Toyota Motor Crop has warned that its earnings might fall during the current fiscal year as the tailwind that boosted exports that the company and other carmakers in Japan received from the sharp depreciation of the yen over the past 18 months losses its steam.
Akio Toyoda the company president now has a different challenge to the events that encompassed his first five years at the helm, such as the huge recalls during 2010, the tsunami in 2011 and the boycott of Japanese products by consumers in China following a 2012 territorial dispute.
The best-selling carmaker in the world said Thursday that it was expecting its net profit to drop 2.4% to $17.5 billion in its March 2015 financial year.
While conservative guidance is typically issued by Toyota, the fall is a big reversal of close to doubling its net profit for the year that ended March 31, which was buoyed by exports.
As Toyoda was briefing reporters, he explained that earnings this year might decline as the automaker rides out an auto market in Japan that is shrinking, hit by a hike in sales tax in April and a temporary hiatus on launches of new vehicles.
Toyoda said in the future that he wanted Toyota to be able to develop long-term, stable growth instead of swings between extremes of high profit, such as 2013, or losses following natural disasters or major recalls.
The forecast for this year is the first in three years Toyota is expecting a drop in net profit.
The dollar is up close to 30% versus the yen since November of 2012, when it was clear for the first time that Shinzo Abe, become prime minister and pledged to increase the economy in Japan with measures to weaken the country’s currency.
However, the fall in the yen’s value versus other major currencies such as the U.S. dollar as well as the euro now appears as if it has run its course after helping to boost Toyota’s profitability in export sales in its major markets such as the United States.
