TOKYO, Sept 22 - Japanese exporters may be forced to revise down their earnings forecasts if the yen strengthens beyond 110 yen per dollar, with every one yen gain potentially shaving billions from profits, analysts said on Monday. The yen soared to 111.37 per dollar , its highest level in nearly three years against the greenback, on Monday, on speculation Japan would stop trying to hold down its currency after the Group of Seven called for flexible currency regimes at a weekend meeting. Most Japanese exporters have already sold the dollar using forward trading so they are unlikely to cut their earnings forecasts for the financial half-year ending this month.
For instance, Nissan Motor Co <7201.T>, Japan's third-largest auto maker, said on Monday that it had booked dollar sales a couple months ahead. Likewise, Honda Motor Co Ltd <7267.T>, the nation's No.2 auto maker, has sold the dollar for the next three months. Japan's auto makers, like many of Japan's exporters, depend on the U.S. market for much of their profits. The trouble for their bottom lines would start if the dollar stays below 110 yen for a prolonged period. According to a survey by the Japanese government, the average break-even dollar level for Japanese exporters is around 114.90 yen. Nissan, which assumes a rate of 120 yen, said on Monday its operating profit would be cut by 10 billion yen ($90 million) for every one yen jump higher against the dollar. Toyota Motor Corp <7203.T>, Japan's top car maker, and Honda said their earnings forecasts are based on a dollar/yen rate of 115. "It is hard to escape the impact of the yen's strength, if the dollar stays below 110 yen for a long time," said Tatsuya Torikoshi, senior economist at Daiwa Institute of Research. Most exporters have not yet reviewed their target exchange rates, preferring to wait to see how the dollar moves in the near term. But some were already taking action.
Mitsubishi Electric Corp <6503.T> on Monday revised its target rate to 115 yen from 120 yen. Yukihiro Sato, Mitsubishi Electric's vice president and head of accounting, said: "If the yen breaks 100, then we cannot avoid an impact on earnings," adding that each one yen rise by the yen against the dollar cuts the company's full-year revenue by three billion yen. At 0840 GMT, the dollar was trading at 112.16/21 yen . ($1=111.69 yen)//