Takeda, Nintendo among Japanese firms quietly celebrating weak yen

Sapporo Breweries

17/06/2022 06:25

By Rocky Swift
    TOKYO, June 17 (Reuters) - Japan's yen is at its weakest in
decades and inflicting high costs of imported food and fuel on
households and businesses, but also proving to be an unexpected
tailwind for multinationals such as pharmaceutical giant Takeda.
    As the Bank of Japan reiterated its commitment to loose
monetary policy on Friday, affirming its position as a
standalone dove in a global environment of rising inflation, the
yen  JPY=  edged back towards the 135.60-per-dollar lows it
struck this week. It is down 14% against the U.S. dollar this
year.  urn:newsml:reuters.com:*:nL1N2XX0RI urn:newsml:reuters.com:*:nL4N2Y403C
    Households have complained of the effect on their wallets.
Nearly half of companies that responded to a Tokyo Shoko
Research poll this week said the weaker yen would have a
negative impact on their businesses. Only 3% said that it would
be a good thing. 
    Yet many firms' forecasts for the current fiscal year are
based on assumptions the currency will be 15-20 yen stronger
against the U.S. dollar than current levels. That means those
with a lot of overseas business and lower dollar debt should get
a boost to their revenues simply by meeting their existing
targets.
    For Takeda Pharmaceutical Co  4502.T , Japan's biggest
drugmaker, a weaker yen helps because 80% of its sales are
overseas, said CFO Costa Saroukos. Takeda had made its
projections based on a yen at 119 per dollar.
    "Assuming FX rates continue where they were in April and
May, with the dollar at around 130 yen, we will have
high-single-digit percentage upside versus what we've given in
our revenue and profit forecasts," Saroukos said this week. 
   Toyota Motor Corp  7203.T , Panasonic Corp  6752.T , and
Nintendo Co  7974.T  were also conservative, expecting the yen
to be at 115 versus the dollar by March 2023. 
    Sony Group Corp  6758.T  has one of the weakest yen
projections, 123 per dollar - but that is still far from the
current levels, which have not seen since 1998.  urn:newsml:reuters.com:*:nL4N2XP38Q
    Nintendo, a Kyoto-based video game maker, released its
full-year earnings forecast last month, assuming dollar-yen
would be at 115 by March 2023, the end of its fiscal year.
President Shuntaro Furakawa told investors at the time that a
one-yen shift from that rate would result in a 6.3-billion-yen
($47-million) bump in U.S. revenue alone if sales were flat. 
    Fujio Mitarai, president of camera maker Canon, said the
fall in the currency's value could be "a very big plus" for the
company. He made the comment after Canon released forecasts
based on an expected rate of 120 yen per dollar.
    But Mitarai cautioned that this would depend on avoiding
extreme increases in component pricing or slowdowns in
production. He cited downside risks that were "moving violently
and difficult to predict." 
    Some Japanese companies that could benefit from the exchange
rate are seeing complications that limit the upside.
 urn:newsml:reuters.com:*:nL4N2XX2CJ
    Koji Shibata, CEO of airline ANA Holdings Inc  9202.T , said
on April 28 that the weak yen was "a great opportunity for
visitors to Japan" but called the current limits on
foreign-arrivals a "waste".
    
    MIXED BLESSING
    Nintendo makes most of its profit through high-margin
software, so it stands to benefit from sales abroad made in
comparatively stronger currencies. 
    But other Japanese companies, which rely on their own
manufacturing, have to deal with reduced buying power for
components and materials due to the weaker yen. 
    And after years of bolstering overseas production and supply
chains, many manufacturers now see less benefit from a softer
currency than they did years ago.  urn:newsml:reuters.com:*:nL5N2W42GG
    Conveyor-belt sushi restaurant operator Sushiro said last
month that its iconic 100 yen plates would come to an end in
October after nearly 40 years, a casualty of the weak yen and
increasing production costs.
    Asahi Group Holdings  2502.T  said in April it would raise
the price of its market-leading Super Dry canned beer for the
first time in 14 years. Competitors Kirin Holdings Co  2503.T ,
Suntory Beverage & Food Ltd  2587.T , and Sapporo Holdings Inc
 2501.T  have followed suit in announcing price hikes.    
    Researcher Teikoku Databank said this month that prices on
more than 10,000 food items in Japan would rise in 2022.
    "We import a lot, so the impact of the weakening yen is
significant," Toru Sakamoto, managing executive officer of
seafood producer Maruha Nichiro Corp  1333.T , said last month.
    "Costs are rising due to a shortage of containers and
increasing fuel prices. We're doing everything to trim
production costs, but at this point, we have no choice but to
pass it on through our prices."
    Tadashi Yanai, Japan's richest person and CEO of Uniqlo
parent Fast Retailing Co  9983.T , believes there is "absolutely
no merit" to a weaker yen. 
    "Japan is engaged in the business of importing raw materials
from all over the world, processing them, adding value to them,
and selling them," he said in April. "In this context, there is
no advantage if the value of a country's currency weakens." 
    Takeshi Hashimoto, CEO of transport giant Mitsui OSK Lines
 9104.T , said in April his firm's profits were rising because
of the weak yen.
    "However, I feel that's not our true strength, and I don't
think we should be happy or sad that profits are increasing or
decreasing because of that." 

 (Editing by Vidya Ranganathan and Bradley Perrett)
 ((rocky.swift@thomsonreuters.com))