JAPAN: Concerns grow over automakers' earnings after China protests
As dozens of Japanese firms have been forced to temporarily halt business in China amid anti-Japan demonstrations, concerns are growing that the development may affect their earnings, especially automakers who have already been plagued by the rise of the yen and a slowdown in the global economy.
"The impact would be limited if the situation returns to normal soon, but if it develops to the point of boycotting Japanese products, that would deal a blow to (Japanese firms') earnings growth," Shigeru Matsumura, equity researcher at SMBC Friend Research Center, told Kyodo News.
Analysts said the auto industry would be the most affected by such moves in China as many automakers have shifted their business focus to the country which has overtaken the United States as the world's biggest auto market.
Though some Japanese firms decided to resume operation of their plants and stores from Wednesday, caution remained over the development of the situation in China, as protests over Tokyo's nationalisation of the Senkaku Islands, claimed by Beijing, spread to over 100 Chinese cities on Tuesday.
Toyota on Tuesday temporarily closed some of its plants in China after an affiliated dealership in the city of Qingdao, Shandong Province, was damaged by fire on Saturday.
Other automakers such as Nissan and Mitsubishi Motors also halted operations of their plants on Tuesday. Some Nissan and Honda JV plants remained closed Wednesday.
The closures came as the automakers laid out plans to increase their sales in China. Toyota said earlier this month it plans to increase its sales in China to 1.8m units in 2015, almost double the sales of 2011.
Nissan also plans to increase its sales in the country to 2m units by 2015, compared with sales of about 1.2m in 2011.
As uncertainty increases about the geopolitical situation, Fitch Ratings on Tuesday said the ratings of Japanese automakers, as well as electronics makers, may come under pressure if the territorial dispute between Japan and China over the islets prolongs.
A Toyota official expressed concern that its investment plan in China would be adversely affected unless the situation there returns to normal soon.
Noting that there have been lingering concerns about a slowdown in the Chinese economy and that a change in leadership is expected next year in the country, the territorial dispute may "add to the atmosphere to refrain from investing in China for the time being," Matsumura told Kyodo News.
"As we see that China bears many unstable factors, we may not be as hopeful about the economic growth in the emerging market as we used to be," he said.