Kyodo news: Strong yen to sink earnings targets — Weak dollar sinking too far for manufacturers to meet forecasts

 The sagging dollar is putting pressure on manufacturers as yen's resultant surge to the ¥76 range brings it well below the ¥82-¥83 range most Japanese manufacturers used in their 2011 business forecasts, economists warned.

                                                                                                                                         Photo: AP

 "The yen's current high level will push down the earnings of Japanese manufacturers considerably in the latter half of the fiscal year," said Yoshikiyo Shimamine, chief economist at Dai-ichi Life Research Institute, on Saturday. "In the long run, it will also accelerate the shifting of production bases overseas."

 Amid uncertainties over the U.S. economy and fears that the U.S. will finally lose its sterling AAA credit rating, the dollar dropped as low as ¥76.72 Friday in New York trading, testing its fresh postwar record of ¥76.25 set on March 17.

 "Can anyone tell me if there's any company that can compete well with (foreign rivals) with a foreign-exchange level of ¥77," asked Kiyoshi Ozaki, vice president of Mazda Motor Corp.

 According to the Bank of Japan's "tankan business sentiment survey in June, major manufacturers projected the yen would trade at an average value of ¥82.59 to the dollar when they compiled their business forecasts for this fiscal year.

 Toyota Motor Corp., for example, based its business plan on a value of ¥82. Each ¥1 rise in the value of the currency will lop ¥30 billion off the top automaker's operating profit.

 At Fujifilm Holdings Corp., one official said, "We want the government to do various things it can do" to stem the rise yen's rise, hinting at pressuring the Bank of Japan into yen-selling intervention.

 Monetary authorities have refused to intervene in global currency markets, although Finance Minister Yoshihiko Noda has repeatedly said they are "monitoring the market closely."

 The Japanese economy has been recovering gradually thanks to repairs to supply chains disrupted by the March 11 earthquake and tsunami. But the pace has not been strong is still being threatened by power shortages from the crisis at the Fukushima No. 1 nuclear power plant.

 In that light, the strong yen is expected to deal a considerable blow to the economy, analysts said.

 Some analysts say the dollar's weakness stems largely from angst over the 11th-hour theatrics in Congress, which is debating whether to raise the U.S. debt ceiling. Once it is raised, the dollar will probably rebound.

 But Takahide Kiuchi, chief economist at Nomura Securities Co.'s financial and economic research institute, disagrees with that view.

 "The U.S. economy has slowed down and the current trend may not reverse its course easily."

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