Canon Inc raised its full-year operating profit forecast by $300 million
as a weakening yen triggered by Japan's latest deflation-fighting
policies inflates its overseas earnings, despite smartphones sapping
compact camera sales.
For the business year to December 31 2013, the
company, which relies on foreign markets for four-fifths of sales,
lifted its operating profit forecast to 450 billion yenfrom 410 billion
yen. That compares with the average expectation of a 473 billion yen
profit among 21 analysts surveyed by Thomson Reuters.
As one of
the first blue-chip Japanese corporations to report quarterly results,
results from Canon, which is considered a leader in profitability in
corporate Japan with its aggressive cost-cutting and high degree of
factory automation, is often seen as a barometer for tech sector
"We welcome Abenomics," Chief Financial Officer Toshizo
Tanaka said at a news briefing, acknowledging the impact of Prime
Minister Shinzo Abe's economic policies.
"The Japanese economy moves on this kind of mood so we value this and hope to find success," he added.
company raised its forecast for the yen rate against the dollar to 95
yen for the business year compared with 85 yen to the dollar three
Abe's government says the yen's rapid weakening is
a by-product of its economic policies and not the goal. Still, the
depreciation is what business leaders worried about their ability to
compete, particularly against South Korean firms, have been urging.
goods worth around 38 trillion yen a year, Japanese makers of TVs,
mobile phones, printers and personal computers account for a sizeable
chunk of Japan's $5 trillion economy. The tech sector directly employs
around 2 million workers in Japan, making it an influential lobby.
operating profit in the first quarter dipped 34 percent to $552
million, which the company blamed on a weakened global economy, and
picture-taking consumers eschewing compact cameras in favour of
Corporate heads who have
praised Abenomics include Sony Corp CEO Kazuo Hirai. His company and
other Japanese TV makers, Panasonic Corp and Sharp Corp struggled to
fend off competition from Samsung Electronics as a strong yen bit into
Sony with its bigger exposure to overseas markets stands
to gain the most from a weaker yen, particularly versus the euro. A 1
yen change against the European single currency adds about 6 billion yen
to operating profit at the maker of Bravia sets.
At Panasonic a 1
yen weakening against the euro moves the currency by 2 billion yen, and
by 2.5 billion yen for changes against the dollar. At Sharp, which more
heavily relies on its home market, a 1 yen move against the euro is
worth around 500 million yen in operating profit and 700 million yen
against the dollar.
More than a third of companies remain worried
about domestic demand stagnating, a Reuters survey of 240 companies
released on Friday shows. A quarter said they were likely to increase
output in Japan because of the weaker yen.
Since mid-November when
an Abenomics stock rally began, Canon's shares, have gained 58 percent
in line with a 60 percent gain in the Nikkei 225 benchmark index. Its
stock rose 1.3 percent in Tokyo to 3,840 yen on Wednesday. Quarterly
results were released after the close of trading.
© Thomson Reuters 2013