Weaker Yen Gives Japanese Automakers a Rare Breather

Japanese automakers are benefiting from a weaker yen, which is shielding them from US tariffs and other global uncertainties. Toyota Motor Corp., Nissan, and Honda are set to release their quarterly results next week, with market participants closely watching for any revisions tied to currency movements.

In May, Toyota predicted an unexpected fall in annual operating profit to ¥3 trillion for the year ending March 2027, based on a yen-dollar rate of 150. However, since that prediction, the yen has plunged to its weakest point in 40 years and continued to slide, with the dollar fetching 163.59 yen on Thursday in Tokyo.

Analysts now forecast Toyota's profit at ¥3.9 trillion for this fiscal year, up from the earlier prediction of ¥3 trillion. According to Julie Boote, an analyst at London-based Pelham Smithers Associates, 'The weak yen is a saving grace for Japanese automakers.' She added that 'Currency gains will be important in lifting earnings in the first quarter.'

However, Toyota's bearish projection demonstrates how global upheavals are burdening even the auto sector's most lucrative company. The firm has stated that compensating for the ¥670 billion blow to its profits from disruptions such as US duties on vehicles and components, climbing energy expenses, a persistent chip shortage, and soaring R&D costs required to match the fierce rivalry from increasingly sophisticated Chinese electric vehicles in key markets will prove challenging.

Tatsuo Yoshida, a senior auto analyst at Bloomberg Intelligence, noted that 'Toyota is likely to be one of the biggest absolute beneficiaries of a weak yen, and the same is broadly true for Japanese automakers overall in the short term.' However, he also cautioned that 'The weaker yen should help cushion geopolitical, tariff, supply-chain and cost pressures. But it can't eliminate them or resolve company-specific structural challenges.'