The weaker yen boosted corporate earnings during this week's earnings season, but concerns are mounting over side effects such as higher raw material prices and weak domestic consumption. More companies are also assuming that the yen will not return to the ¥120 range, viewed as an appropriate level for the currency.
In this week's earnings reports from Japanese companies, the weaker yen boosted profits from overseas businesses, while higher raw material costs, a downturn in the domestic market and rising personnel expenses have emerged as side effects. Given the disparity between economic conditions in Japan and the United States, more companies are taking a cautious view of the yen returning to what is considered an appropriate level.
Mitsubishi Electric's CFO said the company raised its consolidated forecast for the fiscal year ending March 2027 because the yen was weaker than assumed during the April-June quarter. Toyota Motor also revised its assumed exchange rate in the direction of a weaker yen and raised its earnings forecast. Tanaka CFO (田中CFO) explained that overseas operations account for the majority of profits.
Few companies are emphasizing only the benefits of a weaker yen, with higher energy prices and soaring component costs cited as factors squeezing costs. Sharp cut its previous forecast, while Kagome lowered its profit outlook. According to an analysis by JETRO, the most common response for the desirable exchange rate was ¥120 to ¥124, but more companies are choosing ¥145 to ¥149.
There are also growing concerns about high volatility, with a widespread recognition that sharp swings in the yen's value after coordinated intervention could affect earnings plans and investment decisions. Companies including Itochu, Toyota and Mazda have expressed a desire for stable exchange rates while indicating that they are prepared to cope with a weaker yen over the long term.