TOKYO: Strong earnings for many Japanese exporters may have soothed concerns about the impact of the strong yen, but the unit's rise still compromises the nation's biggest companies, analysts warn. The likes of Canon, Sony and Honda collect more revenue overseas than in Japan and the profit-eroding surge of the Japanese currency has threatened to undermine a demand revival following the global financial crisis. The earnings season for the quarter ended December has seen Japan Inc. rake in profits thanks to a pick-up in the global economy and strengthening emerging market demand, reflected in Tokyo's Nikkei index's 1.77 percent gain last week. But many companies have remained cautious in their outlook, maintaining earlier forecasts as the yen continues to cast a shadow, say analysts. “Corporate earnings seem to be positive, but the impact of a higher yen is certainly there,” said Taro Saito, a senior economist at NLI Research Institute. “Figures may look good when you see the earnings compared to the previous year, when the aftermath of the Lehman Brothers collapse was still dragging on the economy,” he said. “But profits have slowed because of the strong yen.” The strength of the yen has compounded the harsh environment in which Japan Inc. finds itself, given sluggish consumption and entrenched deflation at home and worries over the durability of recovery in key US and European markets. Nintendo generates more than 80 percent of its sales overseas and holds most of its cash assets in foreign currencies. It partly blamed an 84.4 billion yen ($1 billion) foreign exchange loss for a 74 percent net profit slide in April-December. “The speed of the yen's ascent has exceeded our capacity to cope,” admitted Nintendo president Satoru Iwata last month. In November the yen struck a 15-year high against the dollar at 80.21. While it has since stabilised at around the 82-yen level, analysts warn that its strength will continue to bite. A strong yen causes headaches for Japanese exporters because it makes their products more expensive abroad and eats into overseas revenues repatriated to Japan. – Agence France
