Takeda and Nintendo Among Japanese Companies Quietly Celebrate Yen Weakness

TOKYO, June 17 (Reuters) – The Japanese yen is at its weakest level in decades and is inflicting high costs of imported food and fuel on households and businesses, but is also proving to be an unexpected tailwind for multinationals such as the pharmaceutical giant Takeda.

As the Bank of Japan reiterated its commitment to an accommodative monetary policy on Friday, asserting its position as a dove in a global environment of rising inflation, the yen retreated to lows of 135.60 to the dollar. he had achieved this week. It is down 14% against the US dollar this year. Read more

Households complained about the effect on their wallets. Nearly half of companies responding to a Tokyo Shoko Research survey this week said a weak yen would negatively impact their business. Only 3% said it would be a good thing.

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Still, many companies’ forecasts for the current fiscal year are based on assumptions that the currency will be 15 to 20 yen stronger against the US dollar than current levels. This means that those with a lot of overseas business and lower dollar debt should increase their income simply by hitting their existing goals.

For Takeda Pharmaceutical Co (4502.T), Japan’s biggest drugmaker, a weaker yen helps because 80% of its sales are overseas, chief financial officer Costa Saroukos said. Takeda had made its projections on the basis of the yen at 119 to the dollar.

“Assuming exchange rates stay where they were in April and May, with the dollar at around 130 yen, we will have a high single-digit percentage upside from what we gave in our revenue forecast and profit,” Saroukos said this week.

Toyota Motor Corp (7203.T), Panasonic Corp (6752.T) and Nintendo Co (7974.T) were also cautious, expecting the yen to be at 115 against the dollar by March 2023.

Sony Group Corp (6758.T) has one of the weakest yen projections, 123 to the dollar – but that’s still a far cry from current levels, which haven’t been seen since 1998.

Nintendo, a Kyoto-based video game maker, released its full-year earnings forecast last month, assuming the dollar-yen would be at 115 by March 2023, the end of its fiscal year. Chairman Shuntaro Furakawa told investors at the time that a change of one yen from that rate would lead to a 6.3 billion yen ($47 million) increase in US revenue alone if sales were flat. .

Fujio Mitarai, president of camera maker Canon, said the drop in the currency’s value could be “a very big plus” for the company. He made the comment after Canon released forecasts based on an expected rate of 120 yen to the dollar.

But Mitarai warned that this would depend on avoiding extreme increases in component prices or slowdowns in production. He cited downside risks that were “moving violently and difficult to predict.”

Some Japanese companies that could benefit from the exchange rate are experiencing complications that limit the upside.

Koji Shibata, CEO of airline ANA Holdings Inc (9202.T), said April 28 that the weak yen was “a big opportunity for visitors to Japan” but called current limits on foreign arrivals a “waste”.

MIXED BLESSING

Nintendo makes most of its profits from high-margin software, so it should benefit from overseas sales made in relatively stronger currencies.

But other Japanese companies, which depend on their own manufacturing, are facing reduced purchasing power for components and materials due to the weak yen.

And after years of strengthening overseas production and supply chains, many manufacturers now see less benefit from a weaker currency than they did years ago. Read more

Conveyor belt sushi restaurant operator Sushiro said last month that its iconic 100-yen plates would end in October after nearly 40 years, a victim of a weak yen and rising production costs.

Asahi Group Holdings (2502.T) said in April it would raise the price of its market-leading Super Dry canned beer for the first time in 14 years. Competitors Kirin Holdings Co (2503.T), Suntory Beverage & Food Ltd (2587.T) and Sapporo Holdings Inc (2501.T) followed suit by announcing price hikes.

Researcher Teikoku Databank said this month that prices for more than 10,000 food items in Japan will rise in 2022.

“We import a lot, so the impact of the weaker yen is significant,” Toru Sakamoto, chief executive of seafood producer Maruha Nichiro Corp (1333.T) said last month.

“Costs are rising due to a shortage of containers and rising fuel prices. We are doing everything to reduce production costs, but at this point we have no choice but to pass it on to our price.”

Tadashi Yanai, Japan’s richest person and CEO of parent company Uniqlo Fast Retailing Co (9983.T), believes there is “absolutely no merit” in a weaker yen.

“Japan is in the business of importing raw materials from all over the world, processing them, adding value to them and selling them,” he said in April. “In this context, there is no benefit if the value of a country’s currency weakens.”

Takeshi Hashimoto, CEO of transportation giant Mitsui OSK Lines (9104.T), said in April that his company’s profits were rising due to the weak yen.

“However, I don’t think that’s our real strength, and I don’t think we should be happy or sad about profits going up or down because of it.”

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Editing by Vidya Ranganathan and Bradley Perrett

Our standards: The Thomson Reuters Trust Principles.

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