Toyota Profits Soar Amid Yen Weakness... Accounting for 40% of Excess Profits Among Top 10 Listed Companies

Securities Market Outlook: 40% of Excess Profits Belong to Toyota

Thanks to the yen depreciation effect, the total operating profit of Japan's top 10 companies, which are posting strong earnings, is expected by the securities industry to exceed the combined forecasts of each company by 600 billion yen (approximately 5.25 trillion KRW) this year. It is estimated that more than 40% of this excess profit of 600 billion yen will come from Toyota, Japan's largest company by market capitalization.

[Image source=Yonhap News]

On the 26th (local time), Bloomberg reported that the securities industry's consolidated forecast for the 2023 fiscal year (April 2023 to March 2024) results of the top 10 non-financial companies with a market capitalization of over 500 billion yen, which make up the TOPIX index in Japan, predicts this outlook.

The company with the highest market expectations was Toyota, ranked first in market capitalization. Toyota already recorded a profit of 2.5592 trillion yen in the first half of this year (April to September), doubling the amount from a year ago. The securities industry expects Toyota's annual profit this year to reach 4.21 trillion yen, which is about 260 billion yen higher than Toyota's own forecast of 3.95 trillion yen. On the 1st of this month, Toyota raised its annual profit forecast by a whopping 1.37 trillion yen from the previous 2.58 trillion yen, citing increased export competitiveness due to the weak yen. However, it still fell short of the securities industry's forecast. The difference between the securities industry's and the company's profit forecasts was largest for Toyota.

Regarding this, Koji Endo, a researcher at SBI Securities, said, "It is a common pattern for companies to present conservative forecasts," and evaluated that "Toyota has already achieved its goal of producing 10.1 million units annually." He then raised Toyota's 2023 fiscal year profit forecast to 4.6 trillion yen, 900 billion yen higher than the previous forecast.

Besides Toyota, profits of other automobile manufacturers are also expected to improve significantly. The securities industry forecasted that Honda will achieve a profit of 979.2 billion yen and Suzuki 271.1 billion yen, exceeding their own company forecasts by 49.2 billion yen and 31.1 billion yen respectively. Toyota, Honda, and Suzuki are expected to account for more than half of the 600 billion yen excess profit suggested by the securities industry.

The stock prices of Japanese automobile companies have also surged significantly this year, supported by improved earnings. Toyota's stock price soared 54.6% this year. Honda and Suzuki's stock prices rose 38.4% and 34.6% respectively since the beginning of the year.

However, the possibility of a U.S. economic recession next year is a burden factor. If the Bank of Japan shifts its monetary easing policy, which has driven the weak yen, to a tightening stance, it will be difficult to expect a dramatic profit increase like this year.

Akinori Mitsushike, CEO of Ichiyochi Asset Management, said, "The reason companies set relatively low earnings forecasts is due to expectations that the U.S. and Chinese economies will slow down," and predicted, "Stock prices may fall depending on the results of the fourth quarter this year."

This content was produced with the assistance of AI translation services.