Weak Yen Gives Hope to Weak Japanese Companies

Will Tokyo's pedestrians shop more? Photograph by Toshifumi Kitamura/AFP via Getty Images

In the new weak-yen Japan, even the frailest companies are enjoying a reprieve. Today’s example is Pioneer, the bedraggled maker of car-navigation systems and audio and video equipment. Back in October, when the Kawasaki-based company reported its half-year numbers, the picture was bleak. Hammered by the rising yen and an ill-fated alliance with money-losing LCD TV maker Sharp, Pioneer said it had lost ¥4.83 billion ($61.6 million) for the six months. The company had estimated a profit of ¥1 billion.

Since then, a lot has changed in Japan. A new government led by Prime Minister Shinzo Abe has promised drastic action to reverse deflation and end the country’s long economic stagnation. The yen has weakened dramatically, hitting a four-year low of 102 to the dollar on May 13. The Japanese currency has lost nearly 22 percent of its value over the past six months, by far the worst performer among the 10 biggest developed-nation currencies. Among the losers, the Australian dollar is closest to the yen—and the Aussie is down only 2.6 percent.

Pioneer on Monday announced some dismal numbers in its report on consolidated results for the fiscal year ended March 2013. The company posted a net loss of ¥19.5 billion, compared with a profit of ¥3.67 billion the previous year, even as sales grew 3.5 percent, to ¥451.8 billion. Pioneer incurred restructuring costs of ¥6.2 billion and will be incurring more in the year ahead; the company has announced plans to cut 800 jobs.

Pioneer is optimistic that the worst is over, though. The company says it will sell shares to Mitsubshi Electric and NTT DoCoMo, raising almost ¥9 billion n the process. That will make Mitsubishi the second-largest shareholder and DoCoMo the third-biggest. With the money, Pioneer wants to move into new businesses such as car navigation systems. The company expects net income to rebound to ¥6 billion in the new fiscal year, with revenue jumping to ¥515 billion. Could this turnaround really happen? Investors are confident: Pioneer’s shares rocketed on Tuesday, increasing by as much as 33 percent. That’s no typo. The jump was the largest for Pioneer shares since 1974.

The weak yen is giving a lift to other Japanese electronics companies, including Sony and Panasonic. It has even provided hope to Pioneer’s biggest shareholder: Sharp. The Osaka-based company has been steadily losing competitiveness, with its share of the global LCD TV market falling to just 5.4 percent in 2012, compared to 6.6 percent the previous year, according to DisplaySearch. That’s far behind Korean rivals Samsung Electronics, with 27.7 percent, and LG Electronics, with 15 percent.

Still, Sharp expects that it, too, will be back in the black after two years of losses. Sharp could earn ¥5 billion in the new fiscal year, the company announced in a statement on Tuesday. That’s better than the ¥2.1 billion profit analysts had been expecting, according to estimates compiled by Bloomberg. The company’s share price jumped 4.9 percent on Tuesday and has increased 75 percent this year, compared to a 42 percent increase for the benchmark Nikkei index.

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