RETRANSMISSION—ANGLE: Yen weakness takes hold, intervention creates an opportunity for companies to strengthen hedging; risks can also be contained through business strategy

The story

Japanese companies are increasing their hedging ratios and extending the duration of their hedges to manage foreign-exchange volatility. After intervention by the Japanese and US governments, a series of limit orders for Workman’s forward bookings for the next fiscal year were executed, allowing the company to secure dollar-denominated procurement in stages. Approximately 85% of bookings for the fiscal year ending March 2027 are being made at around ¥148 to the dollar, and the company is currently booking rates with a one-year horizon.

Demand for long-term hedges is spreading among companies, with some fixing rates for as far as 5–10 years ahead. As concerns grow about the impact of further yen weakness into the ¥160 range, some companies have refrained from entering new transactions even after the intervention while they assess market trends. Interest in monetary policy and interest-rate trends in Japan and the United States remains high, and views have emerged that corporate demand for hedging will remain solid for the time being.

Stronger corporate hedging is also affecting procurement cost smoothing and revisions to product strategies. ハニーズ has built up hedges several years ahead and says that, as yen weakness persists, financial strength is directly linked to competitiveness. Assuming that yen weakness will persist, セリア is considering efforts to contain costs as a way of limiting the impact on purchase prices. Export companies are increasing the share of overseas procurement as dollar-denominated purchase costs rise when converted into yen.

Demand for interest-rate hedging is also expanding. As the trend toward fixing interest rates gathers pace, opportunities to address management challenges through hedging proposals are expanding, in some cases leading to proposals involving business succession and M&A. Stronger risk management is accompanying a broader focus on stabilising companies’ balance sheets as a whole.

At a glance

DatesThe yen rebounded sharply on 31 July, immediately after the intervention. A series of Workman’s forward bookings were executed.

ScaleFor the next fiscal year, the proportion of dollar-denominated purchases booked in advance is rising. Approximately 85% of purchases for the fiscal year ending March 2027 have been booked at around ¥148 to the dollar. The assumed rate is ¥150.

TypeMore companies are fixing long-term hedges for as far as 5–10 years ahead. As the yen weakened into the ¥160 range, calls for further measures increased.

ImpactCompanies are placing greater emphasis on smoothing procurement costs and fixing costs and margins when products are developed.

Examplesハニーズ has built up hedges several years ahead, while セリア is considering measures to contain costs in anticipation of the impact on purchase prices. Export companies are reviewing their procurement methods as dollar-denominated costs rise.