Japanese Companies Wary of Side Effects from Weak Yen, Do Not Expect Return to Appropriate Level of 120 Yen Range

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Summary · why it matters

As Japanese companies announce their earnings, the weak yen is boosting performance, but there is growing caution about side effects such as higher raw material costs and sluggish consumption. Mitsubishi Electric CFO Fujimoto noted that the assumed exchange rate of 150 yen is stronger than the post-intervention level, leaving room for further upside, while Toyota Motor and Mitsui & Co. also raised their earnings forecasts, citing the weak yen as a tailwind. However, Denso and Sharp were forced to report profit declines or downward revisions due to soaring component costs, and Yoshinoya Holdings and Kagome also pointed to the impact of rising costs and slowing domestic sales. Companies have also voiced concerns about rapid currency fluctuations, with Itochu and Toyota calling for stable exchange rates. Regarding the appropriate level, CFOs at Mitsubishi Corporation and Mitsui & Co. expect the trend of a strong dollar and weak yen to continue, while Mitsubishi Electric CFO Fujimoto indicated that the company does not anticipate a return to the 120 yen range.

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