The weak yen is already in the numbers
October 21, 2026 · Michael Lawton · Advisor edition
Summary. The yen is near 158 per dollar even after the BOJ hiked to 1.25%, because the Fed hiked too and the rate gap stayed wide. Exporters like Toyota and Mazda are the textbook winners, but Toyota's guidance already assumes ¥160/$, so most of that benefit is priced in. With a December BOJ hike largely expected and intervention capping yen losses, we think the better risk/reward is watching companies the weak yen has hurt, such as Nitori, for a turn.
What happened
The yen sits near 158 per dollar (about 158.1 on October 22), weaker than before the Bank of Japan hiked in September.
- The BOJ raised its policy rate a quarter point to 1.25% on September 18, its second hike in three months. The yen was about 155.9 before that hike and 157.1 by October 13.
- Over the past 12 months the dollar is up roughly 3.6% against the yen.
- Japan's Finance Ministry and the US Treasury intervened jointly to support the yen in late July. The yen has drifted back toward the weak end anyway.
Why it happened
The BOJ is hiking, but the Fed is hiking too, so the rate gap that drives the yen has not closed.
- Both central banks tightened in September. The Fed raised rates 25 bp to 3.75–4.00% on September 16 as energy prices pushed inflation up, and most officials expect one more hike this year. That leaves US rates roughly 2.5 to 2.75 points above Japan's.
- Carry trades persist. Borrowing cheap yen to buy higher-yielding assets keeps selling pressure on the currency.
- The BOJ is moving slowly. It is expected to hold at its October 29–30 meeting, with swaps pricing about 88% odds of a hike by December.
Will it last? Probably near current levels in the short run. Intervention risk caps how far the yen can fall, and a December BOJ hike is mostly priced in. A real reversal likely needs the Fed to stop hiking.
How it flows through
A weak yen reaches company earnings through four channels; which ones dominate decides who wins.
- Revenue translation. Dollar and euro sales are worth more yen when converted back.
- Costs. Anything bought in dollars gets pricier: oil, LNG, jet fuel, food commodities, imported finished goods.
- Competitiveness. Goods made in Japan get cheaper versus Korean, German and US rivals. This helps companies that export from Japan, not ones that build where they sell.
- Demand. Japan becomes a cheaper destination for tourists, while Japanese households lose purchasing power on imported goods.
The test for any company: where it makes things versus where it sells them. Sell abroad, build in Japan: winner. Buy abroad, sell in Japan: loser.
Winners and losers
Exporters that build in Japan gain most; domestic sellers of imported goods and energy users lose.
| Industry | Effect | Main channel | Examples (TSE code) |
|---|---|---|---|
| Autos, export-heavy | ▲ Winner | Revenue translation, competitiveness | Toyota (7203), Mazda (7261) |
| Machinery, factory automation | ▲ Winner | Revenue translation | Komatsu (6301), Fanuc (6954) |
| Inbound tourism, department stores | ◆ Mixed | Demand | Visitors fell 2% in Jan–Jun as Chinese arrivals dropped 56%, though total spending held at a record |
| Retailers of imported goods | ▼ Loser | Costs | Nitori (9843) |
| Airlines | ▼ Loser | Costs (jet fuel in dollars) | Japan Airlines (9201), ANA (9202) |
| Electric utilities | ▼ Loser | Costs (LNG, oil) | Kansai Electric (9503) |
Sources: Trading Economics; TTG Asia (JNTO data); company filings.
Names to watch
The obvious weak-yen winners already assume a weaker yen than today, so the more interesting angle is who gains if it strengthens.
Toyota 7203
▲ Weak-yen winner
Raised its full-year operating income forecast to ¥3.4T from ¥3.0T in August and now assumes ¥160/$, up from ¥150. Guidance assumes a weaker yen than today's ~158, so further upside from FX is limited.
Mazda 7261
▲ Weak-yen winner
April–June operating profit of ¥32.8B against a ¥46.1B loss a year earlier, helped by the weak yen and lower tariffs. The most leveraged auto name to the yen, which cuts both ways if it strengthens.
Nitori 9843
▼ Weak-yen loser
April–June revenue down 2.3% and operating profit down 1.1%. If the BOJ hikes and the yen firms, import costs ease; Nitori shares have historically rallied on yen strength.
What would prove us wrong
Our view: the weak-yen benefit is already in exporter guidance, and the next big move is more likely a firmer yen than a much weaker one. We are wrong if:
- The Fed keeps hiking past one more move, widening the rate gap and pushing the yen through 160.
- The BOJ skips December and signals a long pause.
- Oil spikes further, hurting Japan's trade balance and the yen.
- Tariffs come back up on Japanese autos, which would hit Toyota and Mazda regardless of the yen.
This view is tracked publicly as Call #001: the yen will be stronger than 158 yen per dollar on December 18, the day of the BOJ's next decision after this one.
Sources
- Trading Economics: Japanese yen
- Bloomberg via The Edge: BOJ leans against back-to-back hike
- FXStreet: BoJ to leave rates steady
- Khaleej Times: US Fed raises rates
- Toyota Q1 FY2027 presentation (Aug 4, 2026)
- Alicante Plaza: Mazda April–June 2026 results
- Quartr: Nitori Q1 FY2027 results
- TTG Asia: Japan inbound visitors, Jan–Jun 2026
Sound Street Research is an independent publication written by students. It is for informational and educational purposes only, is not personalized investment advice, and is not an offer or solicitation to buy or sell any security. Authors may hold positions in securities discussed; holdings: none.