Cheap yen a boon and a risk for Japan companies

Published on NewsOK Modified: February 12, 2013 at 2:49 am •  Published: February 12, 2013
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Other struggling electronics companies are also getting a boost but for some the cheap yen is more of a reprieve than an enduring solution. Panasonic Corp. reported last week it gained 3 billion yen ($33 million) in additional operating profit from the weakening yen in the latest quarter even as it stuck to its projection for a 765 billion yen ($9.6 billion) annual loss.

Sharp Corp., which forecasts a record 450 billion yen ($5 billion) loss for its business year through March, has struggled to cut costs and reshape its business, partly because it has invested in expensive plants in Japan that make panels for which prices have fallen sharply overseas. The plants embody Sharp's prized technology, but they also make the company hostage to the yen's swings.

Nintendo Co. raised its profit forecast for the year through March 2013 to 14 billion yen ($154 million) from 6 billion yen ($66 million), largely because of the weak yen. That's despite having to lower the number of Wii U consoles it expects to sell by 1.5 million units to 4 million.

Its currency gains for the nine months to December totaled 22 billion yen ($242 million), according to the maker of Pokemon and Super Mario games. But the weaker yen can't solve the fundamental challenge that Nintendo's business is facing: casual gamers shifting from specialized game machines to tablets and smartphones.

The declining yen is also playing out in the auto sector.

Toyota Motor Corp., the world's top automaker, gets a whopping 35 billion yen ($380 million) added to its annual operating profit for each yen the dollar gains.

Among the Japanese automakers Toyota is viewed as more "sensitive," or exposed, to the gyrations of the foreign exchange rate, partly because Toyota, as a Japan Inc. leader, has repeatedly promised to help save jobs by keeping production of 3 million vehicles a year in Japan.

Toyota's Lexus luxury models, many of them sophisticated hybrid models, are among the vehicles routinely exported from Japan.

Toyota raised its fiscal year profit forecast this week to 860 billion yen ($9.3 billion), triple what it eked out the previous year. Its comeback is based on a solid sales recovery in the key U.S. market as well as new markets in Asia. But when Toyota reports full year results later this year, the numbers are likely to highlight huge gains from the weak yen. Its forecasts had assumed the dollar at 81 yen compared with its current level above 94 yen.

Still, Toyota isn't celebrating.

Toyota insists it's instead trying to produce vehicles where they're sold, and boost the purchase of locally produced auto parts to better adapt to a fluctuating currency.

"It can get good, and then it can get bad," company spokesman Ryo Sakai said. "Our basic policy is to produce vehicles where the demand is."

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Follow Yuri Kageyama on Twitter at www.twitter.com/yurikageyama