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Denso Corp. is giving Japanese Prime Minister Shinzo Abe a reason to believe his weak yen policy will eventually boost investment by manufacturers.

The parts maker, Toyota Motor Corp.’s biggest supplier, said it’s considering expanding production in Japan. “It’s possible to maintain a certain level of domestic production, or even increase the output,” Denso president Nobuaki Katoh said.

Denso tends to boost output when and where carmakers do, so a decision to make more parts in Japan would signal that Abe’s weak yen policy is rekindling interest in domestic production. That would start to reverse the prevailing trend since at least 2008 for automakers and suppliers, an industry that employs about one in 11 Japanese workers.

Katoh’s comments run against the conventional wisdom of building cars where they are sold to better suit local tastes, save shipping costs and reduce exposure to foreign exchange risk. Japan exports have dwindled as its domestic auto industry deteriorated. A sign that the yen’s 28 percent decline over the past two years is moderating those trends may boost support for Abe.

Capital spending growth at Japanese companies will decline to 1.3 percent in the year ending March, with automobile and telecommunications companies driving the slowdown, Moody’s Corp. estimated last month. That compares with 12.3 percent spending growth in fiscal 2012.

Vehicle production in Japan shrank by almost a third to 7.9 million units in 2009 from the 2007 record of 11.6 million, after the worldwide auto industry slumped amid the recession. Output stayed weak as the yen remained near a record high and executives including Nissan Motor Co. Chief Executive Officer Carlos Ghosn warned that the industry would “hollow out” if the currency didn’t weaken.

The dollar traded at about 108.15 yen recently, 43 percent higher than its post-war low in October 2011. Every one yen drop versus the dollar increases Denso’s operating income by about 2.5 billion yen ($23.1 million), the company estimates. Denso forecasts an operating income of 350 billion ($3.2 billion) for the financial year ending March, based on an assumption the dollar will average 100 yen.

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