Yen depreciation is not universally beneficial: ASICS benefits most clearly, while Fast Retailing's import costs create a key offset

Overview

The report stress-tests the impact of a yen reversal on the earnings and share prices of Fast Retailing, ASICS, Food & Life, and Ryohin Keikaku. Its core conclusion is that overseas profit translation gains from yen depreciation must be assessed together with higher costs from US dollar-denominated procurement and imported inputs, meaning that companies with similar levels of internationalization can exhibit entirely different net FX sensitivities.

Core views

In this round of earnings for Japanese consumer stocks, companies with higher overseas sales exposure generally outperformed, benefiting both from genuine growth in local-currency terms and from financial statement translation gains caused by yen depreciation. However, the report notes that the view that "more overseas business means greater benefit" is incomplete: if a company sells mainly in Japan but procures extensively overseas, a weaker yen raises domestic cost of sales and erodes margins. Since 2021, USD/JPY has risen from approximately 110 to a peak near 164, representing cumulative yen depreciation of about 49% and briefly placing the yen near a roughly 40-year low. As US and Japanese authorities take action to stabilize the exchange rate, the reversal risk from yen stabilization or appreciation has become more important. The report measures net FX sensitivity as the translation impact minus the transaction impact. The translation impact is the benefit generated when overseas revenue and profit are converted into yen; the transaction impact arises from US dollar-denominated procurement, imported materials, and other overseas costs. Under a scenario in which the yen depreciates by 1% against other currencies in FY2027E, Fast Retailing's operating profit translation impact is +0.71%, its transaction impact is -0.75%, and its net impact is -0.04%; for Ryohin Keikaku, the respective figures are +0.56%, -0.20%, and +0.36%; for ASICS, +0.76%, -0.29%, and +0.46%; and for Food & Life, +0.63%, -0.56%, and +0.07%. Therefore, ASICS and Ryohin Keikaku are net beneficiaries in the model, Food & Life is slightly positive, and Fast Retailing is slightly adversely affected under a purely mechanical calculation. Fast Retailing is the most counterintuitive case. Its large pool of overseas profits generates meaningful translation benefits when the yen weakens, but virtually all merchandise sold by UNIQLO Japan depends on overseas production, with more than 95% of cost of sales incurred overseas. The company has 705 production partners, mainly located in China, Bangladesh, Vietnam, and Indonesia, with only 22 in Japan, and procurement is denominated in US dollars. In theory, rising domestic costs are sufficient to offset most overseas translation benefits. In practice, however, the company has managed the pressure through forward contracts that lock in procurement exchange rates up to three years in advance, supplier negotiations, procurement scale, sourcing optimization, and selective price increases, while actual earnings and the share price have continued to benefit from a weak yen. UNIQLO surpassed Nike in 2024/25 to become Shenzhou International's largest customer, also demonstrating the scale of its procurement bargaining power. The risk is that legacy US dollar hedging contracts expire and new procurement rates are locked in at a weaker yen level, potentially raising the cost-of-sales ratio of the Japan business later this year and in 2027. The report views this as a one-off operational disruption before new hedges enter the comparison base rather than a structural issue, although this judgment depends on continued execution. Over the past five years, Fast Retailing's share price had a correlation coefficient of 0.73 with USD/JPY, indicating that market trading behavior is more inclined than its mechanical net sensitivity to treat a weak yen as positive. ASICS is the clearest and most FX-sensitive structural beneficiary of a weak yen within the coverage universe. Nearly 80% of its sales and more than 70% of its operating profit come from outside Japan, and its geographic mix is highly diversified, avoiding excessive reliance on a single currency, with the euro having the most pronounced impact on sales and operating profit. The company has approximately 178 production partners, only 28 of which are in Japan, and its procurement also carries US dollar exposure. However, Japan domestic revenue accounts for only about 20%, so domestic cost pressure is relatively limited. Considering only the translation impact, a 1% depreciation of the yen corresponds to increases in revenue and operating profit of 0.79% and 0.70%, respectively, in 2025, rising to an estimated 0.84% and 0.78% by 2030. Ryohin Keikaku is also a net beneficiary, although it is currently driven mainly by Chinese currency exposure. Greater China contributes more than 50% of its overseas profit, while its smaller overseas earnings pool limits the absolute translation benefit. At the same time, nearly half of its products are still produced in Japan, reducing the impact of a weak yen on domestic import costs. The company has 473 tier-one and 93 tier-two production partners globally, 266 of which are located in Japan, and has established six MUJI Global Sourcing bases in five countries to promote development near production locations and local sourcing. The calculation assumes that goods produced in Japan are sold only in Japan; if actual cross-border flows are lower, localization could make the translation benefit higher than the model result. The company also uses forward contracts to manage exchange rates. Its translation sensitivity to a 1% depreciation of the yen is +0.40% for revenue and +0.51% for operating profit in 2025, rising to an estimated +0.47% and +0.57% by 2030. However, the Japan business will remain dominant through 2030, so its overall FX exposure is lower than that of more internationalized companies. Food & Life is transitioning from being pressured by costs to benefiting from earnings amplification. Its overseas business is currently still smaller than its Japan domestic business, while global seafood procurement creates US dollar cost exposure; the report assumes that 25% of cost of sales is denominated in US dollars in its net-impact calculation. Its industry-leading scale, supplier negotiations, procurement optimization, and selective price increases can cushion the pressure. Moreover, competitors must also procure seafood globally, so higher import costs are more of an industry-wide pressure than a company-specific disadvantage. The key change comes from overseas business expansion: in FY2025, international Sushiro's operating margin is 12.4%, compared with 6.8% in Japan, making the former approximately 1.8 times the latter; overseas revenue as a share of group revenue is expected to rise from about one-third in FY2025 to approximately 60% in FY2030. Accordingly, the translation impact of a 1% depreciation of the yen is expected to expand from +0.33% for revenue and +0.48% for operating profit in 2025 to +0.58% and +0.73% in 2030, gradually making a weak yen a more visible earnings amplifier. By currency composition, the renminbi is currently the largest source of overall revenue and operating profit sensitivity for Fast Retailing, Ryohin Keikaku, and Food & Life, but the structure is changing. As Fast Retailing grows in Europe and Southeast Asia, its relative dependence on China is expected to decline, while the importance of the euro and US dollar will increase; Ryohin Keikaku remains primarily exposed to China; ASICS is the most globalized, with Europe at its core. Although the revenue base in Southeast Asia and Oceania is smaller, their higher margins mean that operating profit sensitivity can be comparable to renminbi exposure. At the trading level, over longer periods, the share prices of Japanese consumer exporters are generally positively correlated with yen weakness, and their tendency to rise on weak-yen trading days is also stronger than their tendency to fall on strong-yen trading days. However, the relationship is notably weaker around earnings releases because investors place greater emphasis on demand, margins, execution, and growth visibility. Reviewing two years of data, the report finds that trading Fast Retailing in line with the FX direction correctly predicted the post-earnings share-price direction in six of the past nine earnings releases, for a hit rate of approximately 67%; the hit rates for the other covered companies were lower, and in some cases contrarian trading was more effective. The report therefore uses regression models to forecast FX tailwinds or headwinds for each company in the next quarter, separating constant-currency growth from reported financial statement FX effects, while explicitly concluding that FX cannot substitute for fundamental analysis. Regarding ratings, Bernstein assigns Outperform ratings to Fast Retailing, ASICS, and Food & Life, with target prices of JPY 98,000, JPY 6,300, and JPY 7,500, respectively; Ryohin Keikaku is rated Market-Perform with a target price of JPY 4,000. Based on market data as of August 24, 2026, the four companies' share prices were JPY 72,840, JPY 4,766, JPY 5,576, and JPY 4,241, respectively.

Analysis framework

The report first decomposes yen movements into overseas profit translation benefits and import procurement transaction costs, then calculates the net operating profit impact for the four companies under a standardized FY2027E scenario of 1% yen depreciation. It subsequently explains company-level differences by combining the shares of overseas revenue and profit, regional margins, supplier locations, procurement currencies, degree of localization, and hedging duration, and extends the sensitivity analysis through FY2030. Finally, the report examines the long-term correlation between share prices and USD/JPY and the hit rate of trading around earnings releases, using regression models to distinguish constant-currency growth from the next quarter's reported FX impact.

Methodology notes

• Company fundamentals and financial framework

  Net FX sensitivity decomposition

  The report subtracts transaction costs arising from US dollar-denominated procurement and imported inputs from the translation benefits generated when overseas profits are converted into yen, determining whether yen depreciation is ultimately accretive or detrimental to overall operating profit.

• Quantitative/Factor/Portfolio Theory

  Regression forecast of constant-currency growth and FX impact

  The report builds regression models to forecast FX tailwinds or headwinds for each company in the next quarter, separating genuine local-currency growth from the exchange-rate translation effect in financial statements.

• Quantitative/Factor/Portfolio Theory

  Share price-FX correlation and earnings trading hit rate

  The report compares the long-term correlation between share prices and USD/JPY and reviews the success of trading in line with the FX direction around earnings releases over the past two years to test whether exchange rates can predict short-term share-price reactions.

• Valuation methodologyP/E and PEG valuation

  Comparable P/E valuation

  The report presents 2025A, 2026E, and 2027E P/E ratios, earnings forecasts, and target prices for the covered companies and peers to compare current valuations and expected earnings changes.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Fast Retailing (9983.JP)

  It benefits significantly from overseas profit translation, but the US dollar-denominated overseas procurement costs of its Japan business can offset that benefit; actual performance depends on hedging and supply chain execution.

  Strengths

  Strong capabilities in global procurement scale, forward hedging up to three years in advance, supplier negotiations, sourcing optimization, and selective price increases.

  Weaknesses

  More than 95% of cost of sales is incurred overseas, and only 22 of its 705 production partners are located in Japan, giving its domestic business the largest transaction exposure.

  Comparison

  Its mechanical net sensitivity is lower than those of ASICS and Ryohin Keikaku, but the 0.73 correlation between its share price and USD/JPY over the past five years is significantly higher than its theoretical net benefit would imply.

  Risks

  The expiration of legacy US dollar hedges could raise the Japan cost-of-sales ratio later this year and in 2027; if operational tools are executed poorly, translation benefits may fail to offset cost pressure.

• ASICS (7936.JP)

  The clearest structural beneficiary of a weak yen among the covered companies, with a +0.46% net operating profit impact from a 1% depreciation of the yen in FY2027E.

  Strengths

  Nearly 80% of sales and more than 70% of operating profit come from overseas, with the most diversified geographic and currency mix; European exposure is especially important.

  Weaknesses

  Global procurement remains predominantly US dollar-denominated and creates a -0.29% transaction impact.

  Comparison

  It has the highest net FX benefit and sales sensitivity among the four companies, with less dependence on a single country or currency than Ryohin Keikaku.

  Risks

  If the sustainability of constant-currency growth and demand in Europe and the United States fall short of expectations, they could outweigh the reported benefits from FX translation.

• Food & Life (3563.JP)

  The overseas profit translation benefit from a weak yen is currently broadly offset by global seafood procurement costs, but overseas expansion will gradually increase the degree of net benefit.

  Strengths

  Its overseas operating margin is 12.4%, approximately 1.8 times the domestic margin of 6.8%; as Japan's largest conveyor-belt sushi operator, it has procurement scale and bargaining advantages.

  Weaknesses

  Global seafood procurement creates high US dollar transaction exposure, with a -0.56% transaction impact in FY2027E.

  Comparison

  The current FY2027E net impact is only +0.07%, but the overseas revenue share is expected to rise from about one-third in FY2025 to approximately 60% in FY2030, potentially giving it the largest increase in FX sensitivity among the covered companies.

  Risks

  Higher imported seafood costs will pressure domestic margins; if overseas expansion and store growth in China fail to materialize, the path toward stronger FX benefits will be affected.

• Ryohin Keikaku (7453.JP)

  Its high share of production in Japan reduces domestic procurement pressure under a weak yen, while profits from Greater China provide positive translation benefits.

  Strengths

  Nearly half of its products are produced in Japan, 266 of its 473 tier-one and 93 tier-two production partners are located in Japan, and it promotes local sourcing through six global sourcing bases.

  Weaknesses

  Its overseas earnings pool is smaller than ASICS', its dependence on China and the renminbi is relatively concentrated, and the Japan business will remain dominant through 2030.

  Comparison

  The net operating profit impact of a 1% depreciation of the yen in FY2027E is +0.36%, below ASICS' +0.46% but clearly better than Fast Retailing's -0.04%.

  Risks

  If supply chain localization in China does not progress as planned, its ability to cushion transaction costs and the positive net sensitivity assumed by the model could weaken.

Key data

• Net operating profit impact of 1% yen depreciation in FY2027EFast Retailing -0.04%; Ryohin Keikaku +0.36%; ASICS +0.46%; Food & Life +0.07%The net impact equals the sum of the overseas profit translation impact and the procurement transaction impact.
• FY2027E translation impact and transaction impactFast Retailing +0.71%/-0.75%; Ryohin Keikaku +0.56%/-0.20%; ASICS +0.76%/-0.29%; Food & Life +0.63%/-0.56%All assume a 1% depreciation of the yen against other currencies; the former is the translation impact and the latter is the transaction impact.
• Fast Retailing FX correlation0.73The correlation coefficient between USD/JPY and the share price over the past five years.
• Fast Retailing supply chainMore than 95% of cost of sales is incurred overseas; only 22 of 705 production partners are located in JapanUS dollar-denominated overseas procurement makes the Japan business highly sensitive to cost pressure from a weak yen.
• ASICS overseas exposureNearly 80% of sales and more than 70% of operating profit come from outside JapanThe highest FX sensitivity and most geographically diversified distribution among the covered companies.
• Ryohin Keikaku China exposureGreater China contributes more than 50% of overseas profitThe renminbi is currently its most important FX driver.
• Food & Life overseas marginFY2025 overseas 12.4%, Japan domestic 6.8%The overseas operating margin is approximately 1.8 times the domestic margin.
• Food & Life overseas revenue shareAbout one-third in FY2025, estimated at approximately 60% in FY2030Overseas expansion is expected to significantly increase its operating profit sensitivity to FX.
• 2025 and 2030 translation sensitivity per 1% yen depreciationFast Retailing revenue +0.65%/+0.76%, operating profit +0.63%/+0.77%; Ryohin Keikaku revenue +0.40%/+0.47%, operating profit +0.51%/+0.57%; Food & Life revenue +0.33%/+0.58%, operating profit +0.48%/+0.73%; ASICS revenue +0.79%/+0.84%, operating profit +0.70%/+0.78%The figures in each set are for 2025 and 2030, respectively.
• Yen depreciation cycleUSD/JPY rose from approximately 110 in 2021 to a peak near 164, with the yen depreciating by about 49%The yen briefly reached its weakest level in approximately 40 years.
• Earnings trading hit rate6 of Fast Retailing's past 9 earnings releases, approximately 67%Historical hit rate from trading based on the pre-earnings FX direction; the hit rates for the other covered companies were lower.
• Ratings, prices, and target pricesFast Retailing: Outperform, JPY 72,840/98,000; ASICS: Outperform, JPY 4,766/6,300; Food & Life: Outperform, JPY 5,576/7,500; Ryohin Keikaku: Market-Perform, JPY 4,241/4,000Prices as of August 24, 2026; figures after the slashes are target prices.
• 2025A/2026E/2027E P/E ratiosFast Retailing 51.7x/42.0x/36.5x; ASICS 34.5x/27.3x/23.2x; Food & Life 55.0x/40.2x/33.3x; Ryohin Keikaku 44.2x/32.5x/28.9xP/E ratios listed in the report's valuation comparison table.

Impact & implications

The report argues that the overseas revenue share alone is insufficient to determine the earnings impact of yen movements; procurement currencies, localized production, overseas margins, and the timing of hedge expirations are equally important. ASICS currently has the clearest net benefit from a weak yen, while Ryohin Keikaku benefits from Japanese production and exposure to profits from China. Fast Retailing's outcome depends most heavily on hedging, supplier management, and pricing execution. Food & Life, meanwhile, could gradually transition from a company facing greater cost pressure into a more visible FX beneficiary as its high-margin overseas business expands. For short-term share prices, exchange rates are only a supplementary variable, while demand, margins, and execution in earnings results are more decisive.

Risks

• Yen stabilization or appreciation would weaken overseas profit translation benefits and could reverse the earnings and share-price support created during the weak-yen cycle.
• US dollar-denominated procurement and imported inputs raise domestic cost of sales when the yen weakens; forward hedging can only defer, not eliminate, this risk.
• After Fast Retailing's legacy hedging contracts expire, new contracts reset at weaker yen exchange rates could create near-term cost and earnings pressure later this year and in 2027.
• A weak yen cannot reliably predict post-earnings share-price reactions; demand, margins, operational execution, and growth visibility may outweigh FX-driven earnings benefits.

What to watch

• Monitor yen stabilization or appreciation and the difference between each company's constant-currency growth and reported FX tailwinds or headwinds in the next quarter.
• Watch Fast Retailing's Japan cost-of-sales ratio after legacy hedges expire and whether procurement, pricing, and sourcing adjustments can absorb the pressure.
• Watch whether Ryohin Keikaku can advance supply chain localization in China as planned.
• Watch the sustainability of ASICS' constant-currency growth and demand in Europe and the United States.
• Watch whether Food & Life accelerates store expansion in China and whether its overseas revenue share can rise from about one-third in FY2025 to approximately 60% in FY2030.