It’s hard to imagine that the growth in sales of Nintendo’s hybrid console Switch 2 in Japan would hurt its profitability. But Nintendo president Shuntaro Furukawa said that is exactly what happened. In the Q&A section of the company's official third-quarter financial report, Shuntaro Furukawa confirmed that "exceeding expectations" sales of Switch 2 in Japan will have a negative impact on its operating profit and gross profit.
Why is this happening? Because the components used by Nintendo to produce the Switch 2 were purchased with U.S. dollars. Therefore, when Japanese players buy Switch 2 with Japanese yen (the Japanese yen exchange rate is currently on a downward trend), Nintendo will eventually lose money.
During the Q&A session, an investor asked Furukawa: "Considering that most procurement costs are denominated in US dollars, am I understanding correctly? Profitability is declining due to the continued depreciation of the yen?" They also asked Furukawa if he could explain why the Switch 2 is selling so well in Japan. Furukawa's answer was that it was thanks to "Pokémon Legend ZA" and "Kirby: Flying Knight".
Furukawa responded: “Hardware-related purchases are primarily settled in U.S. dollars, so better-than-expected Japanese hardware sales will have a downward impact on gross profit and operating profit given the current currency environment.
Japanese hardware sales exceeded expectations, mainly due to the release of "Pokémon Legends ZA - Nintendo Switch 2 Edition" and "Kirby: Flying Knight" during the holiday season. These two games continued the initial sales momentum of Switch 2 hardware. We believe that compared to Switch users outside Japan, Japanese users see these two games as opportunities to upgrade to Nintendo Switch 2 and upgrade relatively quickly. "
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For now, Furukawa said he doesn't want to be "overly influenced" by factors that may just be short-term trends. But given recent reports that memory suppliers are adopting a "zero-risk" strategy to avoid shortages, Furukawa and Nintendo may eventually have to increase the price of Switch 2.
However, this is only one of the potential outcomes for the time being, not an established fact. At the same time, Switch 2 is still selling well in markets outside Japan, with 17.37 million units sold in 2025.