Skip navigation
Newswire

Overseas dependence bodes ill for Japan firms-Nikkei

TOKYO, Aug 17 (Reuters) - Japanese firms have become increasingly dependent on overseas earnings, a trend that could bode ill for companies due to an opaque outlook for the U.S. economy, the Nihon Keizai Shimbun said on Saturday.

The report comes at a time when the U.S. economy has been beset by weak corporate profits, sluggish growth and a delay in an employment recovery from its recession last year.

According to a Nihon Keizai survey of 498 listed firms, overseas operations accounted for 27.6 percent of their total consolidated operating profit in the 2001/02 business year that ended in March, up by 6.3 percentage point from a year earlier.

Many firms are forecasting gains in earnings in the current business year on the back of an expected increase in demand in overseas markets, the newspaper said.

But there is a real risk that rising dependence on overseas earnings could come back to haunt them, depending on what course the U.S. economy takes, Nihon Keizai cited analysts as saying.

According to the survey, operating profit fell in regions around the globe but the biggest slide was seen in Japan, and firms' dependence on overseas earnings rose as a result.

Operating profit generated in the United States fell 15 percent from a year earlier, while operating profit in Asia outside of Japan declined 19 percent, Nihon Keizai said. But in Japan, sales dropped six percent due to deflationary pressures in the economy, triggering a 40 percent plunge in operating profit.

North and South America accounted for 15.2 percent of total consolidated operating profit, a gain of 3.7 percentage point. Asia accounted for 8.3 percent, a rise of 1.7 percentage point.

Of the firms included in the survey, Honda Motor Co had the largest overseas operating profit of any company in the survey, followed by Toyota Motor Corp and Nissan Motor Co Ltd .

Although Japanese automakers and manufacturers of electrical machinery posted solid results in the April-June quarter, there is an emerging risk that slowdowns in overseas economies could dampen overall earnings, Nihon Keizai said.

In a troubling sign, the uncertainty surrounding the outlook for the U.S. economy is increasing, while a recent strengthening in the yen will also likely eat into profits earned overseas, the newspaper said.