the coffers of manufacturers from Toyota Motor Corp. (7203) to Sony
(6758) Corp.
As the exporters prepare to announce first-quarter earnings this week,
14 of Japan's 27 largest are projected to beat their own full-year
operating profit forecasts by 5 percent or more, according to data
compiled by Bloomberg. Net income may surge 75 percent from a year
earlier among companies that sell abroad and 33 percent at
domestic-oriented firms, UBS AG said this month.
Abe's drive to end 15 years of deflation in Japan through monetary
easing and fiscal stimulus benefited manufacturers as the yen dropped
5 percent against the dollar last quarter and about 20 percent in the
past 12 months, boosting earnings from overseas. Toyota, the world's
largest carmaker, may exceed its fiscal-year net income target by 21
percent, according to the average of 23 analyst estimates compiled by
Bloomberg.
"Abe introduced a real bullet," said Ichiro Takamatsu, a fund manager
in Tokyo at Bayview Asset Management Co. "Companies will report
stronger numbers because of the weak yen."
Toyota, set to report earnings on Aug. 2, may say first-quarter net
income rose 48 percent to 430 billion yen ($4.3 billion), according to
the average of four analyst estimates. Profit for the year ending
March may jump 72 percent to 1.66 trillion yen, based on 23
projections.
Sony, Japan's biggest smartphone maker, may boost full-year profit 28
percent to 55 billion yen, according to the average of 16 analyst
estimates. The Tokyo-based company will report first-quarter earnings
on Aug. 1.
Return Favor
One question is whether those benefiting from Abenomics will return
the favor to stimulate the broader economy. Companies such as Toyota,
after stockpiling cash, could bolster Abe's stimulus efforts by
increasing capital investment, wages and dividends.
"Companies are of course happy to receive the windfall from a weaker
yen and stronger exports, but extremely reluctant to spread this
additional income," said Martin Schulz, an economist at Fujitsu
Research Institute in Tokyo. "They would rather keep that income and
focus on investment, particularly overseas."
'Good Numbers'
Analysts expect exporters including Toyota and Sony to beat their
forecasts in part because the yen is trading at lower levels than the
companies predicted.
Toyota said in May it expects 1.37 trillion yen in annual profit,
based on exchange rates of 90 yen to the dollar and 120 yen against
the euro. Sony targets 50 billion yen in full-year net income based on
the same projected rates.
Japan's currency traded at an average of about 99 against the dollar
and 129 against the euro in the quarter ended June 30, compared with
about 80 yen and 103 yen a year earlier. The currency may weaken
further to 120 yen against the dollar over the next year, Credit
Suisse AG said in a July 1 report.
Toyota's operating profit is boosted by about 40 billion yen for every
1-yen weakening in the Japanese currency against the dollar, according
to the company.
"We are just at the starting lines toward sustainable growth," Akio
Toyoda, the carmaker's president, said last month at the annual
shareholder's meeting. He said the strong yen was "becoming
corrected."
Shino Yamada, a spokeswoman for Toyota, and Mami Imada, a spokeswoman
at Sony, declined to comment ahead of the companies' earnings
announcements.
"There should be many sectors that will benefit from the yen's
depreciation," said Masamitsu Ohki, a fund manager at Stats Investment
Management Co., a hedge fund in Tokyo. "I expect good numbers for the
first quarter."
Nissan, Panasonic
Nissan Motor Co. (7201), Japan's second-biggest carmaker, said July 25
it increased profit 14 percent to 82 billion yen in the three months
ended June 30, amid the weaker yen and higher U.S. sales. The
Yokohama-based company reiterated its forecast for full-year net
income of 420 billion yen.
Panasonic Corp. (6752), Japan's third-biggest TV maker, may post
full-year net income of 62 billion yen, compared with the company's
forecast of 50 billion yen, according to the average of 13 analyst
estimates compiled by Bloomberg. The Osaka-based company, which
reports first-quarter earnings on July 31, had a 754 billion-yen loss
last fiscal year.
Annual profit at Tokyo-based Honda Motor Co. (7267), Japan's
third-largest carmaker, may jump 71 percent to 627 billion yen,
according to the average of 20 estimates.
Electronics Makers
Carmakers may get a bigger boost from the weaker yen than electronics
manufacturers, said Makoto Kikuchi, chief executive officer at
Tokyo-based Myojo Asset Management Japan Co.
"Consumer electronics makers see a limited impact," Kikuchi said.
"They have high ratios of overseas production as well as overseas
sales."
Sony's operating profit is reduced by a weaker yen against the dollar,
while it's increased by a weaker yen against the euro, according to
the company.
One product where Sony is hurt by the weakening yen against the dollar
is its new PlayStation 4 game console. The electronics maker has
signed contracts to pay for parts in dollars, to avoid being hurt by
the strengthening yen. The result is that parts and production are
becoming more expensive just as the company prepares to compete in
consoles against Microsoft Corp.
Japanese electronics makers continue to suffer from competition
against Samsung Electronics Co. and Apple Inc. and from the emergence
of smartphones and tablet computers, which are eroding demand for
devices such as cameras and video-game consoles.
"In electronics, Japanese companies are extremely challenged by
competition in Asia," Schulz at Fujitsu said. "The overall demand is
not strong."
Canon, Nintendo
Canon Inc. (7751), the world's biggest camera maker, cut its full-year
forecast July 24, citing lower-than-expected demand.
Nintendo Co. (7974), the creator of "Super Mario," may miss its 55
billion-yen profit forecast for the year ending March, according to
analyst estimates. The Kyoto-based company, which fell short of
initial sales projections for its new Wii U game console, may post net
income of 53 billion yen, according to the average of 22 estimates.
The company will report first-quarter earnings on July 31.
A sustained recovery for Japan's economy will depend on whether Abe's
government can execute a more comprehensive growth strategy, Masayoshi
Son, president of SoftBank Corp. (9984), said in Tokyo on July 23.
"Monetary initiatives or monetary techniques will not suffice in the
long run," said Son, whose Tokyo-based mobile-phone company acquired
U.S. carrier Sprint Corp. (S) earlier this month. "Unless Japan grows,
all of those short-term initiatives will have no meaning."
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