Japanese Stocks: Corporate earnings are uncertain
2023-01-31
■ Japanese companies may maintain earnings growth, but the outlook remains uncertain
■ The downward trend in corporate profit forecasts may continue. China's economic restart may turn the tide
Japan's major companies will officially announce their financial results for the fourth quarter of last year this week, most of which will be unveiled on February 14. For now, Japanese equities may be experiencing ups and downs as management releases information about individual companies' earnings results and the future business environment. According to financial information company Refinitiv (as of the 19th), the sales forecast of the Tokyo Stock Price Index (TOPIX) constituent companies in fiscal 2022 is expected to increase by 13.1%, continuing the upward trend. Earnings per share (EPS) growth of 11.1% is a gradual downward revision from last September (13.4%), but USD/JPY (quarter/period average) is higher than last year's fourth quarter. In 2018, it grew by about 24% year-on-year, supporting the upward trend in profits.
However, in fiscal 2023, sales are expected to grow by 1.4%, and EPS is expected to rise by 3.6%, with growth expected to slow significantly compared to fiscal 2022. According to data from the Dutch Bureau of Economic Analysis, world trade volume fell by 2.5% month-on-month in November last year, the second consecutive month of decline and the lowest level since October 2021. The future of Japan's economy is uncertain amid growing concerns about a deteriorating global economy, especially for commodities. In addition, the boost to earnings from yen depreciation is expected to fade quickly in the future. The Revision Index (RI), calculated by the percentage of upward revisions minus the percentage of downward revisions, of analysts' EPS forecasts for fiscal 2023 has dropped to a negative 13%. Our country is in contact with the epidemic prevention policy, and whether the economic restart can change this trend is worthy of attention.