Strong Yen Threatens Corporates

A rising yen threatens to depress annual profit growth at export-driven Japanese companies that close their books in December, adding to concerns about weak consumer spending and higher labor costs in the domestic market, Nikkei reported. Combined net profit at 229 listed companies is expected to climb 4% to 3.74 trillion yen ($35 billion) this year, compared with a 30% jump in 2017, data compiled by The Nikkei shows. Sales are forecast to grow 5% to 51.19 trillion yen, down from the 11% rise last year. The 229 companies on average are assuming an exchange rate of 110 yen to the dollar for 2018, roughly 2 yen stronger than the Japanese currency’s performance in 2017. A little over a tenth of listed Japanese companies close their annual books in December. The earnings total covers corporations with comparable results, excluding financial groups and emerging companies. Domestic groups that follow International Financial Reporting Standards tend to align their fiscal years with the calendar year to match their accounting periods with those of overseas subsidiaries. Many such groups, including pharmaceutical companies and precision equipment makers, earn the bulk of their earnings abroad.