More than a Third of Japanese Companies to Miss Earnings Projections

By Kiyoshi Takenaka

TOKYO (Reuters) – A recent Reuters survey reveals that over a third of Japanese companies are likely to miss their earnings projections for the first half of the business year, which began in April, due to slow sales and rising costs.

The survey, conducted by Nikkei Research from September 25 to October 4, found that 36% of the companies surveyed expected to fall short of their original six-month estimates ending in September. In contrast, 18% anticipated exceeding their initial forecasts, while 45% claimed they were on track to meet their targets. The survey included responses from 241 of 506 companies approached.

With many Japanese firms closing their books on September 30 for the financial results of the first semester, full earnings announcements are expected toward the end of this month.

In the transportation equipment sector, which mainly consists of car-related companies, 50% projected that their half-year earnings would underperform compared to forecasts, while 14% expected to surpass their estimates.

In July, Nissan Motor reduced its annual operating profit forecast by 17% and lowered its retail sales forecast by about 50,000 units to 3.65 million vehicles, citing weaker-than-anticipated sales in the United States and China.

Conversely, the transportation sector saw 40% of participants predicting their half-year earnings would exceed their estimates, while 35% anticipated missing their original targets.

Nippon Yusen and other shipping companies raised their annual outlook in July after disruptions in the Middle East led to rerouted vessels, tightening container ship supply and pushing freight rates higher.

For the second half of the business year starting October 1, 58% of respondents expect to meet their initial earnings forecasts, while 34% predict they will underperform.

The survey also indicated that 70% of participants anticipates the Japanese yen will trade between 140 and 150 yen per dollar by the end of the current business year on March 31, with 21% predicting a range of 130-140 yen.

On October 2, while the survey was ongoing, Japanese Prime Minister Shigeru Ishiba surprised markets by stating the economy wasn’t prepared for further rate hikes, resulting in the yen dropping to a six-week low of 147.25 yen to the dollar.

When asked about managing excessive foreign exchange fluctuations, 45% advocated for monetary easing or tightening, while 33% suggested government intervention.

A manager from a chemical company mentioned, “Besides a difference in interest rates among countries, weakness in the Japanese economy is causing weakness in the yen. We need policy steps that strengthen the Japanese economy.”

Regarding Nippon Steel’s $14.9 billion proposal for U.S. Steel, 46% of respondents said the Biden administration's concerns about national security risks did not change their investment outlook for the U.S. The remaining 54% stated they were not involved in U.S. investments, and none claimed that U.S. security worries affected their strategies.

In response to an increase in cross-border acquisitions targeting Japanese firms, 44% of participants are attempting to enhance corporate value, while 21% are not taking specific measures and 32% do not view themselves as potential M&A targets.