Japanese trading houses cautious on profit forecasts despite US tariffs

Japanese trading houses Mitsui & Co., Sumitomo Corp. and Sojitz issued cautious profit predictions for the current fiscal period as U.S. Tariffs threaten global supply chain and increase economic insecurity.

Ryosei Acazawa, Japan's chief trade negotiator, is currently in the United States to try and negotiate a tariff agreement with President Donald Trump.

The Bank of Japan cut its forecast of economic growth for the year that ends March 2026 from 1.1% to just 0.5% and maintained interest rates at their current levels. This was due to tariffs weighing on exports.

Mitsui - where Warren Buffett’s Berkshire Hathaway has a significant minority stake - said that it expected its net profit for the year to drop 15% to 770 billion Japanese yen (about $5 billion). Citing a drop of 43 billion yen in its infrastructure and machinery businesses, as well as other items, Mitsui cited a drop of 43 billion yen in its profits.

"We are especially cautious in the machinery industry, where supply chains stretch across the globe, and the North American auto business, where we've adopted a conservative setting of margins," Chief executive Kenichi Hori said at a press briefing.

"Additionally we have made conservative assumptions about energy and metal prices," said he, adding that tariff-driven disruptions in the supply chain could create opportunities for Mitsui. It would allow it to leverage its trade functions to help customers find alternative sources.

Sumitomo - where Berkshire Hathaway also has a significant minority stake - projected a net profit record of 570 billion Japanese yen in the current fiscal year, but set aside a buffer of 40 billion yen to protect against any potential negative effects from U.S. Tariffs.

Shingo Ueno, CEO of Shingo Ueno, said that the company faces a risk of a global economic recession unlike any other. He cited the slowdown in U.S., and Chinese economies as well as a weakening dollar, rising interest rates, and increasing material and labour costs.

Sojitz forecast a net profit of 115 bn yen for this fiscal year. This is up 4% compared to the previous year after adjusting for the negative impact of the tariffs.

Kosuke Uemura, CEO of Toyota Motor Corporation said that the tensions between China and the United States would have a negative impact on sales in North America.

He added that the new trade flows present opportunities. $1 = 144.3000 Japanese yen (Reporting and editing by Kate Mayberry; Yuka Obayashi, Katya Glubkova)

(source: Reuters)