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March 17, 2011updated 08 Apr 2021 8:09am

JAPAN ‘QUAKE: Yen’s rise threatens export profits

Toyota and other vehicle exporters face a fresh threat to profits after the yen surged to a record high in the wake of last week's earthquake that has also left many factories idle due to component shortages, a news agency report said.

Toyota and other vehicle exporters face a fresh threat to profits after the yen surged to a record high in the wake of last week’s earthquake that has also left many factories idle due to component shortages, a news agency report said.

“Companies can absorb gradual changes no matter what the range, but this sudden change in just one night, and if it continues to the end of March, will be very bad news for exporters including Toyota,” Yuuki Sakurai, CEO of Fukoku Capital in Tokyo, told Reuters.

Companies didn’t know Japan’s geographical risk “was going to be so big so I think there will be a gradual shift to overseas and the strong yen gives them another reason to push production overseas,” Sakurai said.

The yen reached 77.60 per US dollar on the EBS trading platform, passing through the April 1995 record of 79.75.

Reuters noted that rating agency Fitch on Wednesday warned that the direction of the yen over the coming three months could weigh heavily on profits at Toyota, Nissan Motor and Honda.

Hardest hit will likely be Toyota which relies more on home factories to supply overseas markets than its two nearest rivals, the report said.

Toyota spokesman Paul Nolsaco told the news agency he was not yet in a position to comment on the impact that the surging Japanese currency will have on the company’s profits.

Toyota still builds 38% of its vehicles in Japan, of which more than half are shipped overseas. A one yen shift against the dollar cuts annual operating profit by about JPY30bn ($372m).

Nissan which makes 24% of its vehicles at home gets a JPY18bn hit while Honda, with just 22% of production in Japan, is least impacted, Reuters said.

It added that the hope for Japan’s exporters is that as they repair their facilities, the Japanese government will try and fix the yen.

“Many investors are expecting a joint currency intervention and that the current spike in the yen is speculative,” Teruhisa Ishikawa, equities information manager at Mizuho Investors Securities, said.

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