An unusual situation has arisen: due to strong domestic sales, Nintendo is posting more and more losses. How could this happen?
Increased sales of Nintendo’s latest hybrid console, the Switch 2, in any region (let alone the Japanese domestic market) should increase the console’s profitability, not decrease it. However, according to Nintendo President Shuntaro Furukawa, that’s exactly what’s happening.
During the company’s third-quarter financial report, Furukawa confirmed that the Switch 2‘s better-than-expected sales in Japan would negatively impact its operating and gross profits.
The components used to manufacture the Switch 2 are purchased in U.S. dollars. Therefore, when Japanese gamers purchase the Switch 2 with Japanese yen (which is currently depreciating), Nintendo ultimately posts a loss.
During the Q&A session, an investor asked Furukawa if it was correct to assume that profitability would decline due to the yen’s continued depreciation, given that most procurement costs are in US dollars. The investor also asked Furukawa to explain why Switch 2 sales are so good in Japan. Furukawa said the answer lies in Pokémon Legends: Arceus and Kirby and the Forgotten Land.
“Hardware-related procurement purchases are primarily made in U.S. dollars, so given the current exchange rate environment, the better-than-projected hardware sales in Japan will have a downward effect on gross profit and operating profit.” The backdrop to the better-than-expected hardware sales in Japan was the release of Pokémon Legends: Arceus – Nintendo Switch 2 Edition and Kirby and the Forgotten Land during the holiday season, which built on the initial momentum of the Nintendo Switch 2 hardware. We believe that users in Japan saw these titles as an opportunity to transition to the Nintendo Switch 2 at a relatively higher rate compared to Nintendo Switch owners outside Japan,” he responded.
This interesting information came to light when Furukawa was asked numerous questions about the current memory shortage affecting the entire tech industry and how Nintendo plans to address it. Unsurprisingly, investors wanted to discuss only the memory shortage, especially since Nintendo lost $14 billion in market value at the end of last year due to concerns about the shortage.
Currently, Furukawa does not want to be overly influenced by what may be a short-term trend. However, the latest news is that memory manufacturers are unwilling to risk supplying less memory. Therefore, Furukawa and Nintendo may ultimately be forced to raise the price of the Switch 2.
Currently, this is only a possible outcome, not a fact. Meanwhile, the Switch 2 continues to sell extremely well outside of Japan, with 17.37 million units sold in 2025.
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