Japan Inc set for first combined net loss-report

TOKYO, May 27 Reuters is reporting that corporate Japan is heading for its first combined loss as shrinking global demand and costly restructuring last business year knocked the wind out of high-tech firms in particular, a research firm said on Monday.

In a year when Japan's economy slid into its worst post-war recession, Shinko Research Institute's (SRI) report showed that major listed firms posted a group net loss through to March, after seeing a 167 percent surge in net profit the previous year.

Although SRI gave no exact figure for the loss, but said it would be the first combined net loss since the poll began in 1967, when Japan was the world's rising economic power.

SRI's report polled 886 listed companies -- 91 percent of companies listed in the first section on the Tokyo Stock Exchange -- that had reported earnings for the period by Friday.

Japan's world famous electronics makers were among the worst hit, with firms like Hitachi Ltd and Toshiba Corp reporting swathes of red ink in the face of a global chip slump and strong foreign competition.

The earnings damage was not being confined to high-tech heavyweights. Other hard-hit sectors included air transport in the wake of the September 11 attacks, as well as chemical and material providers for IT equipment makers, SRI said.

Among the firms breaking earnings records of the wrong kind was former state telecoms monopoly Nippon Telegraph and Telephone Corporation, which banked Japan's first loss of over 1 trillion yen ($8 billion).

Newly formed banking group UFJ Holdings Inc weighed in with a loss of 1.23 trillion yen, a Japanese corporate record, underlining the extent of the sector's bad-loan woes.

Analysts said the unresolved bad debt problem would continue to put put pressure on corporate earnings as many firms -- under tight guidances from their creditor banks -- remain hesitant to make fresh investments required for future growth.

"Banks' bad-loan problems have not been solved so banks are afraid to allow companies to make aggressive investments to expand their businesses," said Hitoshi Ichio, strategist at Commerz Securities.

"It's like Japanese companies are being held down by heavy weights."

Current profit, which is pre-tax and excludes extraordinary items, plunged 40.6 percent after jumping 38.3 percent in the previous year, while sales fell 2.1 percent, against a 4.4 percent increase a year earlier, SRI said.

"In addition, special losses to write off restructuring costs and appraisal losses on shareholdings charged by a wide range of firms have weighed on their net profits," said SRI researcher Haruyoshi Yoshikawa.

SHARP REBOUND

One bright spot has been the auto sector, where makers such as Toyota Motor Corp and Honda Motor Co Ltd posted record profits driven by a weak yen and robust U.S. sales.

Looking ahead, many firms are expecting better times this year, helped by a recovering domestic and U.S. economy and as restructuring efforts pay off.

Current profit is forecast to jump 63.1 percent while sales are expected to rise 1.7 percent, SRI said.

"The restructuring measures taken by many companies should bear fruit, sending overall profit higher this year," SRI's Yoshikawa said.

But Ichio said that the recent increase in the yen's value against the dollar and persistent deflation at home made it difficult to predict the corporate earnings trend after the July-September period.

"The market consensus now is for a 60 percent rebound in current profit for this year, but we believe some kind of government action to boost Japanese economy would be needed to make that happen," he said.