ASIA MARKETS: Japan Exporter Shares Skid As Yen Surges

By V. Phani Kumar

Japanese exporters plunged Monday as the yen jumped to an eight-month high against the U.S. dollar, sparking fresh fears that repatriated earnings of automobile and electronics companies could take a hit.

The yen's latest rally came after the Japanese finance minister reiterated the government's continued unwillingness to intervene in the currency market.

In early Asian trading, the U.S. dollar fell as low as 88.23 yen, a level it hasn't seen since January 21, according to FactSet Research data. The dollar hit a 13-year low of 87.10 yen that month, according to EBS. More recently, the dollar was buying 89.57 yen, down from 89.61 yen in late New York trading Friday.

The yen also soared against other currencies, with the euro recently changing hands at 130.88 yen, down from 131.70 yen late Friday. The British pound slumped to 141.91 yen from 143.00 yen Friday, and the Australian dollar slid to 77.16 yen from 77.81 yen Friday.

Auto makers were hurt the most Monday, with shares of Honda Motor Co. (HMC) slumping 5%, Nissan Motor Co. (NSANY) skidding 5.1% and Toyota Motor Corp. (TM) sliding 3.8%.

The steep fall in exporter shares reflected concerns that many of them, which had assumed an exchange rate of 90 yen to 95 yen against the U.S. dollar when they made their annual forecasts, might miss those targets as the stronger yen erodes the value of their overseas earnings.

But some analysts remained positive about automobile makers.

"While Japanese auto stocks have weakened since August, reflecting the impact of yen appreciation to [90 yen to a U.S. dollar], there is growing evidence of U.S.-led earnings recovery," Goldman Sachs analysts Kota Yuzawa and Yuichiro Isayama wrote in a report.

"We see improvement in both U.S. individual consumption and the sales financing environment, which has shackled sales," they wrote, adding that stronger-than-expected production volumes at Toyota were likely to drive analysts' consensus forecasts.

Among other exporters, shares of Nintendo Co. (NTDOY) dropped 3.8% and Toshiba Corp. fell 5.6%.

In wider Asian market action, Japan's Nikkei 225 Average dropped 2.5% to 10,009.52, China's Shanghai Composite lost 2.7%, Hong Kong's Hang Seng Index fell 2.6%, Australia's S&P/ASX 200 slid 0.8% and South Korea's Kospi shed 0.9%.

'Not abnormal'

Japanese Finance Minister Hirohisa Fujii said Monday that recent movements in the U.S. dollar/yen exchange rate are "not abnormal" at this point, suggesting he still isn't worried about the Japanese currency's rise, according to Dow Jones Newswires.

Fujii also reiterated that "foreign exchange dumping" to defend Japanese exporters would be the wrong policy for the government to take, and that artificially influencing foreign exchange rates would be "a mistake."

Analysts have attributed the yen's rally also to seasonal, end-of-quarter strength as exporters repatriated their overseas earnings.

Fuji reportedly made similar comments Friday, echoing comments he has consistently made since being appointed Finance Minister earlier this month in the new government of Prime Minister Yukio Hatoyama.

Despite Fujii's stated opposition to intervention, some analysts were skeptical the government can really afford to wait much longer to intervene if the yen's strength continued.

"In our opinion, even though Fujii has proven to be more supportive of a stronger than weaker yen, political pressure on the new government may force them to intervene prematurely," Kathy Lien, director for currency research, wrote in a note to clients.

Lien, however, cautioned selling in the dollar-yen pair could accelerate "if there are any disappointments in economic data next week."

Fujii's Friday comments "are probably an indication that he wouldn't intervene even if the dollar breaks below 90 yen," Eisuke Sakakibara, who served as vice finance minister for international affairs in 1997-1999, said in an interview with Dow Jones Newswires Friday.

Sakakibara was also quoted as saying that the finance minister would likely take a fall below 80 yen as abnormal.

"These comments are about as clear a buy signal as is likely to be heard," said Societe Generale's Asia forex and rates strategist Patrick Bennett.