Tuesday, February 27, 2001
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Posted on: Tuesday, February 27, 2001

Japan companies' profits diminish


Bloomberg News Service

TOKYO — Japan retailer Ryohin Keikaku Co. saw no reason for pessimism last March.

Fresh off earnings gains of 33 percent and 32 percent in its last two fiscal years, the seller of trendy mujirushi, or no-brand, clothing and household goods predicted a 37 percent jump in net income for the fiscal year ending this week.

Last month the Tokyo company backpedaled. It not only will fall short of its forecast but won’t even match last year’s earnings, Ryohin Keikaku said.

"We had become a bit overconfident with our business," said company president Tadamitsu Matsui, who blames increased competition and falling prices for the profit drop.

Many other Japanese companies are seeing their profit hopes dashed. Through last Friday, 215 companies had cut their net income forecast since Jan. 1, according to Bloomberg data. That’s a 30 percent increase from the year-earlier period, when some economists and companies were predicting the worst was over for the Japanese economy.

With the economy still wobbling and a slowdown in the United States and other export markets, the number of companies scaling back expectations will probably remain high, said Yoshito Sakakibara, a Merrill Lynch Japan senior economist.

"As the U.S. economy slows, exports to the U.S. will decrease," he said. Companies generally can’t trim costs to keep pace with sales slumps, "and that will bring down profits."

Under Tokyo Stock Exchange rules, companies must revise sales and earnings forecasts if they expect sales to vary by at least 10 percent from projections or 30 percent in earnings.

The majority of recent revisions have been reductions. Of 64 changes reported last week, for example, 43, or 67 percent, called for lower net income in the current year or half year.

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