Weak Yen Lifts Japanese Carmakers' Profits While Sales Fall

Toyota's first-half operating profit rose 9.2 percent to ¥2.19 trillion, yet currency effects alone contributed ¥785.0 billion of that result, Nikkei reported on November 12. The figure captures the entire story of Japan's car industry this half-year: record profits built on a weak yen, while actual vehicle sales went backwards.

Seven major Japanese automakers filed their consolidated results for the first half of fiscal 2026, covering April through September. Five of them increased net profit or returned to profit. Nissan and Mitsubishi narrowed their losses. Underneath the headline improvement sits an uncomfortable mechanism.

How the weak yen manufactured the profit gains

The average yen–dollar exchange rate for April–September stood at ¥159 per dollar, 13 yen weaker than the same period a year earlier. When Japanese carmakers convert dollar earnings from overseas markets into yen, that depreciation produces a translation gain (a bookkeeping profit that appears simply because the home currency buys fewer dollars).

Toyota's numbers show the scale. Of the ¥2,191.1 billion in first-half operating profit, ¥785.0 billion came from exchange-rate movement, according to Nikkei. Strip out the currency tailwind and the underlying performance looks far thinner.

Which companies improved, and why

Nissan recorded a net loss of ¥533.1 billion for fiscal 2025, which ran from April 2025 to March 2026. For fiscal 2026 it forecasts an annual net profit of ¥20 billion, roughly 167.3 billion won. The interim result stayed in the red because rising interest rates increased its interest costs. Management expects new model launches and efficiency measures to carry it back to profit across the full year.

Honda posted its first first-half net profit increase in three years. The result includes a ¥435.1 billion loss from the cancellation of its electric vehicle development program. Strong hybrid sales in the United States offset the write-off and lifted net profit 65.7 percent year on year.

Why global sales volumes fell anyway

Sales told the opposite story. Five of the seven automakers sold fewer vehicles globally than in the same period last year. Only Suzuki and Mazda avoided the decline.

China drove much of the drop. Weakening demand and the expanding market share of local EV makers squeezed Japanese brands from both sides. Nissan launched the N7, an electric sedan developed jointly with its Chinese partner, to defend its position. Its first-half China sales still collapsed 45.5 percent year on year, to 182,854 units.

Honda's China sales halved over the same period. At its earnings briefing the company said: "The situation in our core gasoline-car market is extremely difficult."

What could reverse the profit gains

Nikkei flagged two risks to the outlook. Prolonged instability in the Middle East could push up prices of plastics, paints and other raw materials. Sustained high oil prices could accelerate the shift to electric vehicles, a segment where Chinese manufacturers already hold the advantage over Japanese rivals. Either development would erode the profitability that the yen has so far delivered.

The pattern leaves Japanese automakers in a fragile position. Profits depend on an exchange rate they do not control, while the volume base that generates those overseas earnings keeps shrinking in the world's largest car market.

What to watch next: whether Nissan delivers its promised full-year return to profit, whether the yen strengthens past the ¥159 average and exposes the underlying margin, and whether the N7 and further China-specific EV launches can slow the sales decline in the second half.