Runaway yen spurs business growth

February 02, 2013

By MASAHIRO YUCHI/ Staff Writer

A sharply falling yen and rocketing stock prices, by-products of measures promised by Prime Minister Shinzo Abe to end economic stagnation, are lifting many Japanese businesses, with many now reporting significantly rosier financial results.

Net profits announced so far by major Tokyo Stock Exchange-listed companies for the April-December period have jumped by nearly 40 percent year on year.

In particular, exporters are reaping the benefits of a sharply weakened yen after a long spell of lackluster sales.

"The yen's sharp depreciation is a big help to us," said Ryuji Okuda, the president of Sharp Corp.

Similarly, banks and securities houses are reporting improved results amid a general uptick in economic trends and business confidence.

On Feb. 1, the yen slid to around 92 yen against the dollar in trading in Tokyo for the first time in more than two and a half years.

In mid-November, Japan's currency traded at around 79 yen to the dollar. It then slipped to the 86 yen range in late December.

The benchmark Nikkei average, an average of 225 leading stocks on the Tokyo Stock Exchange, hit 11,191.34 on Feb. 1, its highest level since early 2010.

It was the 12th consecutive week of gains, the longest rally in more than five decades, beaten only by a 17-week rally which began in December 1958.

Between mid-November and late December 2012, the Nikkei soared more than 1,700 points.

The surge helped banks recover losses in their stock portfolios. It also spurred activity by securities houses.

Data from SMBC Nikko Securities Inc. shows that by Jan. 31, a total of 468 companies listed in the blue-chip section of the Tokyo Stock Exchange that settle accounts in March, more than one-third of the group, had released financial results.

Their aggregate net profits were up by 36.3 percent in the nine-month period from April compared with the same period a year earlier.

The numbers represent a sharp rebound from the first half of the current fiscal year, in which the group reported average losses of 17.5 percent.

What underpins the trend is a phenomenal turnaround in the October-December quarter, when the companies reported a year-on-year increase of 15.3 percent in consolidated operating profits and group net profits were 3.1 times those of a year earlier.

Overseas contributing factors include signs of recovery in the U.S. economy and an uptick in other foreign markets.

Exporters have done particularly well. Makers of electronics posted a group net profit for the nine months--despite recording net losses for the first six months of the period.

They posted consolidated net profit growth of 2.5 times that of the same period a year earlier.

On Feb. 1, Sharp and Panasonic Corp., two electronics manufacturers that posted huge losses in fiscal 2011, reported consolidated operating profits during the third quarter, due in part to their efforts at restructuring.

Net profits by automakers shot up by 88.8 percent in the first three quarters, while those for makers of precision equipment stood at 45.7 percent.

If the yen continues to weaken and share prices to rise, analysts say Japanese exporters will acquire an edge over competitors in markets overseas.

Kayoko Ota, an analyst at SMBC Nikko Securities, predicted business prospects would improve yet further in coming months.

"The positive impact of a weak yen has not been fully reflected in the recent financial reports," she said. "It is significant to see a weakening yen and a turnaround in foreign markets."

Last month, the Cabinet Office, in its Monthly Economic Report, revised upward its assessment of the Japanese economy for the first time in eight months. It reported "signs of bottoming out" in vehicle production and personal consumption.

Before, many analysts had been painting a bleak picture of an economy that would continue to slow. They based the belief on monthly economic reports which described a downward trend four months in a row from August through November last year, the first such prolonged decline since the period following the collapse of U.S. investment bank Lehman Brothers in autumn 2008.

By MASAHIRO YUCHI/ Staff Writer
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Ryuji Okuda, president of Sharp Corp., announces company financial results on Feb. 1. (Hiroyuki Yamamoto)

Ryuji Okuda, president of Sharp Corp., announces company financial results on Feb. 1. (Hiroyuki Yamamoto)

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  • Ryuji Okuda, president of Sharp Corp., announces company financial results on Feb. 1. (Hiroyuki Yamamoto)
  • The Asahi Shimbun
  • The Asahi Shimbun

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