NNA survey: Asian currency falls hurt earnings at 1/3rd of Japanese firms

08, Jan. 2019

TOKYO, NNA – Generally weaker Asian currencies against the U.S. dollar weighed on earnings at more than 30 percent of Japanese firms in Asia last year, an NNA survey showed.

Of the 630 respondents at Japanese companies in East Asia, Southeast Asia, India and Australia, 31.4 percent said currency depreciations in the countries where they operate had a negative impact on earnings. The survey was conducted from Nov. 26 to Dec. 9.

Among the 15 countries and regions covered by the survey, including Japan, the effect of the currency depreciations affected a higher percentage of companies in Indonesia and India, at 59.6 percent and 54.7 respectively, pushing up their import costs and squeezing profits.

“Earnings declined in line with an increase in the costs of materials imported from Japan,” a Japanese employee with a manufacturer in Indonesia said.

“The weaker currency triggered rate hikes and pushed up capital procurement costs,” said another Japanese employee in the non-manufacturing sector in Indonesia.

Japanese companies in India saw an 8.2 percent drop in the rupee in the first 11 months of 2018 jack up energy costs. India relies heavily on crude oil imports.

In the same period, the Chinese yuan, the Indonesian rupiah and the Vietnamese dong fell 6.5 percent, 5.2 percent and 2.7 percent against the U.S. unit, respectively, according to Sumitomo Mitsui Banking Corp., one of the three mega banks in Japan.

Among the respondents, 48.9 percent said they expected Asian currencies in general would remain weak for the next year or two, while nearly 30 percent said the weakness could last up to three years.

“The Chinese yuan and other Asian currencies face increasing volatility if the world economy becomes more unstable due to the U.S.-China trade dispute and Brexit,” said Shingo Ito, an economist at the Institute for International Economic Studies.