Falling yen is a friend to Toyota
What a difference a yen makes.
Toyota Motor Corp. stands to make some big windfall profits on the yen's current retreat against the dollar.
A one-yen decline of the Japanese currency against the dollar should boost Toyota's operating profit by ¥35 billion to ¥40 billion -- $377.2 million to $431.1 million -- Kohei Takahashi, an auto analyst for J.P. Morgan in Tokyo, wrote in a report after the company announced earnings last week.
That's great news for Toyota -- and other Japanese automakers, which have a similar sensitivity to fluctuating yen -- because lately the yen has been tumbling against the greenback.
The yen began to fall after Japanese Prime Minister Shinzo Abe, who was elected in December, signaled his determination to prevent the currency from becoming too strong.
Since Jan. 1, the yen has dropped by one yen a week against the dollar. Then, the dollar bought 86.16 yen. Now it buys 92.
The current rate brings a full-year operating profit improvement of as much as ¥240 billion ($2.59 billion), or roughly a fifth of the ¥1.150 trillion ($12.39 billion) in global operating profit Toyota forecasts for the fiscal year through March 31.
But there's one important caveat: Toyota bases that forecast on an exchange rate of ¥81 to the dollar. So if the yen's current level holds, the company's operating profit for the year could soar above what increasingly looks like a conservative estimate.