Japanese Government Curated Honda-Nissan Merger Lacks Success Factors, Nikkei Struggled to Advance

Akira Ito
24 Dec, 2024
Tokyo

Stock market indexes in Tokyo closed mixed ahead of the Christmas Day holiday as investors reassess rate path outlook. 

The Nikkei 225 stock average closed down 0.3%, and the broader Topix index edged higher amid rising geopolitical tensions and the uncertain world of new trade tariffs.

The incoming U.S. presidential administration is set to announce additional tariffs on goods imported from China and other leading trade partners, and Japanese policymakers are hoping that Japanese auto and electronics companies may be able to avoid new trade barriers. 

Moreover, a U.S. committee could not agree on the level of risks to national security from the proposed $15 billion purchase of U.S. Steel by Nippon Steel. 

The committee left the final decision in the hands of President Joe Biden, who has opposed the deal, citing possible job losses. 

 

Japan Stock Movers 

The Nikkei 225 Stock Average declined 0.3% to 39,036.85, and the broader Topix index gained 0.01% to close at 2,727.26. 

Honda Motor Co. Ltd increased 12.2% to ¥1,432.50, and Nissan Motor advanced 6% to ¥477.0 after the two companies confirmed, in a press conference, the start of preliminary merger talks.

The merger of two companies is likely to create the third largest automaker in the world with annual vehicle sales of over 7.6 million. 

The merger between the two companies had to be precipitated after Taiwan-based Hon Hai pursued Nissan Motor to ramp up its efforts to commence the production of electric vehicles. 

Japanese government officials have played a key role in urging Honda Motor to complete the deal and avoid the slipping of a Japanese auto company to foreign ownership. 

Japan's Cabinet Secretary Yoshimasa Hayashi supported the merger move while speaking to reporters on Monday. 

While declining to comment on the specifics of the merger, Hayashi stressed the importance of Japanese companies staying competitive. 

"With competitiveness in storage batteries and software increasingly important, we expect measures needed to survive international competition will be taken,” said Japan's Chief Cabinet Secretary. 

However, the merger between Honda and Nissan, and the smaller partner Mitsubishi, is not certain to create a winner in the fast-changing global marketplace. 

Both companies have similar products, are struggling to increase market share in the U.S. and Europe, and are battered by the success of domestic electric vehicle makers in China. 

Japanese companies are saddled with bloated management and excess capacity that is likely to lead to 20,000 job losses over the next two years. 

Japanese automakers have shown little urgency in developing electric vehicles, developing software capabilities for autonomous driving, and investing in battery technologies rivaling the Chinese automakers.