Kihara Makoto : "Yen Depreciation Phobia" has subsided in the market. Because Japanese companies have successively released their performance from July to September, many companies have gained profits due to the depreciation of the yen.
Japanese companies are increasing their performance expectations for (as of March 2023) in fiscal year 2022. Among the major companies that released their performance expectations from October to early November, 32% of them raised their expectations, far exceeding the downward ratio (17%). If you only look at manufacturing industries that are more likely to benefit from the depreciation of the yen, the proportion of companies that are raised is as high as 36%.
yen depreciation will drive an increase in revenue denominated in foreign currencies for companies. Taking Sony Group as an example, excluding the impact of exchange rate changes, sales from July to September only increased by 51% year-on-year, but the financial report actually showed that revenue increased by 16% in the quarter.
Bank of Japan
For foreign investors holding Japanese stocks , the depreciation of the yen is a headwind for the shrinking of holding assets. But it is a good wind for employees and trading companies that receive yen wages and transaction payments in Japan.
How much "exchange benefits brought by the depreciation of the Japanese yen" can Japanese companies obtain? Nomura Securities data shows that for every 1 yen depreciated against the US dollar, the current profit of major enterprises such as automobiles and chemicals will rise by 0.3%. Among the 19 major industries, the depreciation of the yen has led to a decline in revenues of only public utilities and retail industries that rely on imported energy.
The total profit of Japanese listed companies in 2021 was 71 trillion yen. If the yen depreciates by 1 yen, the current profit will increase by more than 200 billion yen. Comparing the average data from April to September, it will be found that the exchange rate of the yen against the US dollar fell by 24 yen within one year. The listed "Japan Co., Ltd." can obtain a profit of 5 trillion yen in one year.
The stock market expects companies to use this "5 trillion yen fund" to achieve growth, especially in information investments such as digital to increase productivity that is seen as a weakness of Japanese companies. The market has left painful memories. After Abenomics , the Japanese yen exchange rate fell from around 1 dollar to 70 yen in 2011 to above 120 yen in 2015. In the past four years, Japanese companies failed to take advantage of the exchange gains brought about by the depreciation of the yen and opened a gap in competitiveness with foreign companies.
Japanese companies have always preferred to retain large amounts of profits rather than use them for investment. Comparing the data in 2011 and 2015, private equipment investment and information investment increased by only 16% respectively. In the past four years, U.S. equipment investment has increased by 29%, and information investment has increased by 34%.
Around 1990, Japan and the United States accounted for a comparable proportion of information investment in equipment investment. Now Japan is 18%, while the United States is as high as 48%. The growth of large-scale Internet companies in the United States ( Google , Apple , Meta, Amazon , Microsoft ) and Tesla are also the result of the active investment in information technology in the United States. There is also market pressure. "Production is not everything, but in the long run, it is almost everything." This is the golden saying by Paul R. Krugman, a famous American economist, and it is still widely circulated by Wall Street .
should be an opportunity to change the trend this time. During the "lost four years" from 2011 to 2015, some companies also exerted their animal instincts (Animal Spirits).
Japanese construction machinery manufacturer Komatsu accounted for 80% of its foreign sales in 2014, and is benefiting from the depreciation of the yen. Komatsu's then president Tokiji Ohashi said: "It is very important to invest where the increase in income through the depreciation of the yen, etc.." At that time, Komatsu Takashi established the most advanced facilities in the main factory in Komatsu City, Ishikawa Prefecture to replace old factories. Improved production efficiency and reduced power purchases by more than 90%.
Dajin Industry also took advantage of the opportunity of depreciation of the yen. In 2014, Daikin Industrial will transfer part of the production capacity of domestic household air conditioners in Japan from China to Shiga factory. As the yen depreciates, the prices of imported products to Japan rise. Daikin Industrial believes that the depreciation of the yen is a good opportunity to implement the original strategy of "production near consumers and shorten delivery time".
This time the same signs appeared. Toyota is expected to increase operating profit by more than 1 trillion yen in fiscal year 2022 (as of March 2023). Suppliers will use 1.65 trillion yen to increase purchase prices. Japan's domestic supply chain is in operational difficulties due to the surge in materials and electricity bills and the increase in import costs caused by the depreciation of the yen. Toyota is strengthening its supply chain.
let us turn our attention to the development of the entire country of Japan. The problem faced is to get rid of deflation by raising wages.
Business scholar familiar with the manufacturing industry and professor at Waseda University Fujimoto Takahiro emphasized: "Someone can become a penguin pioneer." "Penguin Pioneer" is the first penguin that mustered the courage to leave the group and jump into the sea. If companies as Penguin Pioneer start to raise their wages under the depreciation of the yen, other companies will follow the trend and raise their wages in order not to be stolen from talents. He expects that "the wait-and-see attitude that spreads in Japan will become a virtuous cycle."
It is estimated that some companies cannot follow the trend and raise their wages. But the head of a local bank revealed his thoughts: "This is the beginning of metabolism ." Zombie companies that breed under monetary easing are reorganized and the economy will bottom out and rebound. Even if bad debt temporarily appears, only if the economy is dynamic can financing grow in the long term. The top priority of the Japanese government is to create an environment such as re-learning.
Nikon may also be said to be Penguin Pioneer in the future. In October, Nikon increased the annual income of 780 people with professional skills and management positions by up to 20%. The starting salary of new employees will also be increased next spring. From Nikon's performance from July to September released on November 10, it can be seen that Nikon, like Komatsu, has a foreign sales accounted for more than 80%, which is also a representative Japanese company whose profits have increased due to the depreciation of the yen.
Some people also say that the reason why the exchange returns brought about by the depreciation of the yen have not received much attention is because many people are troubled by the rise in import prices caused by the depreciation of the yen, so companies that benefit from it have chosen to remain silent. Making the full value and giving rewards is the business responsibility of the company to stakeholders. If you choose to remain silent, it will only repeat the lost 4 years.
The author of this article is Nikkei Shimbun (Chinese version: Nikkei Chinese website) Commentator Makoto Kajihara
Copyright statement: Nikkei Shimbun is copyrighted. It may not be reproduced or partially copied without authorization. Violators will be prosecuted.
Nikkei Chinese website https://cn.nikkei.com
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-