Nippon Yusen K.K. and Kawasaki Kisen Kaisha Ltd., Japan's largest and third-largest shipping lines, fell to the lowest since January on concerns earnings will be eroded by the yen's gains against the dollar.
Nippon Yusen fell as much as 4.5 percent to 850 yen and traded at 852 yen as of 12:31 p.m. in Tokyo. Kawasaki Kisen, dropped as much as 3 percent and traded at 897 yen. Mitsui O.S.K. Lines Ltd., the second-largest, declined as much as 4.5 percent and traded at 1,140 yen.
The yen rose to the highest against the dollar in more than 12 years, diminishing the value of the Tokyo-based cargo carriers' dollar-denominated contracts, which make up over 80 percent of sales. The U.S. currency tumbled as the Federal Reserve yesterday reduced the interest rate on direct loans to commercial banks in an effort to keep the economy slipping into recession.
The surge in the yen will hurt sales at the shipping lines,'' said Osuke Itazaki, an analyst in Tokyo at Credit Suisse Group. Many of their contracts are in dollars.''
The dollar fell to as low as 95.76 yen, the weakest since Aug. 15, 1995. Nippon Yusen based its earnings forecasts on the yen averaging 108 against the dollar this quarter, and Kawasaki Kisen expected a rate of 105 yen to the dollar.
Dollar-based sales for international shipping made up 86.7 percent of revenue for domestic shipping companies last fiscal year, according to the Japanese Shipowners' Association. A total of 76.5 percent of operating costs were dollar-based.
In the long term, we will continue to increase our U.S. dollar cost portions to better match our revenue,'' said Hidenori Onuki, a spokesman at Mitsui O.S.K. In the short term, we are considering various measures, such as hedging, to lower the impact of a weaker dollar.''
A one yen gain in Japan's currency against the dollar will cut pretax profit by 3.3 billion yen ($34 million) at Mitsui O.S.K., according to figures from the shipping line. Mitsui O.S.K. based its earnings forecasts for the quarter on a rate of 106 yen to the dollar.
Nippon Yusen fell as much as 4.5 percent to 850 yen and traded at 852 yen as of 12:31 p.m. in Tokyo. Kawasaki Kisen, dropped as much as 3 percent and traded at 897 yen. Mitsui O.S.K. Lines Ltd., the second-largest, declined as much as 4.5 percent and traded at 1,140 yen.
The yen rose to the highest against the dollar in more than 12 years, diminishing the value of the Tokyo-based cargo carriers' dollar-denominated contracts, which make up over 80 percent of sales. The U.S. currency tumbled as the Federal Reserve yesterday reduced the interest rate on direct loans to commercial banks in an effort to keep the economy slipping into recession.
The surge in the yen will hurt sales at the shipping lines,'' said Osuke Itazaki, an analyst in Tokyo at Credit Suisse Group. Many of their contracts are in dollars.''
The dollar fell to as low as 95.76 yen, the weakest since Aug. 15, 1995. Nippon Yusen based its earnings forecasts on the yen averaging 108 against the dollar this quarter, and Kawasaki Kisen expected a rate of 105 yen to the dollar.
Dollar-based sales for international shipping made up 86.7 percent of revenue for domestic shipping companies last fiscal year, according to the Japanese Shipowners' Association. A total of 76.5 percent of operating costs were dollar-based.
In the long term, we will continue to increase our U.S. dollar cost portions to better match our revenue,'' said Hidenori Onuki, a spokesman at Mitsui O.S.K. In the short term, we are considering various measures, such as hedging, to lower the impact of a weaker dollar.''
A one yen gain in Japan's currency against the dollar will cut pretax profit by 3.3 billion yen ($34 million) at Mitsui O.S.K., according to figures from the shipping line. Mitsui O.S.K. based its earnings forecasts for the quarter on a rate of 106 yen to the dollar.