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Japan-Update

Soft yen, cheap crude propel hundreds of companies to record profits

TOKYO -- A weak home currency, cheap crude oil, and foreign visitors to Japan helped more than 400 listed companies here post record pretax profits for the three months ended June.

     Almost all of the businesses that close their books in March have reported April-June earnings by now. Pretax profit totaled 9 trillion yen ($71.7 billion), up 24% on the year, a Nikkei survey shows. An impressive 402 companies, including Toyota Motor, enjoyed record profits for the quarter.

     For the full year ending March 2016, combined pretax profit is seen jumping 8% on the year.

     Combined quarterly sales climbed 5%, rising for the fourth year in a row. A year earlier, right after the consumption tax hike in Japan, pretax profit had edged up 2%. But growth proved more robust this time around.

     North American operations have led the surge. Honda Motor's pretax profit rose 16% on brisk sales of sport utility vehicles, which offer high profit margins.

     "The North American market has finally gained vitality," Executive Vice President Tetsuo Iwamura said.

     At Hitachi, profit climbed 23% on North American growth in automotive products and high-function materials.

     A weak yen not only helped exporters, but also boosted inbound demand from foreigners visiting Japan. Government figures show that 5 million foreigners came here in the April-June quarter -- up 48% on the year.

     Passengers traveling to Japan on All Nippon Airways flights from China doubled. The surge "had a ripple effect on related businesses, such as duty-free shops," ANA Holdings Executive Vice President Yuji Hirako said.

     At Meiji Holdings, pretax profit surged 56% as visiting foreigners stocked up on powdered milk and other products.

     Lower prices of crude oil and other resources resulted in starkly differing quarters for some.

     At Sumitomo Chemical, cheaper crude improved the profitability of petrochemical operations. And Tokyo Electric Power Co.'s pretax profit quadrupled on lower fuel costs for power generation.

     But trading house Mitsubishi Corp., with interests in a variety of resources, saw profit decline on falling oil and coal prices.

     The combined full-year forecast is unlikely to change much from that made at the start of the fiscal year. But changing trends in the Chinese economy have raised concerns.

     "China's smartphone market is showing signs of a slowdown, and the outlook is uncertain for parts and materials," said Hideki Kobori, a representative director at Asahi Kasei.

     JFE Holdings Executive Vice President Shinichi Okada took a cautious view, saying: "The steel glut in China is not likely to be resolved anytime soon."

(Nikkei)

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