Listed Companies’ Financial Results: Overcome Headwinds with Proactive Strategies

Editorial

15:36 JST, May 23, 2025

Listed companies have been reporting strong financial results. However, this fiscal year, the situation has changed significantly, and they are likely to face headwinds from the negative impact of tariff measures by U.S. President Donald Trump.

It is hoped that companies will not fall into a defensive posture, but rather implement proactive strategies to continue to grow, and will achieve high wage increases.

Almost all companies listed on the Tokyo Stock Exchange have announced their earnings for the year ending March 31, 2025. The combined net profits of companies that make up the Tokyo Stock Price Index (TOPIX), excluding firms in the financial sector, hit a record high for the fourth consecutive year.

In addition to the strong performance of semiconductor-related companies due to increased demand for chips, corporate performance in the automobile industry also remained firm. The total net profits of the manufacturing sector amounted to about ¥22.7 trillion.

The railroad sector, which is benefiting from the full-fledged recovery of visitors to Japan, and information technology-related services, which are experiencing strong demand for investment in digital technology, also performed well. Mainly for these reasons, non-manufacturing companies’ net profits increased.

It can be said that the trend of listed companies achieving high growth and giving it back in the form of higher wages has been making steady progress.

The concern is corporate performance for the fiscal year ending March 31, 2026, when the impact of the U.S. government’s high tariff policy will be felt fully. Forty percent of the about 1,000 companies forecast a decrease in profits.

In particular, the damage to the automobile industry, a key industry in Japan, is expected to be large.

Toyota Motor Corp. has estimated that tariffs will be a factor in a ¥180 billion decline in operating profit for the two months of April and May. Honda Motor Co. also forecast an annual decline of ¥650 billion in operating profit due to tariffs. Four out of the seven major automakers have disclosed earnings forecasts. According to them, their total net profits are expected to fall 40% from the previous fiscal year.

The automobile industry has led the way in high-level wage increases for three consecutive years until this year’s shunto spring wage negotiations. If momentum for higher wages wanes, the transition to a growth-oriented economy, in which wages and investment both increase, could be derailed.

With about ¥600 trillion in corporate internal reserves, companies should have the capacity to weather the adverse economic conditions. They need to continue their efforts to keep wage increases flowing.

With the outlook becoming increasingly uncertain, many companies have begun to slash their workforces, even though they are in the black. The number of listed companies offering early or voluntary retirement is rapidly increasing. Panasonic Holdings Corp. has announced that it will cut a total of about 10,000 jobs in Japan and overseas.

On the other hand, some companies are anticipating growth despite the headwinds. Ajinomoto Co. forecast its highest profit in three years for the fiscal year ending March 31, 2026, on the back of growth in electronic materials for semiconductors, among other factors. It is hoped that companies will look for new growth areas, rather than relying on restructuring.

There is a possibility that the protectionist stance of the United States will be prolonged. It also will be important to reduce dependence on the United States and develop new sales channels.

(From The Yomiuri Shimbun, May 23, 2025)