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Dollar surges against

yen in Tokyo

TOKYO: The dollar's advance against the yen may give a big boost to Japan's battered carmakers, which have been struggling with weak exports and a sluggish domestic economy, analysts said on Thursday.

"If the current yen/dollar rate remains at 90-95, big changes will occur at Nissan Motor Co Ltd and Mazda Motor Corp. They may return to the black this year," said Seiichiro Iwasawa, a senior analyst at Nomura Research Institute.

In May, both Nissan and Mazda forecast nil parent current profit in the year to March 31, 1996, against respective losses of 61.07 billion yen ($693 million) and 35.49 billion yen ($403 million) a year earlier. Mazda is owned 24.54 percent by Ford Motor Co.

"We have to wait one more month to see if the dollar remains strong before we revise upward our projections of Japanese carmakers' profits in 1995/96. But the weaker yen is sure to help carmakers," said Hiroshi Suemasa, senior analyst at Kankaku Research Institute.

Tokyo's stock market echoed his view on Thursday as investors flocked to buy carmakers' shares. Nissan shares soared 58 yen or nearly 10 percent to 649.

"Sentiment towards carmakers' shares has been weak because of lingering worries over their profitability...But the dollar's rebound seems certain to improve their export profitability," a Kankaku Securities broker said.

The dollar surged to a five-month high against the yen on Wednesday after the U.S. Federal Reserve teamed up with the Bank of Japan to push it higher. It reached a peak of 91 yen after the intervention, its highest level since mid-March.

Iwasawa said Japanese carmakers could benefit across the board from better profits on exports if the dollar stayed firm.

Honda Motor Co Ltd, which in May forecast a parent current profit of 30 billion yen ($340 million) this business year, would likely post a higher profit, he said.

Parent current profit at Toyota Motor Corp would rise near 250 billion yen ($2.84 billion) this business year, above its May forecast of 200 billion yen ($2.27 billion), he estimated.

Current profit is a pre-tax profit which includes gains and losses made on investments in securities and other non-operating activities.

"In general, a move in the yen/dollar rate by five yen will result in a 200 billion yen ($2.27 billion) change in Japanese carmakers' combined profits," Iwasawa said.

In addition to its effect on exports, a weaker yen could help Japan's stock market, and a strong bourse would improve consumer sentiment and thus car purchases, Iwasawa said.

Suemasa agreed. "There is a correlation between stock market conditions and car sales in Japan," he said.-Reuter