TOKYO: Japanese automakers are getting much-needed cover after years of waiting as a weaker yen helps underpin profits amid declining sales in China and an increasingly difficult shift to electric vehicles .
Toyota, Honda and Nissan recently reported earnings that were 6% to 21% higher than analyst estimates for the three months to June, all citing currency as a factor.
“If the yen continues to weaken, it will obviously benefit, but it won’t offset 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,” he added of the problem there.
At the end of last month, Nissan raised its full-year operating profit forecast by 30 billion yen ($208 million) to 550 billion yen. About ¥20 billion of that is due to currency, CFO Stephen Ma said at a press conference.
A weaker yen has traditionally boosted profits for Japan’s big exporters, but it has become less of a boon for automakers that have increased production overseas in recent years.
Automakers’ stocks react quickly to changes in the yen, but the companies themselves tend to maintain a conservative outlook on currency.
For example, Toyota is sticking to its forecast of an average exchange rate of 125 yen to the dollar this quarter, the first since April 2022, about a month after the Federal Reserve began raising interest rates. is the level of Thursday’s yen was 144 yen.
At the smaller Subaru, a one-yen change against the dollar impacts operating profit by ¥20 billion, CFO Katsuyuki Mizuma said earlier this month.
Honda officials said Wednesday that operating profit for the April-June quarter was several tens of billions of yen higher than expected, about half of which was due to the weaker yen.
“The yen was weak not only against the dollar, but also against other currencies, including those in Asia and Europe, so that was a gain,” said the person.
china struggle
For Japanese automakers struggling in China, the yen’s cushion could not have come at a better time. The world’s largest car market is increasingly dominated by domestic companies.
Nissan’s sales to retail customers in China were down 46% in the quarter, while Honda’s sales were down 5%.
Toyota’s sales, including the luxury brand Lexus, increased over the same period. In the first half of the calendar year, it was down almost 3%.
Japanese automakers have also been slow to steer the growing global market for electric vehicles with competitive offerings.
It is unclear how long the yen’s depreciation will last. Japan’s central bank has recently adjusted the cap on bond yields, raising hopes that it will eventually lift the ultra-loose monetary policy that has weighed on the currency.
Eisuke Sakakibara, an influential former Finance Ministry bureaucrat, told Reuters the yen could rise to 130 yen by the end of the year.
Chief Financial Officer Mizuma said Subaru kept its forecast at 128 yen because of the difficulty in predicting exchange rates.
“We monitor exchange rates very closely,” he said.
(1 dollar = 144.2400 yen)