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Listed Japanese startups ride earnings bump

Lesser markets poised to outpace Tokyo exchange's first section in profit growth

TOKYO -- Total net profit at companies listed on five startup-focused Japanese equity markets is expected to jump 35% in fiscal 2016, led by domestically oriented businesses left unscathed by a stronger yen.

Nikkei Inc. looked at 688 nonfinancial companies on the Tokyo Stock Exchange's Mothers and Jasdaq markets, the Sapporo Securities Exchange's Ambitious market, the Nagoya Stock Exchange's Centrex market, and the Fukuoka Stock Exchange's Q-Board. Each of these enterprises has comparable financial data going back to fiscal 2007.

Aggregate net profit is forecast to rise to 425.7 billion yen ($3.73 billion) for fiscal 2016 -- the first year of double-digit growth since the start of Abenomics. For comparison, total profit for companies listed on the TSE's blue-chip-heavy first section is expected to rise just 5% this fiscal year as yen appreciation weighs on exporters.

Companies that scored hits with original products and services have fared particularly well this fiscal year. Toei Animation in October upgraded its initial forecast of a profit decline to growth, thanks to a strong showing by smartphone games based on the popular "Dragon Ball" and "One Piece" franchises.

McDonald's Holdings (Japan) customers gave high marks to bigger, pricier burgers and other new offerings. Same-store sales grew 11% on the year in November. Odelic's colorful household LED lighting is proving popular, while electrocardiogram maker Fukuda Denshi is enjoying solid demand for its proprietary devices.

Japan's labor market is tightening as the population shrinks and ages, pushing companies to post more help-wanted ads -- a trend benefiting job-search website operator en-Japan. Technical staff provider UT Group is seeing demand for assembly line workers for electronic components.

With disposable income stagnating amid generally sluggish wage growth, Seria's 100 yen stores are drawing thrifty consumers. Fujio Food System restaurants are using freshly prepared food to attract businessmen to stop for a drink on their way home.

Profits are projected to surge 130% in the service sector and 46% among real estate companies. But machinery and autoparts makers selling to major exporters are expected to see a decline due to the stronger yen.

The performance of startup-focused markets has been mixed, but companies that are flourishing thanks to hit products or benefiting from labor shortages are outperforming their indexes -- a trend likely to continue.

(Nikkei)

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