Image: Reuters Berita 24 English - The yen is at its lowest level in decades , forcing people and businesses to pay more for imported food a...
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| Image: Reuters |
Berita 24 English - The yen is at its lowest level in decades, forcing people and businesses to pay more for imported food and fuel, but it's also proving to be an unexpected tailwind for multinationals like pharmaceutical giant Takeda.
The yen moved back toward the 135.60-per-dollar lows it hit earlier this week as the Bank of Japan reaffirmed its commitment to loose monetary policy, reaffirming its position as a lone dove in a global climate of rising inflation. This year, it has lost 14% of its value against the US dollar.
Households have complained about the financial impact. Nearly half of the companies polled by Tokyo Shoko Research this week indicated the weaker yen would hurt their business. Only 3% of respondents thought it would be beneficial.
However, many companies' predictions for the current fiscal year are based on the premise that the yen will be 15-20 percent stronger versus the dollar than it is now. Those having a lot of global business and less dollar debt should see an increase in revenue merely by meeting their current targets.
Because 80 percent of Takeda Pharmaceutical Co's sales are made outside of Japan, a weaker yen helps, according to CFO Costa Saroukos. Takeda's forecasts were predicated on a yen exchange rate of 119 to the dollar. "We will have high-single-digit percentage upside over what we've stated in our revenue and profit estimates assuming FX rates remain where they were in April and May, with the dollar at about 130 yen," Saroukos said this week.
Toyota Motor Corp., Panasonic Corp., and Nintendo Co. were also pessimistic, forecasting a yen-to-dollar exchange rate of 115 by March 2023. Sony Group Corp's yen forecast is one of the weakest, at 123 per dollar, but that's still a long way from current values, which haven't been seen since 1998.
Nintendo, a video game company located in Kyoto, announced its full-year earnings prediction last month, anticipating the dollar-yen exchange rate would be at 115 by March 2023, the conclusion of its fiscal year. If sales remained steady, President Shuntaro Furakawa told investors that a one-yen shift from that rate would result in a 6.3-billion-yen ($47-million) increase in U.S. revenue alone.
Canon's president, Fujio Mitarai, said the currency's depreciation might be "a very substantial benefit" for the company. After Canon announced predictions based on an estimated rate of 120 yen per dollar, he made the remark.
However, Mitarai stressed that this would be contingent on avoiding drastic rises in component prices or manufacturing slowdowns. He mentioned "violently shifting and difficult to foresee" adverse risks.
Complications are limiting the upside for certain Japanese enterprises that may benefit from the exchange rate.
The weak yen, according to Koji Shibata, CEO of airline ANA Holdings Inc, is "a tremendous opportunity for tourists to Japan," but the current restrictions on international arrivals are a "waste."
BLESSINGS MIXED
Nintendo makes the majority of its money from high-margin software, thus it stands to benefit from sales made in foreign currencies that are substantially stronger.
Other Japanese companies who rely on in-house production, on the other hand, are dealing with lower purchasing power for components and materials as a result of the weaker yen.
Many manufacturers today see less profit from a weaker dollar than they did years ago, after years of expanding offshore manufacturing and supply lines.
Sushiro, a conveyor-belt sushi restaurant operator, announced last month that after nearly 40 years, its famed 100 yen plates would be phased out in October due to the weakening yen and rising production costs. For the first time in 14 years, Asahi Group Holdings said in April that it would raise the price of its market-leading Super Dry canned beer. Kirin Holdings Co, Suntory Beverage & Food Ltd, and Sapporo Holdings Inc have all announced price increases as well. According to Teikoku Databank, prices of more than 10,000 food items in Japan would increase in 2022. Last month, Toru Sakamoto, managing executive officer of seafood producer Maruha Nichiro Corp, said, "We import a lot, so the impact of the dropping yen is enormous." "Costs are growing as a result of a container constraint and rising gasoline prices. We're doing everything we can to reduce production costs, but we're at a position where we can't help but pass the savings on to you."
Tadashi Yanai, Japan's wealthiest man and CEO of Uniqlo parent Fast Retailing Co, believes that a weaker currency has "absolutely no validity."
In April, he remarked, "Japan is in the business of importing raw materials from all over the world, processing them, adding value to them, and selling them." "If the value of a country's currency falls, there is no benefit in this scenario."
Because of the weak yen, Takeshi Hashimoto, CEO of transportation major Mitsui OSK Lines, indicated in April that his company's profits were rising.
"However, I don't believe that is our fundamental strength, and I don't believe we should be glad or sad because profits are rising or falling as a result."
