Japanese Companies: Updated Jan. 19, 2023.

 

Major Japan firms to log record 1st-half profits on weak yen

Article Source: https://mainichi.jp/english/articles/20231109/p2g/00m/0bu/072000c

Article:

TOKYO (Kyodo) -- Major Japanese companies are expected to log a record combined net profit for the fiscal first half driven by carmakers on the back of a weak yen, with a post-COVID recovery in activity also providing tailwinds for services and other sectors, according to a tally by a securities house.

The aggregate net profit of 819 firms that released earnings for the six months ended September by Wednesday increased 12.2 percent to 17.87 trillion yen ($118 billion) from the same period last year, according to data from SMBC Nikko Securities Inc.

The projected profit for the current fiscal year through March 2024 is also on course to hit a record high, providing a strong argument for businesses to raise wages during next year's "shunto" spring negotiations between management and labor unions.

Ideas:
This might be another good reason for the Bank of Japan to keep the yen somewhat weak and it helps companies and the overall economy.

Of course it might not help the domestic economy overall, but for the most part, the weak yen seems to have helped companies and exporters.

Whether how record net profits are going to help services and other sectors is another story, as maybe most services type companies might be linked to the domestic economy and not to foreign economies.

But the weak yen does help with the record number of foreign tourists who have traveled to Japan and spend a lot because their purchasing power have increased.

As far as companies and increasing wage in April 2024, it remains to be seen if only large major companies are going to increase wages, again, or are small and midsize companies going to also increase wages.

Article:

But the figure, representing only around 57 percent of the companies that will make up the final tally, may be pulled down as major firms release earnings for the first half. SoftBank Group Corp. said Thursday it posted a net loss of 1.41 trillion yen for the period.

Combined net profit for manufacturers rose 11.8 percent to 9.13 trillion yen, with transportation equipment makers such as automakers seeing their net profits soar 90.7 percent to 3.56 trillion as the easing of a global chip supply crunch boosted production.

Food producers also posted an 81.8 percent increase in net profit to 237.7 billion yen as they passed on higher raw material costs to consumers.

Ideas:

A market economy is very complex with many sectors and many more companies in each sector. As such there are always some who improve their profits and some, like ,SoftBank, will have some not so good quarters or years for whatever reason.

It must be remember, that last year and 2022, the Japanese economy, for the most part, was still in a pandemic mindset and also automakers were having supply chain challenges which limited production.

For food producers, it seems maybe they might have used the idea if raw material prices are going to increase, or not, lets increase prices anyway. An 81.8 percent increase in net profit seems too much when the Japanese economy is dealing with increased inflation, and consumers are paying for it while companies rake in huge profits.

If companies passed-on their raw material costs to the next in the supply chain, you might think that whomever, including the final customer might not like the increased costs and not buy as much, but in this case, food producers actually has record net profits.

Article:

Excluding financial firms, net profit among nonmanufacturers grew 11.8 percent to 8.26 trillion yen.

The land and air transportation industries saw notable increases thanks to recovering travel demand and inbound tourism amid the easing of the coronavirus pandemic, with the latter surging almost nine-fold.

Power and gas companies returned to the black as rate increases helped support their bottom lines.

Ideas:

Nonmanufacturers, might be a large group such as the services sector, and if the services sector grew 11.8 percent that is good for the Japanese economy, as maybe, for quarter 4 and or fiscal 2023, Japan's GPD might finally get past the 1 percent growth rate that its been stuck at for a long time.

It seems airlines are trying to make up lost earnings from the pandemic and airline ticket prices are high at this time. But it hasn't stopped people from traveling, and especially to Japan as many foreign tourists are taking advantage of the weak yen. 

Power and gas companies might have seen increases in profits, with rate increases, but what about the average household in Japan and how much have they had to pay related to the rate increases. 

The Japanese government has been providing subsidies related to rate hikes, to companies, but have the subsidies reduced the average household energy cost.

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Meanwhile, shipping firms saw their profits sag 81.7 percent amid a slowdown in China's economy, while wholesalers experienced an 18.6 percent decline.

"We can expect further business expansion, particularly among manufacturers, in the coming years, but risks may emerge if the Chinese economy continues to slow or if the yen appreciates significantly," said Hikaru Yasuda, SMBC Nikko's chief equity strategist.

Ideas:

The Chinese economy, as reported recently, grew 5.3 percent in 2023, which is low for China, but its better than nothing, and or course maybe many investors would prefer to see the Chinese economy grow like before.

But might never happen again, as economies move from the developing stage to near the advanced stage their economy growth gets less and less. So maybe 5.3 percent is about right for China despite its the Chinse economy having some major challenges at this time.

Shipping firms, unfortunately, might have put all of their eggs into the Chinese shipping routes instead of diversifying their routes globally.

Also, many oil used by shipping firms might have put a dent in their profits too and oil and gas prices remain high, but not has high as before.

The decline in profits of wholesalers might be from companies passing-on their costs to the next in the supply chain, including the wholesalers, it could be from higher energy costs, it could be from the weak yen, which increases import prices if the wholesaler buys from overseas.

Have a nice day and be safe!