By Tetsushi Kajimoto

TOKYO, Reuters – Nearly half of Japanese companies expect a drop in yen, according to a Reuters poll.

The Reuters Corporate Survey is one of the most clear indicators that Japan Inc faces rising costs and worsening consumer demands due to the weakening yen.

Another survey revealed that almost 60% of those surveyed believed the government should act fast to start nuclear reactors. It is possible that this could be because they believe higher energy costs, due in part to currency slide, are changing public opinion regarding nuclear policy.

It fell below 126 yen on Wednesday to make it the lowest currency against the US dollar in 20 years. The currency has recovered some of its losses, trading at 125.6yen Thursday.

Although weakening the yen can be a benefit for Japan’s highly export-oriented economy, it is more concerning to companies that at such levels they are concerned about inflating fuel and material imports. This has been exacerbated by the rising costs of raw material and oil due to war in Ukraine. The decades-long shift towards producing more overseas goods has also slowed the yen’s gains.

A manager of a ceramics manufacturer wrote, under condition anonymity: “We see both the rising energy costs and the commodity prices that go with weakening currencies as a negative.”

“We worry that it could cause restrictions on capital expenditure and consumption.”

45% of businesses said it was difficult to deal with the currency’s decline beyond 120yen. Only 31% stated that they feel pain at 125yen.

The survey took place between March 30th and April 8th, when the yen fluctuated between 122 to 124 against the dollar. Nearly half the respondents were large or mid-sized Japanese nonfinancial businesses.

EARNINGS HIIT

Survey results showed that manufacturers were not as sensitive to weak yen as non-manufacturers. However, this is a relative small gap.

Overall, food processing firms were most sensitive with 73% of respondents placing their threshold at 120Yen. Retailers followed them, with 64% having the same threshold.

A manager of a food processor explained that “the ongoing weakening the yen has been on top of high raw material costs and dealt an double blow to my business.”

Overall 48% believe that weakening the currency will have an impact on earnings. 36% expect it to hurt profits, and 12% say the impact will be substantial.

It would increase profits by 23%, and have zero impact on 30% of respondents.

Retailers and food processors alike expect to see a drop in earnings.

Fivety-seven per cent of businesses said the government needed to act fast to start nuclear reactors. It is clear that energy security and the Ukraine crisis have made the problem more urgent.

One manager of a wholesaler said that rising electricity costs were hurting his business. He was for a restart.

Japan is still struggling with nuclear power. Just a few power plants remain operational 10 years after Fukushima’s nuclear meltdown.

According to a newspaper poll, 53% believed that the government should restart nuclear reactors. This is compared with 44% who voted in September’s previous poll.

Manager at a machinery manufacturer wrote, “Nuclear power a necessary evil.”

It would make a significant contribution to reducing CO2 emissions, and should therefore be considered in addition to Russia’s current energy source.