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Business

Yen takes a bite out of listed Japan's pretax profit

A board at Gaitame.com in Tokyo's Minato Ward flashes the yen-dollar exchange rate on April 7.

TOKYO -- The combined pretax profit of listed Japanese companies is likely to have taken a year-on-year hit for a third consecutive quarter, with the stronger yen playing a big role.

In addition to the yen's rising value against the U.S. dollar, weakening economies in China and elsewhere hurt many Japanese exporters during the April-June quarter.

Of all listed Japanese companies closing their books on March 31, 34% had released their results for the quarter by July 29. They account for 46% of the market capitalization of all listed Japanese firms.

According to a Nikkei tally of the quarterly financial results of 536 companies, which include electric utilities but exclude financial institutions and some other firms, their combined pretax profits declined 24% from a year earlier.

The pretax profit level in the April-June quarter remained higher than in 2013, when the Bank of Japan launched what it called a "new phase of monetary easing" in both quantity and quality.

The ultra-easy monetary policy resulted in a weaker yen. But the yen averaged 108 to the dollar from April through June, compared with 121 in the same three-month period of 2015.

The currency's strength since the beginning of the year has taken a toll on Japanese exporters' profitability, with Nippon Steel & Sumitomo Metal incurring a pretax loss in the quarter. Major electronics makers also reported lower profits.

The slowdowns in China and other emerging markets have also hit Japanese exporters. Komatsu saw its April-June sales of mining and construction machinery tumble in these markets.

Nippon Yusen Kabushiki Kaisha, the big shipping company better known as NYK Line, also suffered a pretax loss in the quarter as it carried fewer cars to emerging markets and resource-rich countries.

The business performance of Japanese companies reliant on domestic demand also began to show signs of deteriorating.

The stronger yen meant foreign tourists bought less at department store operator Isetan Mitsukoshi Holdings. In addition, the company's sales of clothing and other items dropped due to the sluggish Japanese consumer.

(Nikkei)

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