SoftBank risks triggering yen rally with T-Mobile share sale

Billionaire Masayoshi Son's Japanese technology group said Tuesday it has started exploring options to sell or "monetize" shares in U.S. wireless carrier T-Mobile as part of its asset reduction, which was first unveiled in March.

The move would mark a major reversal in Japanese investment overseas, which has grown by 50 trillion yen over the past five years and served as a check against a rising yen -- a traditional risk for export-driven companies in Japan. SoftBank's announcement comes at a time when manufacturers are weighing changes to their global supply chains in light of the coronavirus pandemic.

"We are on guard for outbreaks in dollar selling," said a currency dealer affiliated with a banking group.

SoftBank, which suffered a nearly 1 trillion yen net loss in the year to March, is looking to cut its debt. The company on Tuesday gave "no assurance" that any transaction would take place involving its T-Mobile stake, worth well over 2 trillion yen. It is also unclear whether such a transaction would entail any dollar-to-yen conversions.

But SoftBank is not the only company suffering a reversal of fortunes in the pandemic. Listed Japanese companies saw net profits fall roughly 30% in the fiscal year to March. Any drop in foreign investment flows would have an effect on exchange rates.

The balance of foreign direct investment by Japanese interests grew to roughly 169 trillion yen at the end of 2019. The flow of outbound investments started rising in 2012 as Japanese companies faced the prospect of a shrinking, graying population at home. Foreign direct investments outstripped foreign securities holdings in 2014.

Unlike securities holdings, corporate acquisitions and similar direct investments usually represent long-term commitments, so the foreign exchange transactions they entail also are not soon unwound.