Japan automakers brace for yen rally, Hormuz supply hit
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- Toyota, Honda, and Nissan benefited from a historically weak yen in their most recent quarterly reports, with Toyota and Honda upgrading full-year forecasts and Nissan posting its first profit in about two years.
- U.S. Treasury and Japan's Ministry of Finance jointly coordinated a rare yen-buying intervention in early August after the currency fell past 163 per dollar, a 40-year low, raising flags for export-heavy automakers.
- Masahiro Akita, senior analyst at Bernstein, said a 1% change in the yen generally shifts Japanese automakers' operating profit by roughly 2%, with sensitivity reaching about 4% for some automakers.
- Vincent Sun, senior equity analyst at Morningstar, warned that government intervention to strengthen the yen would be negative for Japanese automakers, forcing them to choose between raising foreign prices (risking market share) or absorbing lower foreign-profit values.
- The Strait of Hormuz and Red Sea are critical shipping lanes for Japanese automakers, which rely on aluminum and petrochemicals like naphtha for car production, according to the analysts.
- Akita called surging raw material costs the most significant headwind to automakers' earnings, citing broad-based inflation across naphtha, resins, memory chips, aluminum, copper, and steel linked to the Middle East conflict.
- Sun flagged that the ongoing Middle East conflict could cause further supply chain disruptions and higher costs for the automakers.
Why it matters: Toyota, Honda, and Nissan just reported results buoyed by a weak yen, but a coordinated U.S.-Japan yen intervention past 163 per dollar and Middle East shipping risks through the Strait of Hormuz threaten to reverse those gains — Akita's data point that every 1% yen move swings operating profit by roughly 2-4% shows how thin the cushion is for automakers already absorbing broad-based inflation across aluminum, copper, naphtha, and steel.
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