The yen has been stuck near a 34-year low after months of declines against the dollar, raising concerns that the currency is becoming a burden on Japan’s economy and stocks.
Japan’s depreciating currency has helped push the country’s stocks to records, as many of its largest companies are manufacturers whose revenues earned abroad are rising in yen. In the broad Topix index, transportation equipment companies, including automakers and electrical machinery companies, represent more than 25% of the weighting.
But the yen’s decline has pushed up import bills in Japan, keeping domestic consumer spending tepid since the currency began weakening in 2022. This weighs on companies that depend on the home market for profit. Companies including retailers and rail operators underperformed the broader market despite record numbers of tourists from abroad. Earnings announcements from most Japanese companies in the coming weeks are likely to highlight the widening gap between strong and weak companies.
