The Ministry of Finance's survey of aggregate corporate profits of large companies (over JPY1 billion in capital) shows that the JPY404 billion operating profit loss in the January~March quarter of calendar 2009 was the first aggregate operating profit loss in at least 50 years. Since then, however, Japanese corporate profits have been staging a "V-shaped" recovery.

A Nikkei aggregation of the July^September operating results of 527 major March fiscal year Japanese companies accounting for some 63% of market capitalization shows that consolidated ordinary profit has rebounded to around JPY2, 202.1 billion in the July~September quarter following an unprecedented operating deficit of nearly JPY3 trillion in Q4 FY08 (January~March 2009). This is the second quarter of sequential improvement in Japanese corporate profits.

While aggregate ordinary profit for the group was positive in the April~June quarter (at JPY974.9 billion), the manufacturing sector was still showing a JPY254.7 billion deficit. Most of this improvement has come from draconian cost-cutting, but there was sequential growth in sales of 10% YoY in Q2 FY09 (July~September) on 12% revenue growth in manufacturing. Year-on-year, however, this group's Q2 FY09 sales are still down 23% YoY and earnings are down 42% YoY. From Q3 FY09 (October~December), however, YoY comparisons will suddendly become much easier, and Japanese corporate profits could double YoY in the quarter, even though the forecast for full FY09 is for ordinary profit to decline some 10%-plus YoY.

The profit recovery has helped support Japanese stock prices to date, but has done nothing for Japan's consumers, because the profit recovery in large corporations came at the expense of worker salaries/bonuses, employment and cost reductions that slashed the revenues of SME (small and medium-sized enterprise) suppliers.