Japan companies brace for forex bumps, assume 144 yen-dollar rate
(Good luck achieving that under the current low interest rate environment and that is not going to change any time soon)
Japan's listed companies are assuming an average exchange rate of 144 yen per dollar in their latest earnings forecasts, an appreciation of about 10 per dollar compared with prevailing rates, reflecting their concerns about volatile foreign exchange rates.
According to a Nikkei survey of around 380 companies that disclosed their foreign exchange rate assumptions as of May 15, half of the total, or 191 companies, set their rates 145 yen or above and below 150 yen to the dollar for fiscal year ending March 2025. Two big manufacturers, Toyota Motor and Mitsubishi Heavy Industries, put the dollar at 145 yen. Meanwhile, 122 companies, including Heavy machinery maker Komatsu and electronics company Mitsubishi Electric, chose a range of between 140 yen and just below 145 yen. Industrial robot builder Fanuc was among 16 companies that assumed a rate above 135 yen but below 140 yen, while two companies predicted a rate between 130 yen to less than 135 yen. Closer to the current rate, 48 companies set their assumptions between 150 yen and just below 155 yen, with another five expecting a range from 155 to under 160 yen. Since April, the yen has plummeted due to diminishing prospects for U.S. interest rate cuts. On April 29, the Japanese currency briefly touched a 34-year low against the dollar in the 160 yen range. Subsequent large-scale yen purchases, likely orchestrated by the Japanese government and the Bank of Japan, coupled with disappointing U.S. economic data temporarily pushed the yen up to the 151 yen range.
Companies are navigating these turbulent waters as they forecast exchange rates for the fiscal year ending March 2025. "While yen depreciation can boost earnings, basing business plans on extreme rates like 155 yen is imprudent," said Sumitomo Chemical President Keiichi Iwata, explaining the company's assumption of 145 yen.
Kyocera President Hideo Tanimoto echoed this cautious stance, saying, "Honestly, we don't know what will happen with the exchange rate," adding that the company set its assumption at 145 yen per dollar, maintaining the same level as the fiscal year ended March. Mitsui President and CEO Kenichi Hori expressed concern over erratic exchange rate movements, saying, "A stable exchange rate environment is more manageable." Mitsui's assumption for this fiscal year is based on the rate it used to compile its business plan, which was set at 145 yen. Hitachi Construction Machinery set its rate at 141 yen, a rise in the yen compared with the midyear average for the fiscal year ending March 2024. Chief Financial Officer Keiichiro Shiojima explained that the decision was based on "a broad survey of financial institutions in mid-March," many of which anticipated easier U.S. monetary policy and a consequent rise in the yen. Export-dependent companies do well from a cheaper yen, which fattens their bottom lines by adding to profits from exports, and through foreign exchange gains when dollar earnings are converted back into yen.
https://asia.nikkei.com/Business/Markets/Currencies/Japan-companies-brace-for-forex-bumps-assume-144-yen-dollar-rate
https://tradingeconomics.com/japan/currency