Toyota, Honda and Nissan recently reported earnings that beat analysts’ estimates by 6% to 21% in the three months to June, and all cited currency as a factor.
“If the yen stays low, they clearly benefit, but that doesn’t offset any other concerns,” said Satoru Aoyama, senior director at Fitch Ratings Japan.
“They are struggling in the Chinese market,” he said. “They just don’t have an immediate solution” to their problems there, he added.
Late last month, Nissan raised its full-year operating profit forecast from 30 billion yen ($208 million) to 550 billion yen. About 20 billion yen came from the currency, chief financial officer Stephen Ma told a briefing.
A weak yen has traditionally boosted profits for big Japanese exporters, though it’s no longer such a big boon for automakers which have increased overseas manufacturing in recent years.
Stocks of automakers react quickly to swings in the yen, although the companies themselves tend to stick to cautious forecasts for the currency.
For example, Toyota stuck to its forecast of an average exchange rate of 125 to the dollar this year, a level not seen since April 2022, about a month after the US Federal Reserve began raising rates. of interest. The yen was at 144 on Thursday.
At the smaller Subaru, a one yen move against the dollar has a 20 billion yen impact on operating profit, chief financial officer Katsuyuki Mizuma said earlier this month.
On Wednesday, a Honda official said its April-June operating profit was tens of billions of yen higher than expected, with yen weakness accounting for about half of that.
“The yen was not only weak against the dollar, but also against other currencies, including in Asia and Europe, which translates into a profit,” the official said.
Wrestling in China
The yen cushion could not have been better timed for Japanese automakers, which are struggling in China. The world’s largest automotive market is increasingly dominated by local players.
Nissan’s sales in China to retail customers fell 46% in the quarter and Honda’s fell 5%.
Toyota’s sales, including its luxury brand Lexus, increased during the period. For the first half of the calendar year, they decreased by almost 3%.
Japanese automakers have also been slow to tap into the growing global electric vehicle market with competitive offerings.
It is unclear how long the weak yen will last. Japan’s central bank recently changed its ceiling on bond yields, sparking expectations that it could eventually exit the ultra-loose policy that has weighed on the currency.
Eisuke Sakakibara, an influential former finance ministry official, said Reuters the yen could strengthen to 130 by the end of the year.
Subaru stuck to its forecast at 128 yen, chief financial officer Mizuma said, citing the difficulty in predicting the currency.
“We are watching exchange rates very closely,” he said.
