Oil volatility leads Japanese companies’ earnings risks in Reuters survey

Japanese companies ranked crude-oil volatility as their leading earnings risk in a Reuters survey reported on October 8 in Japan, ahead of currency fluctuations and higher interest rates. The findings arrive before half-year earnings announcements, with energy costs weighing on respondents’ outlooks and Japan heavily dependent on Middle Eastern crude.

About 37% of respondents chose crude-market volatility as the biggest risk to their earnings prospects, compared with 21% selecting foreign-exchange movements and 19% choosing higher interest rates. The figures measure companies’ stated concerns, rather than the share of profit losses caused by each risk.

Nikkei Research conducted the poll for Reuters between September 18 and October 2. It contacted 508 companies, of which 215 responded anonymously. The published report does not provide question-level response counts, sampling weights or a margin of error, limiting how precisely the findings can describe Japanese businesses as a whole.

Energy costs and interest rates pressure manufacturers

Reuters reports that the US-Israeli war on Iran, which began on February 28, constrained crude supplies and raised energy costs, with effects extending to oil-derived products including auto parts and construction materials. Japan imported 94% of its crude from the Middle East in calendar 2025, according to the report.

The Bank of Japan raised interest rates in September to a 31-year high, Reuters reports. Governor Kazuo Ueda signalled a phase focused on preventing inflation from overshooting the bank’s target, leaving the door open to further increases.

“Real estate demand is bound to slow down because of higher rates,” an anonymous manager at a real-estate company told the survey. That statement records the respondent’s expectation; it does not establish that the predicted slowdown has occurred.

Most respondents expect earnings to meet forecasts

For the first half of the current business year, 32% of respondents expected net earnings to beat their own forecasts, while 22% expected to fall short. The largest group, 46%, anticipated results in line with their original projections.

The balance was less positive for the second half: approximately 22% expected earnings below their initial forecasts and 20% expected to exceed them. Still, 58% said their original outlook remained intact. The modest excess of pessimistic responses therefore coexisted with a majority expecting to meet forecasts.

These comparisons are against companies’ own expectations, not against profits a year earlier. They neither establish realised earnings changes nor show how many businesses have formally revised market guidance. Most major Japanese companies start their fiscal year in April; April–September results are scheduled for release in October and November.

Why Japan’s crude supplies remain concentrated

Separate historical analysis by Ryo Eto at the Institute of Energy Economics, Japan helps explain the exposure. His paper, labelled January 2026, examines import concentration using government energy statistics. It predates the October survey and provides background rather than a response to its findings.

IEEJ reports that fiscal-2024 crude imports fell 5.9% to 136.29 million kilolitres, the lowest volume since fiscal 1967. Yet the Middle Eastern share reached 95.9%, a record in comparable statistics beginning in fiscal 1965. Lower import volumes thus coexisted with greater supplier concentration.

The paper attributes declining imports partly to vehicle efficiency, lower ethylene production and substitution toward gas and electricity. For April–November 2025, it puts the Middle Eastern share at 93.0%, as US imports increased. These fiscal-year and eight-month figures cover different periods from Reuters’ calendar-2025 figure and should not be treated as a directly comparable trend.

Eto identifies longer shipping distances, higher freight costs and refinery compatibility as obstacles to replacing Middle Eastern supplies with US crude. Japanese refineries often suit heavier Middle Eastern grades rather than lighter US shale oil. The paper proposes diversifying supply routes and adapting refinery operations to improve resilience; it does not establish that those benefits have been achieved.

AI investment adds uncertainty before results season

Multiple survey participants also questioned the durability of artificial-intelligence investment, which Reuters describes as supporting advanced-chip demand and rapid data-centre construction. The report does not quantify how many respondents raised this concern or establish that AI-related demand is already declining.

The forthcoming earnings releases will provide reported results against which to assess the first-half expectations. The survey’s second-half outlook covers October 2026 through March 2027 and remains a statement of expectations, with most respondents still anticipating earnings in line with their original forecasts.