Decline in Profits Expected for Japan's Leading Public Companies During April-June Period
The financial performance of major Japanese listed companies, particularly those in the automobile industry, has taken a significant hit in the April-June quarter of 2025. This decline is attributed to the impact of US tariffs and the yen's appreciation, according to data collected by SMBC Nikko Securities Inc.
The imposition of tariffs up to 25% on Japanese cars and car parts by the US in 2025 caused a sharp fall of 7.8% in Japan’s Nikkei 225 stock index, reflecting considerable market concern over the impact on export-heavy sectors such as automobiles, which rely on the US for about 20% of their exports. The tariffs raised costs and reduced competitiveness in the US market, a key destination for these exports.
In July 2025, a new trade agreement reduced the tariff rate to 15%, still significant but less than initially feared. However, this ongoing tariff environment creates uncertainty and increases export costs for Japanese carmakers.
The yen's appreciation is another factor contributing to the decline in the sector's profits. The stronger yen makes Japanese exports more expensive and less price-competitive overseas, further squeezing profit margins for exporters like automobile manufacturers.
As a result, net profits at automakers have specifically shrunk by 40%. The combined net profits are down by 10.2% at 11,277.3 billion yen. The combined net and other profits of all firms on the TOPIX index have also experienced a year-on-year drop.
The financial health of the remaining firms on the TOPIX index, and how it may be affected by the high tariff policy of the US, is currently unknown. As of Thursday, 823 out of 1,146 firms on the TOPIX index on the Tokyo Stock Exchange have announced their earnings for April-June, with 71.8% of firms having announced their earnings so far.
The automobile industry has been particularly hard-hit by the financial implications of US tariffs. The sector has experienced significant challenges due to the high tariff policy of the administration of US President Donald Trump. The sector's financial performance during April-June has been negatively affected by both US tariffs and the yen's appreciation.
The decline in net profits at automakers has contributed to a decrease in the overall profits at the listed companies. The ongoing tariff environment and yen's appreciation create uncertainty and increase export costs for Japanese carmakers, potentially impacting the financial performance of these companies in the future.
- The high tariff policy of the US, particularly towards the automobile industry, has contributed to an increase in uncertainty and export costs for Japanese carmakers, which may negatively affect the overall financial performance of listed companies in the industry.
- The ongoing tariffs and the yen's appreciation have compounded challenges for the automobile industry, causing a significant drop in net profits, with automakers joining other firms on the TOPIX index in experiencing a year-on-year decline in combined net and other profits.
