Many cars are lined up to import and export cars to the port. Kokouu | E+ | Getty Images Japanese automakers appear vulnerable to the fallout from the Iran war and any recovery in the yen. Toyota, Honda and Nissan benefited in their most recent quarterly reports from a historically weak currency, with the former two raising their full-year forecasts and the latter posting its first profit in about two years. But external factors might not be so cooperative in the future. The U.S. Treasury and Japan’s Finance Ministry jointly coordinated a rare yen-buying intervention in early August in a historic move, after the currency fell to 40-year lows, topping 163 per dollar. With Japanese automakers traditionally relying on a weak yen to make their exported vehicles cheaper and boost competitiveness in global markets, the actions raised warning signs. “If the government intervention is to strengthen the yen, this would be negative for Japanese automakers,” said Vincent Sun, senior equity analyst at Morningstar. profits, Sun noted. “A 1% change in the yen typically affects Japanese automakers’ operating profits by about 2%,” said Masahiro Akita, senior analyst at Bernstein, “although the sensitivity varies by company and can reach around 4% for some automakers.” Analysts also believe the ongoing conflict in the Middle East could cause problems, with Sun pointing to further supply chain disruptions and higher costs. The Strait of Hormuz and the Red Sea are crucial shipping routes for Japanese automakers that rely on aluminum and petrochemicals such as gasoline for automobile production. “The most significant headwind to automakers’ profits is rising raw material costs, which have intensified amid the ongoing conflict in the Middle East,” Akita said. “Inflation of key inputs, including naphtha and resins linked to oil prices, memory chips and industrial metals such as aluminum, copper and steel, is having a widespread negative impact on industry profitability,” Akita added. Choose CNBC as your preferred source on Google and never miss a moment from the most trusted name in business news.
