Crude oil volatility top earnings risk for Japanese firms, real estate demand seen slowing
A Reuters survey of 215 Japanese companies finds crude oil market volatility is the top earnings risk, cited by 37 per cent of respondents. Rising interest rates and foreign exchange fluctuations follow, with real estate managers warning that higher rates will slow property demand.
TOKYO, Oct 8 – Volatility in the global crude oil market tops the list of major earnings risks for Japanese companies, followed by foreign exchange fluctuations and rising interest rates, a Reuters survey showed on Thursday. The survey, conducted by Nikkei Research for Reuters from September 18 to October 2, contacted 508 companies, of which 215 responded on condition of anonymity.
About 37 per cent of respondents chose crude market volatility as the top risk to their earnings prospects, while 21 per cent picked foreign exchange moves and 19 per cent selected higher interest rates. The US-Israeli war on Iran, which began on February 28, has constrained crude oil supply, sent energy costs higher and driven up prices of a wide range of oil-derived products, including auto parts and construction materials. In 2025, resource-poor Japan imported 94 per cent of its crude oil from the Middle East.
A manager at a company in the ceramics sector wrote: “Rising energy costs driven by the crude oil market and investment cutbacks during a period of rising interest rates that are cooling domestic demand for cement – those are the risk factors.” The ceramics sector includes manufacturers of glass, cement and ceramic products.
Last month, the Bank of Japan raised interest rates to a 31-year high, with Governor Kazuo Ueda signalling that the central bank has entered a new phase focused on preventing inflation from overshooting its target, which opened the door to further rate hikes. “Real estate demand is bound to slow down because of higher rates,” a manager at a real estate firm said.
Multiple companies also cited uncertainties about the sustainability of artificial intelligence-related investment – which has spurred demand for advanced microchips and prompted a rapid buildup of data centres – as a potential earnings risk. “It is vitally important for corporate management to ascertain how much longer an increase in demand brought about by AI investment lasts and when such demand starts turning lower,” a respondent at a machinery maker said. Last month, the Mitsubishi Research Institute said AI investment, centred on data centres, is projected to expand over the medium to long term, but the pace of investment may be adjusted due to power constraints, stricter regulations and rising costs.
On financial performance, 32 per cent of respondents see net earnings for the first half of the current business year beating their own forecasts, while 22 per cent believe they are missing their original outlook. A further 46 per cent expect half-year results to be in line with initial projections. A fiscal year starts in April for most major Japanese companies. For the second half of the fiscal year, more companies are bearish than bullish: about 22 per cent expect net earnings to fall short of their initial forecasts, 20 per cent expect October-to-March earnings to exceed their estimates and 58 per cent say their initial outlook remains intact.
