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February 4, 2017

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Honda revises outlook, future uncertain

HONDA revised up its full-year outlook thanks to a weaker yen but analysts warned of an uncertain outlook for the auto industry following Donald Trump’s drive to support US firms over foreign imports.

The company forecast net profit to hit 545 billion yen (US$4.8 billion) for the fiscal year through March, up from its earlier estimate of 415 billion yen. It also tipped sales to reach 13.8 trillion yen, up from 13.4 trillion yen projected earlier.

The upward revisions came as the yen has weakened against the dollar on bets Trump’s promises to boost spending and cut taxes will fire the US economy, stoke inflation and lead to higher interest rates.

The improved currency conditions offset an expected fall in sales, Honda said.

“The weak yen trend has prevailed in the third quarter, which is a major factor behind recovery in the Japanese auto industry,” said Shigeru Matsumura, analyst at SMBC Friend Research Center.

A weaker yen boosts exporters’ bottom lines by making their products relatively less expensive overseas, while inflating the value of their earnings abroad when repatriated.

“But the outlook for the Japanese auto industry is quite unclear because of political risks of the Trump administration,” Matsumura said.

Last month, Trump threatened punitive tariffs on imports of Japanese cars into the United States in a bid to force them to manufacture and hire there.


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