Major Japanese companies are expected to post record net profits for the sixth straight year in the current fiscal year, as a solid technology sector backed by booming artificial intelligence demand will more than offset higher input costs from the Middle East conflict, analysts at Japanese securities houses say.
The race to build AI data centers is likely to continue to drive growth in the makers of semiconductors, chip-manufacturing equipment and other electronic parts in the year through March 2027.
SMBC Nikko Securities expects the net profits of 250 major companies listed on the Tokyo Stock Exchange to climb 19.3 percent this fiscal year, led by companies related to the semiconductor industry.
Nomura Securities projects that 242 major companies on the Tokyo bourse will see an average 5.9 percent increase in net profit for fiscal 2026, while Daiwa Securities estimates 5.1 percent growth in net profit for 210 firms listed on the bourse.
"AI and semiconductor-related companies are leading the climb (in profits) and are expected to continue growing as some negative factors, including high crude oil prices, are starting to settle," said Hikaru Yasuda, chief equity strategist at SMBC Nikko Securities.
Crude oil futures spiked right after the launch of U.S.-Israeli strikes on Iran in February disrupted oil supplies. The Strait of Hormuz is a key artery for global energy shipments, with Japan heavily reliant on crude oil imports from the Middle East.
But the oil market has recently fallen back to near pre-crisis levels.
Net profit in the electric appliance sector is forecast to more than double from the year ended March 2026, while that of the precision instrument sector, which includes chip-related firms, is expected to rise 19.0 percent, SMBC Nikko said.
According to World Semiconductor Trade Statistics, the global chip market is expected to leap 89.9 percent in 2026 following 26.2 percent growth the previous year.
The brisk demand is expected to provide momentum to chip-related companies such as Kioxia Holdings Corp, Advantest Corp and Tokyo Electron Ltd.
Kioxia, a leading producer of NAND flash memory chips, said in May that it expects its net profit to surge more than 47-fold from a year earlier to 869 billion yen in the fiscal first quarter to June, driven by booming demand for AI data center semiconductors.
The chip maker did not provide its full-year outlook, citing volatility stemming from geopolitical risks, but said it is unlikely to be affected by the Middle East conflict due to its diversification of procurement sources.
"Semiconductor-related industries...are likely to lead upward revisions in forecasts" for this business year, said Kenji Abe, chief strategist at Daiwa Securities.
Iran is set to take measures to reopen the Strait of Hormuz to all commercial shipping under a memorandum of understanding with the United States. But an unclear prospect for how soon the strait will reopen may leave companies cautious.
Major Japanese shipping companies such as Nippon Yusen KK and Mitsui O.S.K. Lines Ltd had based their outlooks on the premise that the blockade would continue to the end of June, with the assumption that transit would gradually normalize within the year. The two shipping companies expect their net profits to fall in the business year through March 2027.
"The situation in the Middle East is changing for the better," said SMBC Nikko's Yasuda. "There were concerns about whether crude oil prices would remain stubbornly high, but they are starting to settle."
The auto sector, which was hit by high tariffs imposed by the United States last year, is expected to see net profit rise by 36.5 percent this fiscal year, compared to a 34.6 percent drop a year earlier, according to SMBC Nikko.
"The impact of the tariffs was initially massive as they were imposed from what was effectively nothing, but its effects this fiscal year will be reduced in comparison" because they are now factored in, said Masaki Motomura, senior equity strategist at Nomura Securities.
In April 2025, U.S. President Donald Trump imposed a 27.5 percent tariff on cars from Japan, sharply up from 2.5 percent. The rate was later negotiated down to 15 percent in July and formally implemented in September.
The auto sector is expected to be also supported by the introduction of more new models and the depreciation of the yen, Daiwa Securities' Abe said.
While some listed companies released conservative outlooks due to the Middle East uncertainty, they are expected to revise up their forecasts during the business year, according to analysts.
"They are likely to be able to shrug off the pressure" from the Middle East, Nomura's Motomura said.
© KYODO
3 Comments
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Blacklabel
Why yes it has! Amazing isn’t it?
isabelle
47-fold? Looks pretty bubble-y to me.
Grab what you can whilst you can, but don't plan on anything lasting.
Diogenes
AI doesn't pay tax.