Are Japanese car companies' "good days" over? Iranian warfare and yen rebound may create a double blow.

According to Jinse Finance APP, Japanese car manufacturers are increasingly facing the dual pressures of ripple effects from the Iran conflict and the rebound of the yen exchange rate.

In the most recent quarterly earnings reports, Toyota (TM.US), Honda (HMC.US), and Nissan (NSANY.US) all benefited from the historic weakening of the yen, with bright financial results—the first two companies raised their full-year profit forecasts, and Nissan achieved its first profit in about two years. However, the external environment in the future may not be as “favorable.”

In early August this year, after the yen-to-dollar exchange rate fell below 163, reaching its lowest level in 40 years, the U.S. Treasury and Japan’s Ministry of Finance jointly took the rare step of intervening in the currency market by buying yen, a move that was seen as historic. Since Japanese carmakers have traditionally relied on yen depreciation to lower export vehicle prices and enhance global competitiveness, this intervention certainly sends a warning signal.

Vincent Sun, Senior Equity Analyst at Morningstar, said, “If government intervention drives the yen to strengthen, it will be unfavorable for Japanese car manufacturers.”

He pointed out that a rising yen will force carmakers to face a dilemma in overseas markets: either raise prices, which may result in loss of market share; or withstand the pressure of shrinking operating profits as foreign currency revenues convert into fewer yen.

Masaaki Akita, Senior Analyst at Bernstein, said: “Each 1% fluctuation in the yen exchange rate typically affects Japanese carmakers’ operating profit by about 2%, though sensitivities differ among companies—some are impacted by as much as 4%.”

Analysts also believe that ongoing conflict in the Middle East poses additional risks. Vincent Sun noted that this triggers more supply chain disruptions and cost increases. The Strait of Hormuz and the Red Sea are critical shipping routes for Japanese carmakers, who are highly dependent on aluminum and petrochemical feedstocks such as naphtha in their manufacturing processes.

Masaaki Akita added: “The biggest headwind to carmakers’ profitability is the steep rise in raw material costs, a trend further aggravated by the prolonged Middle East conflict.”

He also pointed out: “The prices of key inputs, including naphtha and resins linked to oil prices, storage chips, as well as industrial metals like aluminum, copper, and steel, have generally risen, creating widespread negative impacts on overall industry profitability.”