Are Japanese corporates on track to renew their record high earnings in 2016?

The Japanese yen hit a multi-year low of ¥125 to the dollar in June last year, a significant 40% decline from its peak of around ¥75 in October 2011. As a result, the weak Japanese yen drove corporate earnings to record highs in the last few years.

However, we have witnessed the steep yen appreciation after mid-December from around ¥123 to ¥112 versus the dollar today. This 10% increase in four months is a result of waning interest in rate hike expectations in the US, after its first interest rate hike in nine-and-a-half years, as concerns regarding the global economy deepened. Companies are cutting back earnings guidance in light of the dimmed outlook of the global economy, and the recent yen appreciation and are expected to provide even more conservative guidance when they announce their fiscal year 2015 results in May. DIAM h...