Japan Inc's strengths go beyond yen weakness

Mitsubishi UFJ Financial

10/08/2026 13:00

The author is a Reuters Breakingviews columnist.  The opinions expressed are his own.
By Hudson Lockett
HONG KONG, Aug 10 (Reuters Breakingviews) - Japanese companies do not live by yen-weakness gains alone. Sure, the falling currency has been a boon overall to first-quarter earnings. But Japan Inc's export-heavy firms have far more going for them than the juice from the exchange rate slowly being squeezed.
Publicly listed companies' pretax profits for the three months to the end of June jumped almost 50%, Nomura calculates, using earnings reports from businesses that account for 95% of the country's stock market capitalisation; the weak yen drove at least a third of that. U.S. tariff refunds also helped, but perhaps half of the gain in pretax profits is down to other factors.
Net profit at $266 billion lender Mitsubishi UFJ Financial 8306.T, for example, jumped 48% thanks to both loans and fee income growing - and to rising interest rates. Sony 6758.T credited strong returns at its games segment, alongside cost controls, for a 40% rise in first-quarter profit.
There's a growing sense of optimism, too. Analysts at Goldman Sachs pin much of that on company executives reversing their overly conservative forecasts from the early days of the U.S.-Iran war; they estimate 14.5% of firms had increased full-year earnings guidance as of last Thursday, compared to about 5% a year ago.
They also flag a surge in share buybacks, which at about 20 trillion yen ($126 billion) so far this year are already 11% higher than the total for the whole of 2025. That reflects a substantial payoff from the Tokyo Stock Exchange's half-decade push for listed companies to boost returns. Meanwhile, activist investors have been ramping up pressure on companies, such as to monetize undervalued real estate assets.
Yet currency moves remain the X-factor for investors. That's likely to continue: despite the joint intervention by the U.S. and Japan late last month, the spot price has already fallen back to about 158 yen per dollar. That implies traders reckon Japanese Prime Minister Sanae Takaichi's profligate spending plans still hold the balance of power over foreign exchange prices.
Executives at both Toyota Motor 7203.T and Honda Motor 7267.T appear to agree, with each lowering their currency outlook by 10 yen, to 160 yen and 155 yen per dollar, respectively, for the fiscal year to the end of March. So the weak currency may well keep trickling down to the bottom line - adding, if Toyota's own estimate is correct, 250 billion yen, or 8%, to the carmaker's full-year net earnings forecast. But for Japan Inc, it's just an added bonus.
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CONTEXT NEWS
First-quarter earnings at listed Japanese companies jumped almost 50% from the same period last year, according to analysts at Nomura. Thus far, around half of the country’s publicly traded firms, accounting for 95% of stock market capitalisation, have reported results. At least a third of the increase in profit came from weakness in the yen, per the investment bank.
Analysts at Goldman Sachs found year-to-date buyback announcements by Japanese corporates totalled more than 20 trillion yen ($126.3 billion) as of August 6, up 11% from the full-year total in 2025.

(Editing by Antony Currie; Production by Aditya Srivastav)
((For previous columns by the author, Reuters customers can click on LOCKETT/ hudson.lockett@thomsonreuters.com))