Japanese companies including Toyota Motor Corp. and Panasonic Corp. forecast profit will surge this year as exports and cost-cutting power a recovery from the worst postwar recession.
Net income will probably climb a combined 64 percent for the 107 Nikkei 225 stock average companies that have projected earnings so far for the year ending next March 31. Toyota, which this week vowed to slash ¥290 billion in costs, predicts profit will gain 48 percent.
The optimism tracks the companies' expansion in China and India, where rising wages and consumer confidence are fueling demand for cars, televisions, electric power generation and factory equipment. Panasonic, Toshiba Corp. and Hitachi Ltd., the nation's largest private employer, aim to increase sales and production abroad to counter a declining population at home.
"The worst of the crisis is behind us," Nissan Motor Co. Chief Executive Officer Carlos Ghosn said in an interview Wednesday in Yokohama.
The outlook for rising profit helped propel the Nikkei to a 5.2 percent gain in the first three months of the year, the fourth straight quarterly advance.
Japan's economy will probably grow 1.8 percent this year, according to the median forecast of Bank of Japan board members, after a 5.2 percent drop in 2009, the biggest decline since comparable data were made available in 1955.
The 2010 target is less than a quarter of the 8 percent expansion forecast for China, which is set to overtake Japan as the world's second-biggest economy this year. India is projected to grow 8 percent in the year to March 2011.
Firms may even beat their earnings forecasts, many of which are based on worst-case foreign-exchange rate estimates, said Edwin Merner, president of Atlantis Investment Research Corp. in Tokyo, which manages about $3 billion.
"Most companies have made very conservative estimates for this year and results are likely to be better than expected, unless the world economy weakens," Merner said. "Many stocks now look very cheap."
Nissan Motor Co., which on Wednesday said profit may triple this year, boosted sales in China 68 percent to 243,000 vehicles in the three months that ended in March. The automaker, Japan's third-largest, aims to raise output capacity in China by about 70 percent to 900,000 units a year by 2012.
The expected rebound in earnings also shows Japan's biggest companies are reaping benefits after paring costs by closing underused factories and firing workers. Sony Corp. Chief Executive Officer Howard Stringer last year oversaw plans to eliminate 16,000 jobs and shut eight plants. Panasonic in October said it had cut 29,155 jobs since September 2008.
The firings provide another reason for companies to look abroad for growth. Employment has declined in 10 of the past 15 months on a seasonally adjusted basis, dropping to the lowest since 1990 in November.
Sony on May 10 said cost reductions helped it beat its own forecast by reporting a narrower-than-estimated loss for last fiscal year. The company was to announce its forecast for the current year Thursday.
Panasonic, which earlier this month said it intends to boost overseas sales to 55 percent of its total, projects net income of ¥50 billion for this year, compared with a ¥103.5 billion loss in the previous year. The company, the world's biggest maker of plasma televisions, on May 7 said cost-cutting will boost operating profit by ¥490 billion this fiscal year.
At Honda Motor Co., which expects profit to rise 27 percent to ¥340 billion this year, the outlook hasn't been enough to ease some cost controls, said Akemi Ando, a Tokyo-based spokeswoman.
"Just like last year, we still don't get overtime hours or take business trips unless there is an urgent need," she said.
Toyota based its full-year forecast on exchange rates of ¥90 to the dollar and ¥125 to the euro, compared with an average ¥93 against the dollar and ¥131 against the euro last fiscal year. The company estimates annual operating profit is reduced by ¥30 billion when the Japanese currency rises ¥1 against the dollar.
Japanese exporters' profit remains vulnerable, Merner said, citing "risks that include an overly strong yen, weak stock markets, continuing financial crisis in Europe, problems in BRICs (Brazil, Russia, India and China), loss of investor confidence."
For Toyota, Japan's biggest company and almost double the size of its nearest rival in market value, the expected turnaround may mark the end of the worst patch in its history. Battered first by the global recession, then by recalls that cost the company at least ¥170 billion, President Akio Toyoda said things are at last looking better.