Japanese corporate earnings are declining sharply under the impact of Trump's tariffs.

The preliminary statistics for the real GDP (seasonally adjusted) for the first quarter (January-March) of 2025 released by the Cabinet Office on the 16th showed a decrease of 0.2% compared to the previous quarter, marking the first negative growth in four quarters after adjusting for price changes. Due to the increased frugality tendency caused by rising prices of daily commodities, personal consumption performed poorly. Converted into an annual rate, it dropped by 0.7%. Some views pointed out that there is a lack of driving force in the future economic outlook and downward risks from US trade policies need to be guarded against.

According to the median forecast of the actual GDP for the first quarter compiled by Reuters from 15 private survey institutions, it was expected to decrease by 0.1% compared to the previous quarter, with an annual rate conversion showing a negative growth of 0.2%.

According to an article published by the "Nikkei" on May 16 titled "US Tariffs Inflict ¥1.7 Trillion Hit on Auto Industry; Electronics and Machinery Sectors Also Affected in the First Quarter," the fluctuating tariff policies in the United States in 2025 are causing fluctuations in corporate earnings. The total profit reduction due to tariffs for 36 major listed companies is expected to reach ¥2.6 trillion in the first quarter of 2026, with approximately 70% (about ¥1.7 trillion) borne by the automotive industry.

The world's largest automaker, Toyota Motor Corporation, expects its net profit this year to plummet by 35%, down to ¥3.1 trillion. The company's performance will face pressure from US tariff policies and yen appreciation. It is estimated that the impact of tariffs alone in April and May will reduce operating profit by about ¥180 billion. Last year, Toyota sold 2.33 million vehicles in the US, with approximately 50% being imported vehicles.

Honda Company's consolidated performance outlook for the fiscal year 2025 shows that sales are expected to decline by 6.4% compared to the fiscal year 2024, reaching ¥20.3 trillion; operating profit (main business profit) is expected to drop by 58.8%, at ¥500 billion; net profit is expected to fall by 70.1%, at ¥250 billion, indicating a significant reduction in overall earnings.

Sony Group announced on May 14 that its net profit for the fiscal year 2025 is expected to be ¥930 billion, excluding the financial business to be split off in October. Compared to last year's performance excluding the financial sector, the net profit is expected to decrease by 13%. Although the gaming and semiconductor sectors performed well, Sony has taken into account the profit reduction of approximately ¥100 billion due to the tariffs imposed by the Trump administration.

Due to the tariff policies of the Trump administration, it is expected that the performance of Japan's major domestic enterprises will gradually deteriorate this year. At the same time, expectations of yen appreciation are also believed to negatively impact corporate earnings. Export-oriented companies may face dual impacts from tariffs and exchange rates.

Source: https://www.toutiao.com/article/1832277528320228/

Disclaimer: This article represents only the author's viewpoint.