Major Japanese Firms Post Higher Earnings in April-Dec.

Jiji Press

16:38 JST, February 11, 2024

TOKYO (Jiji Press) — Many publicly traded Japanese companies have reported robust earnings for the nine months ended in December as their bottom line improved thanks to price increases.

Of 786 component firms of the TOPIX Japanese stock index that had announced their April-December results as of Wednesday, 455 companies, or nearly 60% of the total, reported higher net profits year-on-year, according to SMBC Nikko Securities Inc.

The number of companies that raised their net profit forecasts for the full fiscal year ending next month exceeded that of those that lowered estimates 154 to 78.

“The combined full-year net profit [of TOPIX companies] is on track to hit a record high,” said Hikaru Yasuda, chief equity strategist at SMBC Nikko. “The earnings recovery that started in the previous year continues.”

The recovery has been led by manufacturers including automakers and machinery makers, with the combined net profit of 364 firms climbing by about 20% in the April-December period from a year before.

Especially, global manufacturers reported solid profit increases on the back of the robust U.S. economy.

Toyota Motor Corp. posted operating and net profits that reached the highest levels on record for a Japanese company. Its full-year net profit is expected to top ¥4 trillion for the first time in the country.

Higher interest rates overseas and lower commodities prices also benefited Japanese companies. The net profit of Mitsubishi UFJ Financial Group Inc. and two other major banking groups surged 65.4% due to higher lending margins.

Kansai Electric Power Co. and seven other major power suppliers posted record net profits thanks to electricity rate increases and stable prices for liquefied natural gas.

Airlines and railway operators reported higher earnings due to a recovery in travel demand after the removal of COVID-19 restrictions. “We achieved higher earnings than in 2019, before the pandemic,” said Yuji Saito, chief financial officer at Japan Airlines.

Higher earnings may drive wages higher. “Better earnings were partly attributable to improved productivity, and the results should be reflected in wages to some extent,” said Hisato Kozawa, CFO of Mitsubishi Heavy Industries Ltd.

Mizuho Financial Group Inc., which posted a net profit increase of about 2%, aims to raise wages by some 7%.

“Wages should be raised by at least about 5% on average despite downbeat financial performance,” said Hideo Tanimoto, president at Kyocera Corp., which lowered its full-year net profit forecast due to weak semiconductor demand.

Corporate profits continue to grow, laying the groundwork for companies to spend more on personnel, said Takahisa Odaka, senior strategist at Nomura Securities Co. “Whether or not to raise wages is up to an employer.”

Some say even smaller companies have room to raise wages. Large firms are increasingly agreeing to allow smaller suppliers to pass on higher costs to them, helping to improve smaller companies’ finances, an official at a foreign fund management company.

A slowing Chinese economy has started affecting Japanese companies, mainly manufacturers. Motor maker Nidec Corp. lowered its full-year net profit outlook due to falling electric vehicle prices in China, while chemical maker Asahi Kasei Corp. partly blamed weaker demand there for a decline in its operating profit.