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Weakening yen seen boosting profits at major Japanese firms 3.4% in 2012

JIJI

Combined group pretax profits at major nonfinancial firms are expected to rise a moderate 3.4 percent in fiscal 2012 from the previous year, a recent tally showed.

A number of domestic companies have revised their earnings estimates upward following the yen’s decline against major currencies, although the economic slowdowns in China and Europe are continuing to weigh heavily on many other businesses.

Experts expect Japanese firms to only start benefiting in full from the weak yen in the next fiscal year from April 1.

The data covered 990 nonfinancial firms listed on the Tokyo Stock Exchange’s first section that had published earnings reports for the April-Derember period by Friday. They account for 85 percent of companies on the first section that close their books March 31.

Many businesses in the automotive sector have revised up their full-year pretax balance projections since their first-half results were published in November because they are benefiting to a considerable extent from the yen’s depreciation. Among them were Toyota Motor Corp., Suzuki Motor Corp., Mazda Motor Corp. and parts maker Denso Corp.

“The yen’s fall gave us a ¥140 billion boost,” Toyota Director and Senior Managing Officer Takahiko Ijichi said while announcing the firm’s April-December results at a news conference last week.

Japan’s leading automaker raised its full-year forecast for group operating profit to ¥1.15 trillion from ¥1.05 trillion and its pretax profit estimate to ¥1.29 trillion from ¥1.18 trillion.

Of the 990 companies, 126 increased their full-year pretax balance projections while 151 reduced them.

Hitachi Ltd. slashed its profit forecast, citing worse-than-expected performances by its subsidiaries due to the slowdown of the Chinese economy. Meanwhile, Renesas Electronics Corp. now expects to post a pretax loss, against an earlier projected profit, as demand for semiconductors has been weaker than expected.

“The international competitiveness of Japanese businesses is likely to start improving,” said Shinobu Yonezawa, a senior quantitative analyst at Mizuho Securities Research & Consulting, suggesting the effects of the weaker yen will be reflected more clearly in future earnings.

Many market analysts project that pretax profits at domestic companies will increase by some 20 to 30 percent in the year starting in April.