Japan TOPIX firms see 6% net profit rise as AI, rates boost earnings, SMBC Nikko data shows

TOKYO, May 13 (Reuters) - Companies on Japan's TOPIX index .TOPX with March year-ends are set to post nearly 6% net profit growth this business year, driven by electronics and banking firms benefiting from AI-linked demand and rising interest rates, an SMBC Nikko Securities tally showed on Wednesday.

• The findings point to continued resilience in Japanese equities, underpinned by artificial intelligence-driven investment and a corporate governance push. The Nikkei share average .N225 hit a string of record highs, closing above 63,000 for the first time on Wednesday despite the Middle East conflict.

• The tally estimates combined net profit for TOPIX companies for the year ending March 2027 at 60.092 trillion yen ($381.03 billion), up 5.9% from the previous year. The Japanese securities firm said profits could even rise by double digits.

• The estimate is based on earnings announced through Tuesday by 536 firms, representing a 48% disclosure rate.

• Hikaru Yasuda, chief equity strategist at SMBC Nikko Securities, said corporate margins continue to improve.

• "As inflation becomes more entrenched, companies have been implementing price increases, and I believe the underlying driver is that their earnings power has been strengthening."

• Just under 10% of non-financial companies with March fiscal year-ends have refrained from issuing earnings guidance due to the Middle East war, compared with an average of about 7% that withheld forecasts after COVID.

• Although the U.S.-Iran conflict forced many companies to adopt conservative estimates, their forecasts could be revised upward if the situation improves, Yasuda said.

• "I don't think there is necessarily a need to be overly pessimistic or assume that earnings forecasts for fiscal 2026 will continue to be revised downward on a sustained basis," he added.

• Corporate earnings are among the factors the Bank of Japan will scrutinise as it decides whether to raise interest rates in June or hold off until later.

($1 = 157.7100 yen)