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Soaring yen hits Toyota's profits

August 4, 2016

After five successful years in a row, Toyota has reported shrinking profits. Like other Japanese carmakers, it is grappling with a strong yen and falling US sales - so much so that it lowered its yearly forecasts.

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Toyota Logo
Image: picture-alliance/AP Photo/D. Zalubowski

The world's leading carmaker trimmed forecasts, as a resurging yen and shrinking US sales squeezed year-on-year results between April and June.

Net profits in its first fiscal quarter had slumped by nearly 15 percent to 553 billion yen (4.9 billion euros, $5.7 billion), while revenues had dropped by 5.7 percent to 6.6 trillion yen, Toyota announced on Thursday.

In light of the losses, the Japanese company cut its annual net profit forecast from 1.5 to 1.45 trillion yen and sales predictions from 26.5 to 26 trillion yen.

Problems are manyfold

Toyota mainly blamed a rallying yen for its unsatisfactory quarterly figures.

Volatile financial markets and insecurity after the Brexit vote drove investments into the stable currency, which consequently rose in value.

This hit Japanese companies operating globally, like Toyota, as money earned abroad was now worth less when exchanged back into yen.

Stalling demand in the US was another problem, especially as it's one of Toyota's key markets.

On top of that, the automaker struggled with a recall of flawed airbags and production blackouts as huge earthquakes battered southern Japan.

"It's going to be a tough year for the industry," said analyst Yasuo Imanaka.