Japanese Automakers Forecast Profit Upside as Yen Weakness Persists

Japanese automakers could see higher profits this year if the yen remains near current levels, despite Japan’s efforts to curb the currency’s slide to a 40-year low. According to Odaily, company forecasts suggest the sector’s potential earnings upside totals about 934 billion yen, assuming exchange rates stay close to current levels. Toyota Motor Corp. assumed an exchange rate of 150 yen per U.S. dollar in guidance released in early May, compared with a current level of about 161 yen. Toyota estimates that each 1-yen depreciation increases operating profit by 50 billion yen. Other automakers also used relatively conservative exchange-rate assumptions, including Honda at 145 yen per U.S. dollar, Nissan at 150, and Subaru and Mazda at 155. The report also said declines in raw material and energy costs may exceed expectations. After a peace agreement between the United States and Iran, crude oil prices in yen terms fell more than 30% from a peak in late April. Senior analyst Tatsuo Yoshida said that for automakers such as Toyota and Honda that had already incorporated Middle East developments into full-year forecasts, recent changes could be a major positive factor. He added that lower gasoline prices could improve consumer confidence and support auto sales.