The yen’s slide may ripple through domestic firms beyond exporters, underscoring pressure on Prime Minister Shinzo Abe to prevent the currency rebounding from close to its lowest level since 2010.
Softbank Corp. and advertising agency Dentsu Inc. stand to reap higher earnings from abroad after taking part in the nation’s record $113 billion worth of overseas acquisitions last year. Hotels and theme parks are set to benefit from increased tourism, with a ¥40,000 room at Tokyo’s Imperial Hotel about $70 cheaper compared with three months ago.
The widening benefits and the decision Saturday by the Group of 20 nations not to criticize Japan over its currency may help Abe to maintain a market rally and public support ahead of this summer’s Upper House election. Nomura Holdings Inc. sees a 10 percent fall in the yen against the dollar boosting growth by as much as 0.3 percentage point, moves that may depend on whether the next Bank of Japan governor, due to be nominated next week, enacts aggressive monetary easing.
“Abe needs to maintain the impression that the economy is improving,” said Hideo Kumano, chief economist at Dai-ichi Life Research Institute in Tokyo and a former BOJ official. “He needs a governor who’ll carry out more aggressive monetary easing to help prevent a rebound in the yen.”
The benefits of a weaker currency are shown in the Nikkei 225 stock average’s 25 percent rise over the past three months.
The costs of a weaker currency were highlighted by Wednesday data showing a record trade deficit in January due to a rising import bill.
Royal Bank of Scotland Group PLC says higher profits from overseas at firms such as Dentsu, which last year paid $5 billion for Britain’s Aegis PLC, may filter into domestic wages through higher bonuses. Almost 7 in 10 voters have positive expectations for Abe’s economic policies, according to a newspaper poll published Feb. 4.
The currency will be at 92 per dollar this quarter and 95 by the end of the year, according to the median forecast of economists surveyed by Bloomberg News. That may help to spur economic growth after three quarters of contraction through December, with a separate survey showing that gross domestic product will probably rise 1.4 percent this quarter.
Still, Westpac Banking Corp., the most accurate foreign-exchange forecaster in the fourth quarter, is betting the yen will be at 80 per dollar by the end of this year as it sees the central bank struggling to satisfy investors.
“Expectations are rising that the BOJ governor will deliver something more aggressive,” said Masamichi Adachi, senior economist at JP Morgan Securities Asia in Tokyo and a former BOJ official. “International investors need to be convinced that the regime has really changed.”
The Aegis deal means Dentsu will more than double the share of its revenue from overseas, according to research by Bloomberg Industries, while the weaker yen helps to boost the value of income earned abroad. The company expects its net income to rise by nearly a fifth in the fiscal year that starts in April on a 12 percent increase in revenue.
Shares in Softbank, which agreed to pay $20 billion for control of Sprint Nextel Corp. last year — the biggest-ever foreign acquisition by a Japanese company — gained the most in nearly four months on Feb. 12 after Sprint’s revenue topped forecasts.
“The impact on earnings of these acquisitions will appear this year and may accelerate after that.” said Yoshimasa Maruyama, chief economist with Itochu Corp., Japan’s third-largest trading company, which agreed to pay $1.69 billion for two units of Dole Food Co. in September. “Abe’s timing was good.”
In the latest survey, a tourist hotel in Hokkaido reported that foreign visitors had increased. A department store in western Japan said that inquiries about imported brand items have risen as shoppers expect prices to climb.
South Korean visitors to Japan rose 35 percent in January from a year earlier, while those from Thailand rose 33 percent, according to figures released Tuesday by the Japan National Tourism Organization. The Thai baht has risen more than 18 percent against the yen in the past three months, the most among Asian currencies, while the won has gained 15 percent.
Oriental Land Co., operator of Tokyo’s Disneyland and DisneySea parks, said its third-quarter earnings exceeded forecasts on visitor numbers. The company expects an 11 percent rise in net income next fiscal year.
While the weaker currency will be a boon for parts of the economy, it is pushing up import costs. Japan relies on other nations for almost all of its oil and gas and about 60 percent of its food on a calorie basis.