With Japan’s quarterly reporting period almost over, one analyst summed up the general feeling about companies’ profit performance.

“The results season was probably a disappointment,” said Jonathan Allum, a strategist at SMBC Nikko Capital Markets Ltd. in London.

It’s difficult to disagree. Most firms have posted net income that fell short of analyst expectations, according to data compiled by Bloomberg. And beyond the bottom-line numbers, the word from some of Japan Inc.’s biggest names hasn’t been good.

Mitsubishi UFJ Financial Group Inc. forecast the largest profit slide this year among Japan’s three biggest lenders. Sony Corp. said it expects weaker sales and operating profits across most of its business units, while Honda Motor Co. predicted a surprise decline in operating income.

That results were underwhelming this quarter hardly comes as much of a surprise. Few expected the good times to continue after stellar reporting periods last year. This time 12 months ago, for example, most firms beat analyst expectations.

In the three months that ended March 31, Topix companies had their worst performance in six quarters, according to Morgan Stanley. In the brokerage’s analysis, companies’ net income surpassed the consensus analyst estimate by just 1.2 percent in the period, far below the average over-performance of 6.7 percent for those six quarters.

But as the yen continues to slide, optimism is creeping back in. The Japanese currency has reversed course after hitting a 16-month high against the dollar in March. It’s weakened about 6 percent against the dollar since March 23, helped by a strengthening greenback as U.S. Treasury yields rose. A falling yen, of course, is seen as good news for the Japan’s legion of exporters, as it inflates the value of their overseas profits when repatriated.

Allum and others point out that Japanese firms are notoriously cautious when it comes to projecting future profits, or making assumptions about factors like the exchange rate. Investors are well aware that forecasts for the year are “too conservative,” Allum said. A number of companies are basing their forecasts on an average foreign exchange rate of ¥100 to ¥105 per dollar, levels that look “increasingly unlikely,” he said. The Japanese currency currently trades at ¥111.32 per dollar.

“We can be more optimistic than corporate projections would have us believe,” said Kiyoshi Ishigane, chief strategist at Mitsubishi UFJ Kokusai Asset Management Co.

The global economy, led by the U.S., is likely to fare better than it did in the March quarter, dulling demand for the yen as a safe haven asset, both Allum and Ishigane said. Ishigane sees a positive impact from tax cuts by U.S. President Donald Trump’s administration materializing from this quarter.

Last week, data showed that U.S. factory production regained its footing in April, pushing capacity utilization to the highest since 2015.

“It has been clear for some time that the global economy — including that of Japan — was weak in the first quarter,” Allum said. “But it is generally believed that this is no more than a blip.”

Greg Dean, a fund manager who oversees $3 billion at Cambridge Global Asset Management in Toronto, sounded a note of caution. Wages are starting to pick up in Japan, and while that may be good news for Bank of Japan Gov. Haruhiko Kuroda, Dean says it’s not a positive for Japanese companies’ earnings outlooks.

“I am reducing my exposure to retailers in Japan where multiples are high and where they may struggle to pass on higher wages due to competition,” Dean said.

But John Vail, New York-based chief global strategist for Nikko Asset Management Co., sides with the optimists when it comes to Japan Inc.’s future earnings — and the prospects for their stocks.

“Japanese corporates are usually very conservative in their outlook,” Vail said. “Profits are likely to continue growing and valuations are low by international comparison.”

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