Japanese companies posted huge increases in sales and profits in the first half of fiscal 2010, but the “China risks” coupled with the strong yen threaten to pummel performances in the second half.
Toyota Motor Executive Vice President Satoshi Ozawa releases business results in Tokyo on Friday. (The Asahi Shimbun)
Aggregate sales rose 11.6 percent from a year ago, while pretax profits increased 131.7 percent and net profits soared 179.8 percent, according to Nikko Cordial Securities Inc.’s survey of 650 companies listed in the First Section of the Tokyo Stock Exchange that had released their half-year results by Thursday.
But the companies say the business turnaround could be short-lived depending on what happens in China. Chinese exports of rare earth minerals, vital ingredients in high-tech production, were stalled in September when Beijing demanded the release of a Chinese captain whose fishing boat rammed Japan Coast Guard vessels near the disputed Senkaku Islands in the East China Sea. The de facto ban on rare earth exports to Japan came on top of China’s increasingly tight export quotas on the materials.
Chinese imports account for more than 80 percent of clothes sold in supermarkets and other stores operated by Aeon.
Many manufacturers say they have secured rare earth supplies for the short term, but a prolonged delay in delivery would inevitably hit them hard.
Japan is pursuing alternative supply sources in India and elsewhere to reduce Japan’s reliance on China, which accounts for 97 percent of the world’s supply. But such development will take time.
While trading firm Toyota Tsusho Corp. is developing rare earth mines in Vietnam, Executive Vice President Kenji Takanashi said the work “will take at least two to three years.”
Meanwhile, export-oriented companies say their efforts to fend off the impact from the yen’s appreciation are reaching their limits. Toyota Motor Corp., for example, expects currency exchange losses to total 320 billion yen ($3.94 billion) for the year ending in March, which will more than offset its estimated profit rise from sales increases totaling 280 billion yen.
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