Yen's Rally Offers Japanese Firms a Breathing Space

The yen's recent surge has caused Japanese equities to decline, but despite this, many companies' profit forecasts remain intact. The Japanese currency is still about five yen away from ¥151.49 per dollar, the weighted-average assumption of more than 800 companies surveyed by the Bank of Japan.

This buffer should limit the earnings impact on exporters, giving their shares room to rebound as they report results, strategists say. The threshold for profit forecasts is a key consideration for investors, and since the yen has not yet reached this level, stocks may still have upside potential.