TOKYO -- Earnings at Japan's listed companies look set to drop 15% on the year for the fiscal second half ending in March, leaving full-year growth flat, as the U.S.-China trade war raises fears of a Chinese economic slowdown.
Aggregate net profit at 1,346 large companies tracked by Nikkei is forecast to fall to about 12.9 trillion yen ($113 billion) in the October-March half, based on guidance issued as of Nov. 9.
That figure would slow full-year profit growth for fiscal 2018 to just 1%, despite a 19% jump for April-September to a record 15.6 trillion yen. Any rise in net profits for the full year would mark a third consecutive record.
The data, which excludes financial groups, accounts for 85% of Japan's listed companies by total count and 93% by market capitalization.
Among the companies forecasting a second-half profit decline is Mazda Motor. In China, "trade friction is having a chilling effect on consumer sentiment, and inventories are piling up," managing executive officer Yasuhiro Aoyama said recently.
Besides concerns about China, Japanese companies also face headwinds from currency weakness in emerging markets, higher materials prices and a domestic labor shortage.
U.S. corporate tax cuts gave a boost to profits last fiscal year, helping lift Japanese earnings more than 30% and setting a bar that would be tough to match this year.
Japanese managers tend to be conservative in setting earnings forecasts, and upgrades may yet follow in the coming months. Despite the trade war, American companies look set for 24% profit growth in 2018, while their European peers are headed for an 8% rise, according to research firm Refinitiv.
Yet analysts point to the risk of slower Chinese growth as a result of the trade standoff between Beijing and Washington. "Whether it's the outlook for the global economy or other factors, there's little to suggest the business environment will improve," said Hisao Matsuura at Nomura Securities.
In the first half, Japanese mobile carrier SoftBank Group's net profit grew more than eightfold from a year earlier as investments through its nearly $100 billion Vision Fund bore fruit.
But Japanese earnings for the half were polarized, with strong overseas economies lifting multinationals in electronics and other industries, while high commodity prices squeezed domestic-market-focused utilities.
By sector, electronics companies logged profit growth of roughly 91%. Sony scored record highs for April-September as the company shifted its main operations from slumping electronic devices to fields like video games, while Hitachi likewise achieved growth as it moved toward infrastructure. Toshiba booked large profits from the sale of its profitable memory unit, a step in its long effort to restructure after a string of missteps plunged the company into financial crisis.
Communications companies enjoyed a 72% profit increase. SoftBank peer KDDI boosted net profit 5% to 345.4 billion yen despite pressure from the Japanese government to lower phone bills.
Toyota Motor earned 16% profit growth, with enhanced safety measures and other features helping the country's top automaker raise prices on new cars.
But retail struggled with a domestic economy that Mitsubishi UFJ Morgan Stanley Securities senior economist Hiroshi Miyazaki described as "at a standstill." Consumer electronics seller Yamada Denki's net profit plunged 90% as the company faced tough competition from online shopping.
Machinery companies, for which a relatively high proportion of business is seen to come from China, also saw a marginal decline in profit.