Major Japanese companies are forecasted to record their sixth consecutive year of net profit growth in the current fiscal year, driven primarily by strong demand in the artificial intelligence (AI) and semiconductor sectors, analysts from leading Japanese securities firms reported. This surge is expected to offset pressures from elevated input costs linked to the ongoing Middle East conflict.
The expansion in AI data center construction continues to underpin growth for manufacturers of semiconductors, chip-making equipment, and related electronic components. Analysts from SMBC Nikko Securities project that net profits for 250 major companies listed on the Tokyo Stock Exchange will increase by 19.3 percent through March 2027, with semiconductor-related firms playing a leading role. Nomura Securities expects a 5.9 percent rise in net profit for 242 major companies, while Daiwa Securities forecasts a 5.1 percent gain among 210 Tokyo bourse-listed firms.
Hikaru Yasuda, chief equity strategist at SMBC Nikko Securities, highlighted that companies connected to AI and semiconductors are driving profitability growth and are expected to maintain momentum as some adverse factors, such as previously high crude oil prices, begin to ease. Oil futures had surged earlier in the year following U.S.-Israeli strikes on Iran, which disrupted supplies and intensified concerns about crude oil transportation through the Strait of Hormuz—a critical passage for global energy shipments vital to Japan’s import-dependent economy. However, oil prices have recently retreated to levels near those before the crisis.
Within the Tokyo Stock Exchange sectors, electric appliance firms are projected to more than double their net profits compared to the prior fiscal year, while precision instrument companies, which include chip manufacturers, are expected to post a 19 percent increase, according to SMBC Nikko. Global chip market revenues are anticipated to soar by nearly 90 percent in 2026, following a 26.2 percent gain the previous year, driven by escalating AI-related demand.
Leading semiconductor companies such as Kioxia Holdings Corp, Advantest Corp, and Tokyo Electron Ltd stand to benefit significantly. Kioxia announced in May it expects its net profit for the first quarter of fiscal 2026 to jump over 47-fold year-on-year to 869 billion yen, fueled by strong AI data center chip demand. While the firm did not provide a full-year forecast due to geopolitical uncertainties, it noted that its profit outlook remains resilient thanks to diversified procurement strategies.
Despite these positive indicators, some uncertainty lingers. Iran’s plans to reopen the Strait of Hormuz to commercial shipping under a memorandum of understanding with the United States offer some relief, but the timeline remains unclear. Several major Japanese shipping companies, including Nippon Yusen KK and Mitsui O.S.K. Lines Ltd, have based their fiscal year projections on the assumption that the existing blockade would persist through June, with gradual normalization expected later. Both firms forecast declines in net profit for the year ending March 2027.
The automotive sector is also anticipated to recover strongly, with SMBC Nikko projecting a 36.5 percent increase in net profits following a 34.6 percent drop in the previous fiscal year. This rebound reflects adjustments to the impact of U.S. tariffs imposed on Japanese vehicles last year, which initially surged to 27.5 percent before being negotiated down to 15 percent and formally implemented in September 2025. Nomura Securities’ Masaki Motomura noted that the tariff effects have now been largely factored in, reducing their burden on profits.
Additionally, Daiwa Securities expects the auto sector to benefit from the introduction of new models and the depreciation of the yen. While some listed companies have issued cautious profit forecasts amid Middle East uncertainties, analysts predict upward revisions as the fiscal year progresses, with many firms likely to offset external pressures linked to geopolitical risks.