Question

Honda executives were aware that the value of the yen could decline against the dollar. So, from the business profits perspective, what could then motivate them to go ahead with moving their some of the production to the U.S?

Answer 1

A depreciation of yen implicitly indicates an appreciation of USD. Now this implies that if they continue to produce in Japan, the cost of raw matrials would be higher as yen is weak. This would increase the cost of production. Shifting the production base to the United States and then import the necessary parts from Japan would be cost advantageous because appreciated dollar makes imports cheaper from Japan. Hence this strategy will increase sales reduce cost and increase profit.