TOKYO -- Corporate Japan's earnings recovery has broadened, with a record 68% of nearly 1,600 listed companies booking higher net profit for the April-June quarter as growth among makers of autos and electronics spread to their materials and equipment suppliers.
Aggregate net profit at 1,582 listed companies reporting quarterly results as of Tuesday rose 33% on the year, the largest gain since the 2008 global financial crisis, data compiled by The Nikkei shows.
The proportion of companies logging profit growth beats the 66% from the April-June quarter of 2015 and goes down as among the highest for any quarter since October-December 2009.
Of 32 industries, 26 saw higher profits, compared with just eight during April-June of last year. The total excludes finance and certain other industries.
Strong economy, weak yen
Powered by the U.S. and China, the global economy has chugged along, providing a tailwind to Japanese businesses. Japan's gross domestic product for April-June jumped an annualized 4% in real terms. Meanwhile, "the added effect of a soft yen has helped broaden the earnings recovery," said Takashi Ito of Nomura Securities. Japan's currency traded at an average of 111 yen to the dollar during the quarter, about 3 yen weaker than in the same period last year.
Strong quarterly results led 112 companies to upgrade full-year earnings forecasts. Listed companies now expect fiscal 2017 net profit to climb 14%, point a second straight year of record-high results.
But the rest of the year could bring unfavorable foreign exchange headwinds. Japan's currency has strengthened to around 110 yen per dollar as tensions with North Korea escalate.
"Concerns about disappointing corporate earnings will grow should the yen continue to appreciate on growing geopolitical risk," warned Masahiro Ichikawa of Sumitomo Mitsui Asset Management.
Manufacturers on a roll
The manufacturing sector drove corporate earnings growth in the April-June quarter with a 49% jump in net profit on the year. Profit in the non-manufacturing sector rose only 17%, supported by trading houses but held back by telecommunications companies and other laggards.
Earnings improved in 14 of 17 manufacturing fields. Nonferrous metals and chemicals recorded steep profit gains of 68% and 58%, respectively. Both industries profited from better earnings at automobile and electronics makers, which received a tailwind from factors such as a weak yen.
Dowa Holdings' net profit rose 24% as the nonferrous metals group enjoyed growth in rolled copper for cars. Mitsui Mining and Smelting saw a 29% profit gain on brisk sales of ultra-thin copper foil used in smartphone circuit boards.
Mitsubishi Chemical Holdings' net profit soared 83% thanks in part to strong sales of raw material for acrylic resin used in autoparts and other products. First-half earnings could come in over 10% higher than initially projected, said Kenkichi Kosakai, chief financial officer.
Semiconductor-industry suppliers enjoyed a resurgence of demand. Tokyo Electron's net profit jumped 230% to 41.2 billion yen ($372 million). CEO Toshiki Kawai predicted capital spending on chipmaking equipment would grow more than 10% in the current fiscal year.
In the non-manufacturing sector, trading houses' net profit climbed by 50% on higher natural resource prices. Mitsubishi Corp. logged a 17% increase thanks in part to higher prices for coking coal used in steel production.
The April-June quarter was not only a good one for export-oriented companies. Domestic-demand-driven industries including construction and food also posted strong results. Builders saw a 31% profit gain as general contractors' bottom lines rose on preparations for the 2020 Tokyo Olympics.