Japan’s profit growth fueled by automakers image

Japanese exporters led by Toyota are set to report higher third-quarter profit as a weaker yen fuels the country’s longest stretch of earnings growth since 2007.

Net income for Japan’s largest non-financial companies probably rose about 52 % in the three months ended December, a fifth straight quarter of aggregate increase. Earnings almost doubled on average in each of the previous four quarters, nine times faster than the Standard & Poor’s 500.

Toyota, the world’s most profitable automaker, is set to report an estimated fourfold increase for the quarter after vehicle demand jumped in the US and recovered in China. Panasonic and Hitachi, Japan’s two biggest employers after Toyota, are also benefiting as rising profits bring Prime Minister Shinzo Abe closer to ending 15 years of deflation.

“Automakers and machinery makers have really benefited from the increase in overseas earnings,” said Yoshimasa Maruyama, chief economist at Itochu Corp. in Tokyo. “Those gains drove stock prices higher, which in turn stimulated domestic personal consumption.”

The growth comes as a weaker yen boosts the value of overseas earnings, especially at companies that had already cut costs to cope with a currency near a postwar high over the previous year. The dollar averaged 98 yen in 2013, compared with 80 yen in 2012. The average so far this year is about 104 yen.

Via Bloomberg