Japan sees yen problem in latest earnings season

Bloomberg

In a disappointing third-quarter earnings season for Japan Inc, one prominent theme is that moves in the yen have been a particular headache.
A total of 438 Tokyo-listed companies have cut their full-year earnings guidance, according to data compiled by Bloomberg. Fifty-six of them announced a change to their currency expectations in addition to their lowered profit forecasts.
Prominent corporates Mitsubishi Motors Corp and Shiseido Co all highlighted the impact of currencies when they revised their earnings guidance lower.
“The economy was doing much better last year, which may have made it harder to see the impact from forex,” said Seiichi Suzuki, chief equity market analyst at Tokai Tokyo Research Institute. Given the impact of the trade war, “it’s no surprise companies are affected by forex this year.”
A combination of the surge in trade tensions and slowing global growth has led to a mixed year for the yen against its global peers. While the currency is up over 4% against the euro and more than 2% versus the Chinese yuan, it has risen just 0.4% against the greenback, with fund withdrawals, seasonality and the steady growth in Japanese acquisitions abroad all acting as a counterweight to haven flows, according to analysts.
Japanese companies have been expanding overseas organically and through big ticket M&A in a bid to be less dependent on the stagnant home market, where falling population numbers hold dim prospects for growth.
But the growing exposure to overseas business has left many firms vulnerable to a currency that can move as much on geopolitical uncertainty as it does on Japan-specific economic factors.
Meanwhile, automaker Mitsubishi Motors cut its profit forecast, citing revised exchange rate expectations and a decrease in vehicle volumes.
Cosmetics giant Shiseido also pointed to foreign exchange when it said that it expected annual sales and operating income to be less than previously announced.