At first glance, corporate earnings reports for the first half of fiscal 2002 seem too good to be true, given the continuing economic slump. On average, pretax profit surged nearly 40 percent in April through September from the same period a year earlier -- a dramatic reversal from the 40 percent decline in fiscal 2001 profits. For the full year to March 2003, a huge increase of more than 60 percent is forecast.
One reason given for this is that stepped-up restructuring produced better-than-expected results. Another reason is that exports, particularly to the United States, expanded markedly. Record earnings in a number of well-off sectors, such as automobiles, also raised the overall level of before-tax current profits.
The earnings outlook for fiscal 2003 and beyond does not warrant optimism, however. Exports will probably level off because of growing uncertainties over the U.S. economy. At home, a speedup in bad-loan write-offs by commercial banks is likely to drive more deadbeat clients into bankruptcy and throw more workers out of their jobs.