Yen weakens against Euro, providing earnings boost for exporters

The yen has weakened about 9% against the euro so far this year providing a potential earnings boost for Japanese companies with significant sales in Europe. 

Companies with the largest percentage of sales in Europe have an average forecast of 156 yen to the euro, about 15 yen lower than the current rate of 170.79. 

The yen has fallen against all major currencies this year largely due to the discrepancy between the Bank of Japan’s low interest rates and higher rates elsewhere. This has been a boon for exporters. 

Makita Corp., a maker of power tools, which gets 46% of sales in Europe, estimates that a ¥1 depreciation of the Japanese currency will boost operating profit by just under ¥900 million. Canon Inc. estimates that a ¥1 depreciation of the yen will boost operating profit by ¥2.5 billion in the April-December period. 

In addition to direct imports to Europe, the weaker yen can also help Japanese firms undercut pricing of European competitors in third countries, according to Tsuyoshi Ueno, a senior economist at NLI Research Institute. 

Shionogi & Co. Ltd. is enjoying strong European sales of its anti-AIDS virus medications. The majority of the company’s European sales are in the UK, and a spokesperson said that the current depreciation of the yen against the euro and pound sterling is having a positive effect on earnings.

The following is a chart of Japanese firms with a market capitalization of over ¥1 trillion and a high percentage of sales in Europe.