreign markets remain healthy.
Yet analysts often get it wrong, and this time could be another example. The X-factor counterbalancing the negativity is the Japanese automotive industry's remarkable history of adaptation to the ever-changing and often hostile trade, market and economic climates it has faced since mounting the world stage more than a half-century ago.
First and foremost is Japan's ability to intervene in its currency, through its finance ministry and the Bank of Japan.
"Current exchange-rate markets are showing extremely nervous movements. In order to prevent such moves from continuing, I'll closely watch currency market moves more than ever with a sense of urgency and will respond firmly when necessary," declared Taro Aso, the country's finance minister the day following the Brexit vote.
Deliberately weakening the yen, of course, will elicit howls of protest in Detroit and other automotive capitals. But Japan has demonstrated time and again that, like most other nations, its national interests are paramount.
Starting in the early 1980s, when Japanese auto imports began to cut deeply into Detroit's share of the U.S. market, negotiated restraints between the two countries reduced trade tensions and held back the tide. Toyota, Honda (HMC - Get Report) , Nissan (NSANY) and other Japanese producers responded to the restraints by building assembly plants in the U.S. and inviting their suppliers to do the same.
Since then, the market share of Japanese automakers has risen steadily while the share of Detroit-based automakers has fallen from close to 90% to less than 50% of the U.S. market.
As U.S. consumers bought more and more minivans, sport-utility vehicles and pickup trucks of all sizes rather than passenger cars, Japanese automakers came up with models like the Honda Odyssey minivan and Toyota Tacoma midsize pickup truck to compete. Today, General Motors. (GM - Get Report) no longer builds a minivan, and Ford (F - Get Report) doesn't offer a midsize pickup. (Ford, however, is planning to build a new Ranger midsize).
Nissan, an automaker that didn't adjust as well as Toyota or Honda, in 1999 was forced into an alliance with France's Renault, which has flourished.
Japanese policymakers, as they assess Brexit, will try to balance domestic pressure to keep the yen as weak as possible to grow exports and create jobs against opposition from abroad that resists competitive Japanese products. Caught in between are Japan's automakers, which have evolved into delicately hedged global enterprises.
The safest bet on the future of Japanese vehicles is one that assumes the country's strongest and most innovative automakers will stay true to form and find ways to flourish in a post-Brexit world.