The Japanese yen falls to near a 40-year low, Japanese companies experience "two extremes": car companies welcome unexpected $58 billion windfall, while domestic demand retail suffers.

Even as the Japanese government seeks new intervention measures to curb the yen from falling to near 40-year lows, weak yen may still provide unexpected windfall profits of about $5.8 billion to the country's car manufacturers this year. Assuming the yen remains near current levels, Bloomberg Intelligence estimates based on forecasts from various companies show a total profit upside of about 934 billion yen ($5.8 billion). Toyota Motor Corporation's profit forecast was released in early May, assuming an exchange rate of 150 yen to the US dollar, but the current exchange rate is around 161 yen to the US dollar. Toyota's management predicts that for every one yen depreciation of the yen, its operating profit will increase by 50 billion yen, meaning that if the yen continues to weaken, the company will benefit significantly. The business outlook for other major Japanese automakers is set with relatively conservative assumptions: Honda Motor Company assumes an exchange rate of 145 yen to the US dollar, Nissan Motor Company assumes 150 yen to the US dollar, Subaru Corporation and Mazda Motor Corporation assume 155 yen to the US dollar. Meanwhile, material and energy costs may further soften beyond expectations. After the temporary peace agreement between the US and Iran, expectations of the reopening of the Strait of Hormuz have driven oil prices sharply lower. Priced in yen exchange rates, crude oil prices have fallen by over 30% from their late-April peak. Tatsuo Yoshida, a senior analyst at Bloomberg Intelligence, stated that recent developments may serve as a "significant positive factor for profit expansion" for manufacturing companies like Toyota and Honda that have already factored in the impact of the Middle East tensions into their full-year forecasts. He added that the decrease in gasoline prices may also improve consumer sentiment and support car sales. Toyota had previously warned in May that rising material costs and production cuts due to unstable Middle East geopolitical issues could negatively impact profits by 670 billion yen. With the yen further weakening and geopolitical risks easing, the company's forecasted operating profit of 3 trillion yen and a significant year-on-year drop of 20% may be revised upwards. Bloomberg Intelligence's mean analyst estimate has significantly increased to 4 trillion yen. On Thursday, the US dollar hovered around 161.7 yen, with the yen exchange rate still close to its lowest level since 1986. Despite verbal interventions by the Ministry of Finance officials, the support for the yen remains minimal. Earlier this week, Japanese Finance Minister Kaori Tanaka stated that she held talks with US Treasury Secretary Scott Benson, reaffirming their joint commitment to coordinate in the foreign exchange market when necessary. The strengthening of the US dollar and the large interest rate differential between the US and Japan continue to put pressure on the yen. Two months ago, Japan carried out an unprecedented scale of currency intervention, significantly reducing foreign exchange reserves, leading the market to doubt Tokyo's willingness to further intervene in exchange rates. The benefits of falling oil prices may outweigh the negative impact of the weakening yen on airlines, with aviation fuel prices dropping to less than half of the March peak. The Japan Scheduled Airlines Association issued a statement in April warning that if the instability continues, their members including ANA Holdings and Japan Airlines would see industry costs increase by billions of yen annually, threatening industry stability. ANA's forecast outlook at the end of April shows that the Middle East tensions and rising fuel costs will reduce its operating profit by approximately 60 billion yen for the fiscal year. Although Singapore jet fuel prices remain well below the company's first-quarter assumption of $200 per barrel, the yen has fallen below ANA's full-year assumption of 155 yen to the US dollar, presenting mixed effects on profit prospects. However, most Japanese companies are facing a significant negative impact from the weakening yen. According to a survey conducted by the Tokyo Chamber of Commerce in June, 40.7% of respondents said that the exchange rate of about 159 yen to the US dollar in late May had a negative impact. Industries most affected include snack giants like Calbee, wholesale and domestic retailers, and traditional domestic manufacturing whose import costs are the main influencing factor. The average "ideal" exchange rate mentioned by respondents was 136.8 yen to the US dollar. For example, Nitori Holdings Co. imports furniture and household goods manufactured overseas, estimating that for every one yen depreciation of the yen, its operating profit will decrease by 2 billion yen. Although the company uses an exchange rate of 155 yen to the US dollar in its budget, it assumes 165 yen to the US dollar when developing products to ensure profitability even at that exchange rate. At current levels, Nitori expects to achieve its planned gross profit margin without the need for price increases. Takahiro Kazahaya, a senior analyst at UBS Securities in the Japanese market, pointed out that many retail, food, and other traditional domestic demand industries have expanded significantly into overseas markets, increasing their ability to cope with the weakening yen. He emphasized that the widening gap between food service companies that can successfully pass on costs and manage expenses and those that cannot will significantly determine winners and losers, potentially acting as a catalyst for industry consolidation.