The Japanese game maker ignored the weak yen winner

Nippon Ichi Software Inc — a 213-person video game developer based in central Japan — has been an overlooked winner from the yen’s recent slide.

The RPG maker is based in Gifu, a mountainous and mostly rural prefecture where average wages are 20 percent lower than in Tokyo, all paid in yen.

However, more than half of the company’s sales are in U.S. dollars, and that share is likely to grow further thanks to the boom in Japanese anime among American gamers, Nippon Ichi President Sohei Niikawa said in an interview with Bloomberg News.

“The continued depreciation of the yen is driving huge gains from the exchange,” he said, adding that North America now accounts for 60 percent of the company’s group revenue.

The creator of the Disgaea series declined to disclose the alleged yen-to-dollar exchange rate, but the Japanese currency has already fallen about 20 percent against the greenback this year to hit a 24-year low.

The company maintained its May forecast of a decline in annual profit.

Nippon Ichi shares rose 8.3 percent after the report yesterday, marking the company’s biggest jump in eight months. Shares are still down 20% year-to-date.

The boost from a weak yen to Japanese hardware makers has waned in recent years as a shift to building more factories overseas. Game content creators like Nippon Ichi are the rare beneficiaries, with most of their production in-house.

Given the surge in the U.S. dollar, the company is likely to raise its earnings forecast, Toyo Securities Co analyst Hideki Yasuda said.

“The forecast could rise by at least 7 percent if the dollar moves to ¥135 and 9 percent if it is ¥140,” based on an assumed rate of ¥120 to the dollar, he said.

Nippon Ichi shares trade at less than 5 times earnings, which is lower than its peers. The low price is due to the lack of name recognition, Yasuda said.

Square Enix Holdings Co is at 14 times, Bandai Namco Holdings Inc is at 23 times and Koei Tecmo Holdings Co is at 22 times.

The company’s low profile stems from its failure to create a popular franchise outside of Disgaea. More than half of the company’s U.S. revenue comes from games borrowed from Nihon Falcom Corp.

Nippon Ichi is increasing its budget for young creators to develop new games, thanks to the additional dollar sales revenue each quarter, Niikawa said.

The company also remains wary of game subscription services, through which more players now access games.

Nippon Ichi provided content to Sony Group Corp’s PlayStation Now and Microsoft Corp’s Xbox Game Pass membership services, but Niikawa said the model was “dangerous” for software providers.

“The subscription model is good for users and platform owners, but it’s hard for us to make the business sustainable, especially when the whole catalog has become too big for players to find our games,” Niikawa said.

“I’m afraid the money that would otherwise be ours is flying away from us,” he added.