More Japan firms expect profit growth this year - Reuters survey

By James Topham

TOKYO (Reuters) - A rising number of Japanese firms are expecting profit growth this business year on a weaker yen and improving consumer sentiment, with recent volatility in financial markets having little effect on most earnings outlooks, the Reuters Corporate Survey showed.

The proportion of Japanese companies expecting a modest climb in profits ticked up to 48 percent, 1 percentage point more than three months earlier. Those predicting a steep rise in earnings jumped to 12 percent from 7 percent, the survey showed.

Corporate outlooks have become much rosier on the back of bold new policies from Japanese Prime Minister Shinzo Abe that have served to weaken the yen since late last year, boosting exports. Exports last month rose at their fastest clip in more than two years.

The poll was conducted in tandem with the monthly Reuters Tankan survey of business sentiment, which hit its highest level in more than two years this month.

While the yen has climbed 5 percent since marking a 4-1/2 year low on May 22, it is still some 30 percent weaker than it was in mid-November. It is now trading around 98 to the dollar.

"The difference in an exchange rate at 80 yen and one at about 100 yen is huge," said one respondent at a metals, machinery company that is expecting a steep rise in profits.

The poll of 400 companies was conducted for Reuters by Nikkei Research between June 3 and June 17, with 298 firms responding to the question on earnings forecasts.

GRAPHIC: http://link.reuters.com/keg98t

Firms also cited improving demand, both overseas and at home, as a reason behind their better earnings outlooks.

"We are seeing profits rise on a recovery in the amount of volume we handle," said one auto-related firm.

Electronics, machinery and petroleum companies were also among the firms saying they were seeing a pickup in demand.

Although concerns about how soon the U.S. Federal Reserve will begin to wind back stimulus helped to pushed the benchmark Nikkei 225 stock average <.N225> into bear market territory last week, 61 percent of firms responded that stock market moves over the last month or so had only a marginal impact on their outlooks.

The Reuters Corporate Survey polls upper management at 400 companies each capitalised at more than 1 billion yen.

The firms, which are split evenly between manufacturers and non-manufacturers, are not required to answer every question, and provide responses on condition of anonymity.

(Editing by Edwina Gibbs)