AI boom lifts Japan corporate profits
Japanese companies posted a sharp rise in profits in the July to September quarter, as booming demand tied to AI outweighed pressure from higher U.S. trade barriers in traditional manufacturing industries, Qazinform News Agency correspondent reports, citing Kyodo News.
According to figures from the Finance Ministry, aggregate pretax profits surged 19.7% year on year to 27.54 trillion yen ($177 billion), marking the fourth consecutive quarterly increase. Manufacturers delivered much of this growth, with profits climbing 23.4% to 10 trillion yen on the back of strong orders for AI data centers and semiconductor production equipment. In contrast, transportation equipment makers suffered a 14% drop as higher US tariffs weighed on exports.
Service oriented businesses also reported broad gains. Nonmanufacturing companies saw pretax profits rise 17.6% to 17.54 trillion yen, supported by a recovery in consumer activity.
Restaurants and accommodation providers benefited from rising customer numbers and higher average spending, while construction firms recorded a standout 48.6% jump thanks to large scale projects and the ability to pass on higher building costs.
Investment activity remained resilient. Capital spending across nonfinancial sectors increased 2.9% to 13.81 trillion yen, extending growth into a third straight quarter. Information and communications companies expanded capacity to serve AI related workloads, while steel producers pushed forward with spending aimed at decarbonization.
Economists noted that corporate earnings held up better than expected against the backdrop of trade uncertainty. In July, Japan and the United States reached an agreement to cut US vehicle import duties to 15% from 27.5%, with the lower rate taking effect in mid-September, helping to ease some pressure on exporters.
Overall sales edged up 0.5% to 379.04 trillion yen, marking the 18th consecutive quarterly increase. The profit data will be used to revise Japan’s gross domestic product figures for the quarter, which initially pointed to an annualized real contraction of 1.8%, the first economic decline in six quarters. Updated GDP numbers are set for release next Monday.
The survey covered 26,574 companies with capital of at least 10 million yen, excluding banks and insurers, with 72.5% responding.
Earlier, Qazinform News Agency reported that HP Inc. expects to eliminate between 4,000 and 6,000 jobs as part of a broad effort to streamline operations and accelerate the use of AI across the company.