Japan's manufacturing slump deepens as two-thirds see profit fall

Jul 30, 2019 | News On Japan

Jul 30, 2019 (Nikkei) - More than two-thirds of listed Japanese manufacturers have reported declines in quarterly profits so far this earnings season, the broadest slump since the global financial crisis, as trade frictions and China's economic slowdown take their toll.

Because manufacturers account for about 60% of profits at Japanese listed companies, a prolonged earnings slump could weigh on the entire economy as it heads into an October consumption tax increase.

As of Monday, 53 companies in sectors including electronics, machinery and automobiles reported year-on-year decreases in group net profit for the April-June quarter.

This represents 68% of the total so far -- the biggest share since profit fell at 73% of manufacturers in April-June 2009.

Companies exposed to China's slowing economy have taken a hit. Industrial robot maker Fanuc said Monday that net profit dropped 48% on the year. This marks the fourth straight quarterly decline, taking earnings to a six-year low.

"Because of the worsening frictions between the U.S. and China, [Chinese] clients increasingly took a wait-and-see approach," said Kenji Yamaguchi, Fanuc's president and CEO.

Komatsu's sales of construction machinery fell nearly 30% in China and by the same margin in the rest of Asia excluding China and Japan. The company's net profit slid by nearly one-quarter. Various elections in Asian markets put public works projects on hold.

Bearing maker NSK's net profit plunged by half owing to weak demand for machine tool components. Factory sensor supplier Keyence's April-June profit fell for the first time in nine years.

Overall, April-June profits fell at 55% of the companies reporting as of Monday.

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