Moody’s: Japanese corporates face restrained recovery in 2017 (stable outlooks for pharmaceutical)

Moody’s Japan K.K. Service says that Japanese corporates face the prospects of a restrained recovery in 2017 — which would include stable earnings — because of expectations of muted domestic and low global GDP growth.

“Moreover, structural reforms and cautious financial management by Japan’s corporates will — after a weak performance in 2016 — lead to modestly reduced leverage, thereby supporting credit quality and ratings,” says Masako Kuwahara, a Moody’s Vice President and Senior Analyst.

“In addition, companies will increase investment selectively, while most commodity prices will stabilize at a low level, which will be supportive for Japanese trading companies and oil & gas companies,” adds Kuwahara.

Moody’s conclusions were contained in its just-released 2017 outlook presentation for Japanese Non-Financial Corporates, “Non-Financial Corporates — Japan: 2017 Outlook: Muted Recovery After Weak Performance in 2016”.

Stable outlooks for pharmaceutical

Specifically, Moody’s sees negative outlooks for autos; steel; shipping; and oil & gas; and stable outlooks for telecoms; utilities; general trading companies; electronics; and pharmaceuticals.

In its core scenario for 2017, Moody’s expects global GDP to grow at a low pace, with the G20 at around 2.9% and Japan at around 0.9%. In such an environment, additional stimulus measures and the Bank of Japan’s new monetary policy will provide temporary growth by boosting domestic demand.

Moreover, the stabilization of economic growth in emerging markets will also support stability in Japanese corporate earnings, while oil and other commodity prices are likely to stabilize, relieving downside exposure. This development is — as indicated — supportive for JTCs, exploration & production companies (E&P) and refining & marketing (R&M) groups.



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