For the past three years, Prime Minister Shinzo Abe could usually count on surging corporate earnings to back up the case that his policies were turning around Japan, but that is no more.

Pretax profit at the biggest companies will drop about 10 percent in the three months ending June, the biggest slump since Abe took office in late 2012, Daiwa Securities Group Inc. estimates. Investors have taken notice, with Japanese benchmarks being among the worst-performing stock indexes this year.

Behind the outlook is the stronger yen, which hurts earnings at exporters that had benefited over the three years in which the Japanese currency depreciated almost 40 percent against the dollar. The recent appreciation is prompting analysts to cut their profit estimates for companies from Toyota Motor Corp. to Fast Retailing Co. and Canon Inc.

“There could be more losses on foreign exchange if the yen continues to strengthen,” Fast Retailing Chief Financial Officer Takeshi Okazaki told reporters gathered last week when the company reported earnings.

Most of Japan’s biggest companies report results later this month and in early May.

Fast Retailing, the casual clothing maker with flagship Uniqlo stores from New York to London, San Francisco and Tokyo, cited yen strength in slashing its own annual profit forecast by a third.

The country’s highest profit earner and biggest employer, Toyota, has seen analysts cut profit estimates for this fiscal year by about 6 percent since last summer, when volatility in global markets started pushing up the yen, which is seen as a haven. The carmaker’s shares are down 31 percent since July 15, a swoon that has wiped more than $80 billion off its market value.

Toyota estimates that a ¥1 change versus the dollar affects its annual operating profit by ¥40 billion. The company based its forecast for the year ended March 31 on ¥120 to the dollar, matching the currency’s average trading level in the period.

It has been almost two months since the currency last traded at ¥120. It has averaged ¥114.6 versus the dollar since the beginning of the year and held at around ¥109 on Thursday in Tokyo.

Further appreciation may push some exporters into loss in the current fiscal year, said Chihiro Ohta, senior strategist at SMBC Nikko Securities Inc., without naming any companies.

“At ¥107 to the dollar, earnings growth for some export-oriented companies will be shattered,” said Ohta. Some previously profitable companies will forecast annual losses for the current fiscal year when they announce results in coming weeks, he said.

Investors should shift to shares of companies that depend on domestic demand, which are less exposed to currency fluctuations, Ryota Sakagami, a strategist at SMBC Nikko, recommended in a note to clients earlier this month. Initial company projections for the current fiscal year, which they typically announce along with fourth-quarter results for the previous year, will be weak, said Sakagami.

Anticipating an even broader slump, foreign investors are already fleeing Japanese stocks, dumping $46 billion in shares over 13 straight weeks.

Fast Retailing, which accounts for almost 7 percent of the Nikkei 225 average and is run by Japan’s richest person, is seeing its shares decline as analysts have slashed earnings per share estimates for this fiscal year by 55 percent from six months ago, data compiled by Bloomberg show.

Japan Inc. stalwart Canon has seen its earnings per share estimates pared by 17 percent from six months ago. Toyota’s biggest parts supplier Denso Corp.’s has been pared 13 percent, and Japan Tobacco Inc. is down 9.5 percent from earlier earnings-per-share estimates.

Still, the drop is not hurting all Japan’s top companies.

Earnings per share estimates for NTT Docomo Inc., the country’s largest mobile phone carrier, have surged 11 percent over the past six months. The profit consensus for Japan Airlines Co., the nation’s largest carrier by market value, has gained 4.8 percent, partly because a stronger yen lowers the cost of fuel priced in dollars.

“The yen’s gain is hitting earnings harder than at any time since Abe took office,” said Satoshi Yuzaki, general manager at Takagi Securities Co. in Tokyo. “Companies will have to find a way to adjust to the high volatility of the yen again.”

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