Japan up as Asian markets struggle

Japan is emerging as the star of Asia’s latest earnings season, with most companies reporting higher-than-expected profit growth as businesses continue to benefit from Prime Minister Shinzo Abe’s economic policies.

Earnings per share, excluding some items, at 159 companies on Japan’s Topix index have beaten analyst estimates while only 97 missed, according to data compiled by Bloomberg.

By comparison, in the MSCI Asia Pacific Index that excludes Japan, only 74 companies topped projections versus 96 that fell short.

As red flags keep sprouting in China, no other major Asian market is looking as healthy as Japan. A stock market boom is helping Tokyo-based banks reap higher profits and the weak yen continues to bolster earnings for exporters such as Toyota Motor, which on Tuesday reported a record quarterly profit of $5.2 billion.

The strength seen in earnings has yet to be reflected in economic indicators such as household spending, which has fallen for 14 of the past 15 months.

In addition, Japanese workers saw average compensation fall 2.4 percent in June and economists estimate that gross domestic product last quarter only grew about 1 percent from a year earlier.

The Abe administration has been piling pressure on Japanese companies to step up spending at home on factories and wages, given how healthy corporate profits have been. Halfway into this earnings season, the number of companies posting profit growth has been double compared to those recording declines.

All 10 major industries in Japan have seen positive earnings surprises outweigh negative ones.

In technology, the number of companies delivering earnings that beat estimates - including Sony, Nintendo and Panasonic - were almost double those that missed. Bloomberg