Toshiba, Nippon Yusen Call for More Government Action on Yen

Japan's Finance Minister Jun Azumi
Jun Azumi, Japan's finance minister, said he ordered the intervention at 10:25 a.m. local time yesterday, citing “speculative moves” in the currency. Photographer: Tomohiro Ohsumi/Bloomberg

Japan’s move to weaken the yen for the third time this year must be followed up with additional measures to help industries reeling from the strong currency, companies including Toshiba Corp. and Nippon Yusen K.K. said.

“The currency doesn’t move only by intervention,” Makoto Kubo, corporate executive vice president of Tokyo-based electronics maker Toshiba, told reporters yesterday. “The government needs to take various measures on fundamentals.”

Exporters, including Toyota Motor Corp. and Canon Inc., gained in Tokyo trading as the government’s move, which came after the yen surged to a postwar record of 75.35 per U.S. dollar yesterday, sent the currency tumbling. Additional steps will be needed, said Nippon Yusen, which cited a strong yen among the reasons for forecasting a full-year loss.

“We’d like the government to do more,” Yuji Isoda, manager of investor relations at the Tokyo-based shipping line, told reporters in Tokyo. “Ideally we’d like the yen to weaken to around 85 yen to 90 yen against the dollar.”

Yesterday’s intervention spurred the biggest intraday drop in the yen against the dollar in three years. It sank 2.9 percent to 78.05 per dollar by 9:25 a.m. in New York, after reaching a low of 79.53 earlier. The yen declined 1.9 percent versus the euro to 109.33. Japan’s currency traded at 78.30 per dollar and 108.35 per euro at 8:10 a.m. in Tokyo today.

A strong yen reduces exporters’ profits by making them less competitive overseas and eroding the value of repatriated earnings.

“We welcome the intervention very much,” Hiroki Yoshimatsu, executive officer at Mitsubishi Electric Corp., told reporters in Tokyo. Still, “it’s unclear how long the current level will last.”

Overseas Revenue

Alpine Electronics Inc., the Tokyo-based maker of car audio equipment and navigation systems, said the weakening of the yen would only be temporary. Alpine got almost 80 percent of its revenue from outside Japan last fiscal year, according to data compiled by Bloomberg.

“It won’t have any effect,” Seishi Kai, managing director at Alpine, told reporters. “It will go back to normal in a few days, so there’s no meaning to it.”

Plasma television maker Panasonic Corp. forecast an annual net loss of 420 billion yen ($5.4 billion) yesterday, citing the impact of the strong yen and stronger competition. The electronics maker reversed an earlier projection for profit of 30 billion yen for the year ending March 2012.

‘Safe Haven’

“Today’s intervention will have to be repeated at least once to have any lasting effect,” Julian Jessop, chief global economist at Capital Economics Ltd. in London, said in a note yesterday. “The underlying fundamentals driving the yen higher remain in place, notably demand for a safe haven from the financial crisis in Europe.”

The yen weakened against the more than 150 currencies that Bloomberg tracks, as Japan’s Finance Minister Jun Azumi said he ordered the intervention at 10:25 a.m. local time yesterday, citing “speculative moves” in the currency.

“I’ve repeatedly said that we’ll take bold action,” Azumi told reporters in Tokyo. “I’ll continue to intervene until I am satisfied.”

The government last month downgraded its economic assessment for the first time since April, citing the impact of the strong yen and weakening consumer spending.

A trade ministry survey in September showed that about 15 percent of large Japanese manufacturing companies expect operating profit, or revenue minus the cost of goods sold and administrative expenses, to drop 20 percent or more if the yen is at 76 per dollar.

Toyota Profit

Operating profit at Toyota, Asia’s biggest carmaker, will be reduced by 250 billion yen in the year ending March 31 because of the Japanese currency’s advance, based on the average of five analysts surveyed by Bloomberg last month. The Toyota City, Japan-based company and domestic rivals Nissan Motor Co. and Honda Motor Co. are moving some production overseas to offset the yen’s gain.

Toyota rose 0.5 percent to 2,644 yen at the close in Tokyo, while Nissan gained 1.7 percent. Honda fell 3.7 percent.

Before the government’s move, Honda said it expected the strong currency to cut operating profit by 71 billion yen this year, while Nissan predicted a 135 billion yen reduction.

Japan faces a “hollowing out” of its industrial base should the government fail to stem the yen’s rise, Carlos Ghosn, Chief Executive Officer of Yokohama-based Nissan, said last month.

Honda, based in Tokyo, said Oct. 5 it will reduce exports to as little as 10 percent of domestic production from 34 percent last year. The effect of the government’s action may be limited and may not last long, Fumihiko Ike, senior managing director at the carmaker, said at an earnings briefing.

Canon Forecast

Canon, the world’s largest camera maker, cut its full-year profit forecast to 230 billion yen from 260 billion yen on Oct. 25, citing faltering economic growth and the Japanese currency’s rise. The company’s shares rose 1 percent yesterday.

The company projected in July that foreign-exchange fluctuations would reduce its sales this fiscal year by 83.8 billion yen and shave 51.3 billion yen from operating profit.

Daiichi Sankyo Co., Japan’s second-biggest drugmaker, cut its sales forecast by 4.1 percent yesterday because of the strong yen and said it will reduce costs to improve operating income. The Tokyo-based company expects the currency to average 75 per dollar.

Nintendo Co., the world’s largest maker of video-game machines, forecast its first annual loss in at least 30 years on Oct. 28. The Kyoto-based company, which gets about 80 percent of revenue from the Americas and Europe, said it had a 52.4 billion-yen foreign exchange loss in the first six months of the fiscal year that began April 1.

Gree Welcomes Strength

While manufacturers cited the yen in cutting profit estimates, Gree Inc., the operator of a social-networking website, said its expansion to become a global business means a strong yen isn’t a threat.

“I welcome a strong yen,” Gree President Yoshikazu Tanaka, whose Tokyo-based company’s stock has more than doubled in value this year, told reporters in Tokyo.

Finance Minister Azumi acted yesterday after the Bank of Japan last week expanded stimulus programs to a total of 55 trillion yen from 50 trillion yen as Europe’s sovereign-debt crisis spurred the yen to a 7.5 percent gain versus the dollar in the six months to the end of last week.

Japan sold 4.51 trillion yen in August, a statement from the Ministry of Finance showed, the largest monthly amount since March 2004.

Sumitomo Mitsui Banking Corp. and Daikin Industries Ltd. said they applauded the government’s latest move.

Daikin, Unicharm

The “intervention is pretty favorable,” said Keiichi Ando, deputy president at Tokyo-based Sumitomo Mitsui. “It’s very important for the government to keep on showing that it has a strong will to counter the situation.”

The government should have acted sooner, said Noriyuki Inoue, chairman of Osaka-based Daikin, the world’s largest maker of air conditioners.

“The intervention may be a bit too late,” Inoue said. “We can’t expect much impact in the long run.”

Rather than only relying on government action, Japanese companies need to continue decreasing risk by hedging against currency losses and making products where they are consumed, said Takahisa Takahara, president of Unicharm Corp., the Tokyo-based maker of diapers and sanitary napkins.

“The government intervened because only saying it would intervene had no impact on the market,” Takahara said at a press briefing. “The exchange rate will stay around current levels.”

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