While the fall of the yen causes pain for many, SoftBank and game makers are rare beneficiaries

SoftBank Group Corp. and video game makers are emerging as the few beneficiaries of the weaker yen, which no longer offers the clear advantage to the Japanese corporate sector that it did a decade ago.

Automakers and electronics makers, including Sony Group Corp., have once welcomed a weaker yen to bolster their overseas competitiveness and inflate the value of their repatriated profits. But having moved production overseas in recent years to ensure growth and resilient supply chains, many see a mixed – or mostly neutral – effect from the yen’s free fall to its lowest level. in 20 years, according to industry executives and analysts.

For some consumer-facing businesses, including Uniqlo owner Fast Retailing Co., the latest yen drop is a negative factor, exacerbating the impact of soaring raw material costs and rising prices. energy in the context of the Russian war in Ukraine.

“It’s no longer the case that the weak yen is benefiting many companies in the manufacturing sector,” said Morningstar Research analyst Kazunori Ito. “Even those who are still taking advantage of the weak yen – the magnitude has become much smaller. Sony is a great example of that.

The yen saw its longest losing streak against the dollar in 50 years this month as the spread widened between US and Japanese interest rates.

SoftBank’s massive bets on foreign startups mean it is clearly poised to benefit from a weaker yen. SoftBank’s asset value will rise 9% if the yen weakens 12% year-on-year, with the group holding 86% of its value in dollar-linked assets, said Redex analyst Kirk Boodry Research. In a report last week, he said the softer currency was also helping SoftBank’s 1 trillion yen share buyback program announced in November, although it was negative for the group’s debt.

Japanese video game publishers such as Nintendo Co. and Capcom Corp. should also benefit. Both companies create software in Japan, which means most of their costs are in yen, while a large portion of their sales come from overseas.

Nintendo’s operating profit would rise by 1.1 billion yen for every 1 yen drop against the US dollar, said Hirotoshi Murakami, an analyst at Mitsubishi UFJ Morgan Stanley Securities.

Japanese video game publishers such as Nintendo Co. create software in Japan, which means most of their costs are in yen, while a large portion of their sales come from overseas. | Reuters

Kenjiro Asano, chief financial officer of video game publisher Koei Tecmo Holdings Corp., said on Monday that its operating profit could rise by more than 100 million yen for every 1 yen drop.

Upcoming trade results should show that Japanese automakers are benefiting from a weaker currency, at least in accounting terms, analysts said.

“The depreciation of the yen will partially offset the triple pain for Japanese automakers from ongoing virus outbreaks, parts shortages and higher input costs, combined with the impacts of the Russian-Ukrainian war,” the report said. Bloomberg Intelligence analyst Tatsuo Yoshida. “The effects of yen depreciation will vary from company to company, but should provide an overall boost to Japanese automakers’ operating profit,” he said, predicting a particularly strong boost for Mazda Motor. Corp. and Subaru Corp.

But analysts and executives also said the impact of the exchange rate was much smaller than it would have been a decade ago. A strong yen and supply chain disruptions caused by the 2011 earthquake and tsunami have prompted automakers and a wide range of suppliers to build a more resilient global supply chain over the past decade. . Stronger growth in overseas markets versus sluggish demand in Japan also spurred a shift to overseas production.

Bob Carter, Toyota’s top sales executive in the United States, noted that 77 percent of vehicles sold in the United States last year were made in North America. “He doesn’t have the relevance in our business that he had 20 years ago,” he said.

Honda Motor Co. is in a similar situation, according to general manager Toshihiro Mibe. “We operate on the basic principle of producing in the region where the market is,” he told Bloomberg News. “The business operates in a way that makes it unaffected by exchange rate fluctuations.”

Satoru Aoyama, senior director of Asia-Pacific businesses at Fitch Ratings, warned that supply chain constraints and chip shortages meant the year ahead could be more challenging for automakers.

“The depreciation of the yen today and for the next six months — it’s like window dressing; it doesn’t address the real underlying issues,” he said.

For many Japanese manufacturers, the impact should be more neutral. Panasonic Holdings Corp. CEO Yuki Kusumi said the negative impact on its home appliance business would negate gains in other areas.

In Sony’s case, the yen is likely negative for its small smartphone business, which relies on imports and sells primarily in Japan. Its image sensor business could get a boost as these are mostly made in Japan and sold to overseas customers, including smartphone makers like Apple Inc.

But in some industries, the weaker yen is clearly negative, especially among restaurant chains and others struggling with higher costs for food and imported goods.

Even Fast Retailing, whose casual clothing chain Uniqlo benefits from a global sales and production structure, says the latest wave of yen weakness is clearly negative due to rising import costs, especially that a weak economy made it difficult to raise prices in Japan.

Tadashi Yanai, President and CEO of Fast Retailing |  BLOOMBERG
Tadashi Yanai, President and CEO of Fast Retailing | BLOOMBERG

“Weakness in the yen offers no benefit,” CEO Tadashi Yanai said earlier this month. The 73-year-old, one of Japan’s most prominent executives, said the sharp fluctuation of currencies crushes businesses like his between rising costs and reluctant consumers.

“Given the current economic situation in Japan, we cannot easily raise product prices,” he said. “But when the cost of raw materials has doubled and tripled, it’s impossible to sell it at current prices.”

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