Tokyo Stock Exchange firms expect first net profit fall in 3 years: survey

Kyodo

The nation’s major companies are expecting the first decline in combined net profit in three years for the current business year ending next March, as they anticipate the effects of the U.S.-China trade spat, according to a survey released Wednesday.

The survey by SMBC Nikko Securities Inc. showed the total net profit projected for the year by 1,470 companies listed on the Tokyo Stock Exchange’s First Section at ¥36.35 trillion ($327 billion), down 2.1 percent.

In addition to trade concerns, many of the companies are worried that the current weakness of the Japanese yen, which benefits exporters, may not last much longer.

By sector, the net profit of transportation equipment manufacturers such as automakers is forecast to fall 17.6 percent, SMBC Nikko said. The fall would be compounded by a profit increase in the previous business year resulting from U.S. corporate tax cuts.

Carmakers are particularly concerned about their business outlook in the U.S. market following President Donald Trump’s threat to impose additional tariffs on foreign cars. Toyota Motor Corp. has said the proposed tariffs, if imposed, would cause a ¥470 billion increase in costs.

“Uncertainty over trade tensions has dented corporate sentiment, making it difficult for companies to make optimistic forecasts,” said Hikaru Yasuda, equity strategist at SMBC Nikko.

Banks predict an 8.2 percent decline in their net profit, with the Bank of Japan’s ultraeasy monetary policy keeping interest rate spreads small and continuing to squeeze profits from lending.

The construction industry expects a 4.9 percent fall due to the higher labor costs stemming from the country’s labor shortage.

Elsewhere, electric appliance makers expect a 22 percent increase as a result of solid exports, and companies in the land transportation industry forecast 4.5 percent of growth supported by an increase in foreign visitors to Japan.