From the end of January, many listed companies are going to release their 3Q results. For a half year from now, financial analysts might have a tough time.

Until last year, analysts could make forecasts with a certain precision for the full year and the next year, since they can see the 3Q results and orders receipt in the releases. This year, however, forecasting might be extremely difficult. As the current economic downturn is so steep, financial analysts don’t think they should use the forecasting methodology that they have been using. To make matters worse, that’s not all.

We might divide the current economic downturn into two:

• Cyclical part – This derives from inventory cycle, for example. A portion of the downturn from the last part of the boom that was supported by the ‘Mortgage Bubble’ in the US. This part is defined the portion that is recoverable.
• Structural part – This derived from the extinction of the excessive demand in the US. The US consumption went down, yen went up, and the Japanese export went down.

The cyclical part is recoverable, while the structural part is not.

Surprisingly, the Japanese industries still heavily rely on exports. Although Prime Minister Nakasone’s policy of the domestic demand expansion after Plaza Accord, the dependence of Japanese companies on exports turn out to be still large. That dependence brought them a fierce supersonic downturn. Among all, remarkable is “Things are so unforeseeable”.

Many People see the Japanese economy shows a recovery in the latter half of this year. This forecast might be right, but we had better consider that the recovery is the cyclic part mentioned above. Few foresee how Japan structurally changes. A couple of years ago Japan enjoyed expensive dollar of around JPY120, but now it faces JPY90 a dollar. If Japan wants to export goods for a dollar, it has to change the price from JPY120 to JPY90, FOB. It is a 25 percent price down. If Japan tries to reduce costs for the same percent, costs of human resource and property have to be cut by that rate. Even if it’s possible, the profit amount will decrease, because of the reduced sales amount and the maintained profitability. Where the industries of export goods and capital goods go?

Financial analysts’ job is not only sales estimates but profit estimates. This is extremely difficult, when the price is going down by 25 percent. Consider how many Japanese companies have earned a margin of more than 25 percent. They have been wringing a dry towel for years already. Any more room to do so? I guess that analysts’ profit estimates would fluctuate up and down around a negative center value.

I feel the whole society should stop its work for a while to consider what the next Japanese industries are and how the current changes to the next. If the economy relies on the consumption and the public sector expenses, that is far worse than the current US economy. What industries should be promoted and to whom can we sell beside the US? Will Japan accept immigrants more? Many things are here to be considered.

カテゴリー：　English

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この記事は 2009 年 1 月 20 日 火曜日 7:57 PM に English カテゴリーに公開されました。 この記事へのコメントは RSS 2.0 フィードで購読することができます。 現在コメント、トラックバックともに受け付けておりません。