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TOKYO (Reuters) - The yen's rapid descent to six-year lows against the dollar is starting to push beyond comfort zones for three quarters of Japanese firms, a Reuters poll showed, highlighting the potential for profits to be squeezed as import costs climb.
Japan struggled with a strong currency for much of the past decade, only gaining sustained relief from late 2012 as Prime Minister Shinzo Abe came to power and embarked on bold monetary stimulus.
But this past month, the yen has tumbled about 6 percent to trade around 109 yen against the greenback, pressured by growing expectations that the Federal Reserve will lift interest rates sooner than forecast and speculation that the Bank of Japan may have to ease further.
That decline now threatens to further boost the cost of raw materials and fuel at a time when the economy is straining from the impact of a sales tax hike.
"Our business is slowing due to a marked increase in the cost of imports caused by the weak yen," an executive at a textile manufacturer wrote in the survey. "Retail sales at department stores remain slack."
The Reuters Corporate Survey showed only 25 percent of companies prefer an exchange rate of 105 yen or weaker, with 47 percent seeing 100-104 yen as the most desirable range and 28 percent preferring a yen at 99 to the dollar or stronger.
Conducted for Reuters by Nikkei Research from Aug. 29 to Sept. 12, the survey polled 486 firms capitalized at more than 1 billion yen which responded on condition of anonymity. About 260 firms answered questions on foreign exchange.
The survey also showed 73 percent of firms believe authorities should craft fresh stimulus measures if they proceed with a plan to raise the sales tax further to 10 percent from 8 percent next year in a bid to curb runaway government debt. The other respondents saw no need for more stimulus.
The results follow the Reuters Tankan survey which showed confidence at Japanese manufacturers fell the most in nearly two years in September - both polls underlining how fragile the recovery is and how Abe must delicately balance the need to sustain growth and manage the country's debt levels.
Government officials say they stand ready to deploy fresh fiscal stimulus to limit the impact of a tax hike. BOJ Governor Haruhiko Kuroda, a former Finance Ministry official who supports the tax hike as part of needed fiscal reform, has repeatedly said he sees no need to ease monetary policy now but would not hesitate to increase the central bank's massive asset purchases if necessary.
Asked to name their preferred form of stimulus, 28 percent of companies said additional monetary easing, 26 percent called for further tax breaks to promote investment and 17 percent urged measures to sustain share prices.
Only 8 percent saw a need for steps directly aimed at weakening the yen, another sign that further depreciation could be troublesome.
To be sure, some of the biggest corporate names in Japan would still benefit from further yen weakness. Toyota Motor Corp (7203.T), for example, has said every one yen move lower against the dollar compared to its budgeted rate of 101 yen boosts its annual operating profit by a 40 billion yen ($370 million).
But the head of Japan's auto lobby said on Thursday that while current rates were comfortable for his industry, this did not necessarily mean the yen should continue to weaken.
"Rising energy costs are concerns for manufacturers in Japan, which is heavily reliant on importing energy-related resources," Fumihiko Ike, also chairman of Honda Motor Co (7267.T), told a news conference.
For big importers like paper manufacturers, yen weakness against the dollar already hurts.
"We remain unable to post profits as we cannot raise output prices enough to offset higher raw materials and other costs caused by a weak yen," wrote one manager at a paper company.
Government officials have been guarded in their comments about foreign exchange levels, repeating only that rapid swings are undesirable.
The survey did have some bright spots. Fifty-seven percent said full-year business results looked in line with their initial projections. Sixteen percent expected to raise their forecasts, while 28 percent were looking for a cut.
Reporting by Tetsushi Kajimoto Additional reporting by Yoko Kubota and Megumi Lim; Editing by William Mallard and Edwina Gibbs