Domestic Demand Recovery and Yen Depreciation Benefits... Japanese Listed Companies' Earnings Soar

Automakers Lead Travel Industry
H1 Net Profit Up 30% YoY
Strong Performance Expected in H2
Listed Companies' Earnings Surprises
Nikkei Surpasses 32,500 Points

Japanese listed companies recorded earnings surprises in the first half of the 2023 fiscal year (April 2023 to March 2024), with net profits increasing by more than 30% compared to the same period last year, thanks to the rise in travelers and the booming weak yen. In the second half of this year, more companies are raising their earnings forecasts due to the weak yen. The strong performance outlook of companies has also heightened expectations in the stock market.

On the 6th, Nihon Keizai Shimbun reported that, based on the consolidated financial results for the first half of this year of 393 listed companies included in the Tokyo Stock Exchange Prime Market, manufacturing and non-manufacturing sectors posted net profits of 7 trillion yen and 6 trillion yen respectively, up 24% and 32% from the same period last year.

In the manufacturing sector, automobile companies, which greatly benefited from the weak yen, saw significant profit growth. Toyota Motor Corporation recorded a net profit of 2.5894 trillion yen in the first half of the 2023 fiscal year, more than doubling compared to the previous year. Following a price increase for cars this year, the decline in the yen's value against the dollar alone generated an additional operating profit of 260 billion yen, greatly improving performance.

Toyota Motor set the expected exchange rate for the 2023 fiscal year at 125 yen per dollar, achieving an effect of gaining an additional 45 billion yen in operating profit annually for every 1 yen drop in the yen's value against the dollar. Subaru, another automobile company, also gained an additional operating profit increase of 62.5 billion yen due to the yen's depreciation.

On the other hand, excluding automobile companies, about half of the semiconductor, consumer components, and chemical-related companies improved their performance. Sumitomo Chemical posted a loss of 76.3 billion yen due to decreased demand for synthetic resins amid the economic slowdown in China. The semiconductor industry was also hit hard by sluggish smartphone sales in the Chinese market. Advantest, a Japanese semiconductor manufacturing equipment company, saw its net profit decrease by 64% compared to the previous year.

The non-manufacturing sector saw a significant increase in profits due to improvements in the travel and transportation/aviation industries. Among the 207 non-manufacturing companies, 65% recorded strong earnings. Japan’s passenger railway company JR Tokai saw its net profit double to 195 billion yen in the first half of this year compared to the previous year, as both domestic travelers and visitors from overseas increased after COVID-19. ANA Holdings Inc., the parent company of the airline All Nippon Airways, recorded a net profit of 93.2 billion yen, an increase of 4.8 times compared to the previous year.

As the weak yen situation continues, the streak of strong corporate earnings is expected to continue in the second half of this year. Among the 360 listed companies that announced their first-half financial results by the 2nd, more than 30% raised their net profit forecasts for the 2023 fiscal year. Nihon Keizai forecasts that these companies will achieve a combined net profit of 17.483 trillion yen for the full fiscal year, a 13% increase compared to the previous year.

Investors are anticipating a positive stock market trend following companies’ ‘earnings surprises.’ As of 10 a.m. on the day, the Nikkei 225 stood at 32,601.99 yen, up 2.04% from the previous trading day’s 31,949.89 yen. The Nikkei 225 surpassed the 32,500 mark for the first time in a month and a half. Following a slowdown in the October employment data, which was expected to determine the continuation of the U.S. tightening policy, and the Bank of Japan’s monetary policy meeting having little impact on stock prices, market attention focused on further earnings announcements.

Japan’s economic magazine Diamond forecasted, "This week, the Nikkei 225 stock price is expected to show a steady trend as it watches earnings announcements."