Svmuu News: Although Japan is trying to stem the yen’s slide to a 40-year low, the weak currency could bring Japanese automakers substantial windfall profits this year. Based on the companies’ forecasts, assuming the yen remains near current levels, the overall profit upside for Japanese automakers is approximately 934 billion yen (about $5.8 billion).
In its earnings guidance released in early May, Toyota Motor Corporation assumed an exchange rate of 150 yen to the dollar, while the current rate is around 161 yen. Toyota estimates that for every 1-yen depreciation of the yen, its operating profit increases by 50 billion yen, meaning the company stands to benefit significantly from the yen’s continued weakness. Other automakers have also adopted relatively conservative exchange rate assumptions: Honda at 145 yen to the dollar, Nissan at 150 yen, and Subaru and Mazda at 155 yen. Meanwhile, declines in raw material and energy costs may exceed expectations. Following the peace agreement between the U.S. and Iran, crude oil prices, measured in yen, have fallen by more than 30% from their peak in late April.
Senior Analyst Tatsuo Yoshida noted that for automakers such as Toyota and Honda—which had already factored the Middle East situation into their full-year forecasts—recent developments could prove to be a “major positive factor,” and falling gasoline prices may also improve consumer confidence and support auto sales. (Jin Shi)