Weak yen takes the wind out of Japanese firms’ acquisitions

Japanese companies made the fewest acquisitions in a decade during the first half of 2013 as the yen’s volatility climbed to a four-year high, cooling buying interest.

The number of deals announced in the first half of 2013 was 997 with a total value of $45.7 billion, according to data compiled by Bloomberg. That’s the lowest number of deals and value since the first half of 2004. Total deal value is 47 percent lower from the first half of 2012.

Since Prime Minister Shinzo Abe swept into power in December on promises to resurrect the economy by expanding stimulus measures and weakening the yen, the Japanese currency has whipsawed between 82.36 and 103.21 to the dollar.

The yen’s 100-day volatility rose to 14.81 points in July, the highest since August 2009, and more than double the 6.97 figure at the start of the year.

“Companies had set their budgets for the year as of April and May under certain assumptions, but they’re not sure they will hold,” said Nobuhisa Ishizuka, a Tokyo-based partner specializing in mergers at Skadden, Arps, Slate, Meagher & Flom. “This makes it difficult for a lot of them to pull the trigger.”

Currency options show volatility in the yen is set to continue, which could force companies to cut the size of deals or delay them. JPMorgan’s Group of Seven Volatility Index, based on currency-option premiums, climbed to 11.96 percent on June 24, the highest since January 2012.

The total number of domestic and overseas acquisitions announced by Japanese companies in the first six months of last year was 1,167, the data show. The total deal value was $85.5 billion, according to the data.

Overseas mergers and acquisitions by Japanese firms fell to $10.6 billion this year from a record $112 billion for all of 2012, the data showed.

Bloomberg