Japan Carmakers Assume Weaker Yen Ahead

Japan's carmakers are projecting that the yen will remain near its current levels against the US dollar in the coming months. Toyota Motor Corp., Nissan Motor Co., and other companies have based their profit and sales outlooks on this assumption, which puts the currency between ¥150 to ¥160 for the fiscal year through March 2027.

The yen is currently trading at around ¥157.7, within the range predicted by the carmakers. This projection comes after the US and Japan took joint action in the currency markets for the first time since 2011 to reverse a slide that threatened to drive up inflation and import prices in Japan.

While a stronger yen would alleviate these concerns, it would also cut into carmakers' earnings, which are driven by sales abroad. Bloomberg Intelligence senior analyst Tatsuo Yoshida noted that Japanese automakers seem to expect the yen to remain weak even after the recent US-Japan intervention, while keeping some buffer against yen appreciation and exchange-rate volatility.

Toyota, Honda, and Suzuki revised their assumptions toward a weaker yen from the levels set in May, while others left theirs unchanged. This positioning reflects how the industry's exposure has changed, with Japanese carmakers manufacturing a large share of vehicles they sell overseas in or near their final markets, creating a natural hedge.

Mazda's chief treasury and accounting officer Tetsuya Fujimoto emphasized the importance of building resilience to currency fluctuations by reducing costs. Toyota is better equipped to tolerate this risk due to its global earnings spread across Japan, North America, Europe, Asia, financial services, and other businesses.