June 11, 2014 5:15 am JST

Six in 10 Japanese companies see yen holding steady vs. dollar

TOKYO -- Corporate Japan is not counting on another boost to earnings from a weak yen, with a majority of companies expecting the Japanese currency to change little against the dollar compared with last fiscal year.

     Nearly 60% of 362 major companies are assuming a yen-dollar exchange rate of 100 for the year ending next March. Among them are Toyota, Honda and Komatsu. Mitsubishi Electric reckons the yen will strengthen to 95 to the dollar, while Panasonic expects it to weaken to 105. The average estimate was 100.7.

     Toyota's annual operating profit grows by 40 billion yen ($390 million) every time the yen weakens by 1 against the dollar. Favorable exchange rates pushed up earnings at the seven leading Japanese automakers by roughly 1.8 trillion yen last fiscal year. But they cannot hope for another such windfall this time.

     More than 90% of the companies see the yen at 130-140 against the euro this fiscal year. Ken Osuga, a senior executive officer at Konica Minolta, says it is hard to imagine the euro strengthening beyond 135.

     Should the yen weaken by 1 against the dollar and the euro, pretax profit growth at 250 leading Japanese companies would rise by 0.7 to 0.8 percentage point this fiscal year, says Keiichi Ito, chief quantitative analyst at SMBC Nikko Securities.

     If anything, companies have more to worry about from emerging-market currencies. Of the 67 billion yen that Honda expects exchange rate movements to bite off its fiscal 2014 operating profit, more than 40 billion yen likely owes to emerging-market currencies. The Brazilian real's weakness against the dollar will undercut profit by 15 billion yen, Director Kohei Takeuchi says. Honda also sees the Thai baht and Russian ruble moving in the wrong direction. That said, the automaker's estimates look conservative.

     Toyota expects currency movements to knock 95 billion yen off operating profit. Here, too, emerging markets are to blame. A weak real will inflate the cost of making cars in Brazil with imported parts paid for in dollars, says Managing Officer Takuo Sasaki.