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TOKYO – It is anticipated that Japanese firms will achieve unprecedented profits in the 2026 fiscal year, supported by ongoing expansion in the information technology sector and the diminishing effect of tariffs set by the United States.

The growing development of AI infrastructure is anticipated to boost the semiconductor and IT service industries, with economic strategies led by Japanese Prime Minister Sanae Takaichi potentially driving additional growth, according to experts.

“We can step into the next year with a somewhat positive and hopeful perspective,” stated Hikaru Yasuda, chief equity strategist at SMBC Nikko Securities.

SMBC Nikko Securities predicts that the pre-tax earnings of top companies will grow by 6.0 percent in the current fiscal year and 8.3 percent in fiscal 2026, whereas Nomura Securities expects a 3.4 percent increase for major firms this fiscal year and 6.2 percent growth in the upcoming business year.

Experts note that expected growth in company earnings this year, even amid the impact of U.S. tariffs, is mainly due to higher profits at SoftBank Group Corp., with Nomura Securities predicting a 0.8 percent drop in pre-tax profit if the investment and technology company is not considered.

In November, SoftBank Group announced a net profit of 2.92 trillion yen ($18.7 billion) for the period from April to September, marking a new high for any Japanese company over a six-month span, driven by its stake in OpenAI, the creator of ChatGPT.

“The industry expected to generate the highest profits in fiscal years 2025 and 2026 is information and communications, fueled by a significant rise in earnings from SoftBank Group’s investment vehicles,” noted Masaki Motomura, senior equity strategist at Nomura Securities.

Daiwa Securities Group, on the other hand, predicts that pre-tax earnings at major companies in the country, excluding SoftBank Group, will decrease by 0.1 percent for fiscal 2025 and increase by 12.7 percent for the next fiscal year.

U.S. tariffs were cited as a key reason for the poor performance throughout this fiscal year, significantly affecting automobile manufacturers. Nevertheless, the effects have turned out to be less severe than earlier projections, according to analysts.

The Trump administration introduced a 27.5 percent tax on Japanese cars imported earlier this year, significantly higher than the previous 2.5 percent, in an effort to reduce the trade deficit. However, the rate for vehicles from Japan was reduced to 15 percent in September through negotiations.

“Companies are encountering greater challenges in fiscal 2025 than in the prior year because of the tariffs, although these are not anticipated to affect operations as significantly in fiscal 2026,” Motomura stated.

Kenji Abe, the head strategist at Daiwa Securities Group, stated, “There were fears that the tariffs would negatively impact the global economy, but optimism has increased as those concerns have been largely alleviated.”

Daiwa anticipates that AI-related industries will maintain robust growth during fiscal years 2025 and 2026, with the electronics sector projected to increase by 11.0 percent and 15.5 percent, respectively.

Abe described investments in artificial intelligence as “global and historic,” highlighting that companies involved have been achieving greater growth than anticipated.

Although there have been worries regarding a possible AI bubble, he noted that the likelihood of it having already reached its peak is minimal, as funding for AI infrastructure continues to grow without any indication of a slowdown.

Experts also voiced optimism regarding Takaichi’s administration in the future.

Following her inauguration as Japan’s first female prime minister in October, she committed to encouraging investment in 17 key areas, including artificial intelligence and shipbuilding, which has led analysts to anticipate increased capital expenditure on new infrastructure.

Their inflation relief initiatives for families are also contributing to enhancing corporate executives’ economic perspective, they mentioned.

In addition to other sectors, the banking industry is also anticipated to experience rising profits due to higher interest rates and expanded loan activities.

Abe from Daiwa mentioned that the yen’s ongoing weakness, even though the interest rate difference between Japan and the U.S. has narrowed, is helping industries like automobiles and is positive for overall company profits.

Regarding risk factors, companies with connections to China may experience a challenging year following Takaichi’s comments about Taiwan in November, which caused a reaction from Beijing, resulting in a decline in tourist visits from China and several cancellations of cultural events related to Japan.

I don’t think we can expect a quick recovery, and relations are expected to stay as they are for some time,” said Yasuda from SMBC Nikko. “This is a negative aspect for companies serving inbound travelers, as well as those with operations within the country.