Japan Firms to Log Record Profits, Driven by Finance, AI Biz
Tokyo, Feb. 9 (Jiji Press)--Japanese listed companies are poised to report record profits in fiscal 2024 ending next month, driven by the strength of the financial sector and businesses benefiting from the unabated artificial intelligence boom.
But company executives are keeping their guard up, concerned about the course of the tariff policy of U.S. President Donald Trump's administration.
With third-quarter earnings announcements peaking for companies that close the books in March, such businesses are forecast to post record profits for the fourth consecutive year.
According to SMBC Nikko Securities Inc., combined net profits at 1,407 companies included in the TOPIX stock price index covering those listed on the Tokyo Stock Exchange's top-tier Prime section for fiscal 2024 were forecast to rise 6.7 pct from the previous year to a record 52,296 billion yen as of Thursday.
Leading the growth is the financial sector, buoyed by the return of positive interest rates to Japan thanks to the Bank of Japan's rate hikes.
The three megabank groups including Mitsubishi UFJ Financial Group Inc. posted record consolidated net profits in April-December 2024, as interest margins improved amid the monetary policy tightening cycle since March that year, when the BOJ scrapped its negative interest rate policy.
At Nomura Holdings Inc., Chief Financial Officer Takumi Kitamura said, "We now expect our company will rewrite its full-year net profit record." The brokerage giant has benefited from increased customer assets under custody and strong interest in corporate mergers and acquisitions.
To nonfinancial companies, increases in interest payments and other costs caused by higher interest rates are a burden. But "the negative impact is not big because many can absorb (the burden) with internal reserves," a market watcher said. Many other analysts take the same view.
Semiconductor-related companies enjoyed brisk profit growth, powered by the generative AI boom.
"Demand for generative AI-related products will remain strong," Lasertec Corp. President Tetsuya Sendoda said. The semiconductor testing equipment maker reported a record net profit in the first half to December 2024.
Another testing device maker Advantest Corp. revised up its earnings forecasts for the year ending next month.
The yen's rise during the July-September quarter last year was followed by a weaker yen the following quarter, which underpinned earnings at export-oriented global companies and consumption by visitors to Japan.
"We will take advantage of brisk demand," said Yuji Saito, executive vice president of Japan Airlines, whose international flights contributed to revenue and profit increases in the three quarters to December 2024.
Toyota Motor Corp., whose production was sluggish due to the product certification fraud scandals within the group, saw its performance recover sharply in the October-December quarter.
It raised its consolidated operating profit forecast for the year ending in March 2025 to 4.7 trillion yen, also aided by price revisions and the weak yen. Executive Vice President Yoichi Miyazaki said, "We feel we're gaining a foothold for growth."
Nevertheless, the future of the U.S. tariff policy is unpredictable. If the delayed additional tariffs on Mexico and Canada come into effect in March or later, the damage will be heavy especially for automakers.
SMBC Nikko estimates that consolidated ordinary profits at Japanese automobile-related companies will be pushed down by about 1.2 pct.
Some companies are considering supply chain restructuring.
Asahi Kasei Corp., which plans to build a plant for electric vehicle battery materials in Canada, has said it will review its sales and production systems. Primary Executive Officer Toshiyasu Horie said, "We will minimize the impact on our business."
To prepare for the expected U.S. imposition of tariffs just after Trump's inauguration, companies accelerated exports to the United States last year.
Mitsui O.S.K. Lines Ltd. scored revenue and profit expansion in April-December due to such last-minute demand, but demand may fall back quickly.
The impact of U.S. tariffs on Japanese corporate earnings "is expected to start appearing in autumn or later although much will depend on their inventory levels in the United States," said Yukino Yamada, a senior investment information official at Daiwa Securities Co.
On the other hand, an official of a foreign asset management corporation said, "Companies that have production bases in the United States and hold certain positions in the U.S. market will benefit from fresh tariffs."
Panasonic Holdings Corp. "does not expect any major change" from such tariffs, Executive Vice President Hirokazu Umeda said. The group has an automotive battery factory in the United States.
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