Lesotho declares state of disaster amid US tariff uncertainty https://t.co/YwxYUfoOBq ...

India’s southern states are using a Made in China playbook to become the next manufacturing hub amid steep US tariffs https://t.co/mID3nIrwOM ...

Summary of J.P. Morgan Japan Equity Strategy Conference Call Industry Overview - The conference call primarily discusses the **Japanese corporate sector**, focusing on the findings from the **June BOJ Tankan survey** regarding business sentiment and corporate earnings forecasts. Key Points and Arguments Impact of US Tariffs - The June BOJ Tankan indicates that **US tariffs have not significantly dampened corporate sentiment**, with a business conditions diffusion index (DI) for large manufacturers remaining steady at **13 points**, surpassing the Bloomberg consensus of **10 points** [1][4] - However, corporate earnings forecasts predict a **10% drag on net profit**, particularly affecting the **manufacturing sector**, especially **automobiles** and other processing industries [1][4] Corporate Earnings Forecasts - The FY2025 net profit growth forecast for large enterprises is revised to **-5.3%**, down from **-1.3%** in the March survey, aligning with the broader TSE Prime constituents' forecast of **-5.8%** [1][4] - **Manufacturers** lowered their profit growth forecast to **-9.8%**, while **non-manufacturers** raised theirs to **-0.8%** from **-2.0%** [1][4] Sales and Capital Expenditure (Capex) - Both manufacturers and non-manufacturers have increased their sales forecasts, with capex plans revised sharply upward to **+11.5% YoY** overall for large enterprises, driven by investments in **semiconductors**, **automation**, and **power transmission/distribution** [1][5] - Capex growth for manufacturers is projected at **+14.3%**, while non-manufacturers expect **+9.9%** [5] Foreign Exchange and Inflation Outlook - The corporate forex estimate for FY2025 is set at **¥145/$**, indicating a **4% YoY strengthening of the yen**, which is expected to negatively impact EPS by approximately **2 percentage points** [5][30] - The inflation outlook has slightly decreased, with companies expecting general prices to rise by **2.4%** in one year, down from **2.5%** previously [5][31] Sector-Specific Insights - Business conditions DI worsened in sectors more exposed to US tariffs, such as **automobiles** and **machinery**, while sectors like **materials** (paper & pulp, steel, oil & coal) and **construction** showed improvement [4][5] - The market consensus appears more cautious than company outlooks in sectors like **steel**, **services**, and **paper & pulp**, while being relatively optimistic for **electric & gas utilities**, **real estate**, and **communications** [4][5] Overall Corporate Sentiment - Despite the challenges posed by tariffs, corporate earnings remain resilient, particularly in domestic non-manufacturing sectors, which aligns with the investment strategy focusing on domestic demand sectors and potential upside in **semiconductors** and **machinery** [1][5] Additional Important Information - The report highlights the **limited impact of tariffs** on business conditions, with a flat DI for manufacturers and slight deterioration for non-manufacturers, which was in line with market expectations [4][5] - The report also notes that the **FY2025 TOPIX consensus EPS** has seen downward revisions in overseas demand sectors, particularly **automobiles**, which have been lowered by **18%** over the past three months, yet still shows a modest **+3.3% YoY profit growth forecast** as of end-June [4][5] This summary encapsulates the critical insights from the conference call, providing a comprehensive overview of the current state of the Japanese corporate sector and its outlook amidst external pressures.

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - The global economic outlook remains uncertain due to ongoing US tariffs and geopolitical tensions, particularly regarding Iran and its nuclear ambitions [3][4][24] - US tariffs are expected to have a significant impact on both US and global growth, with a projected decline in global GDP from 2.8% in 2024 to 2.5% in 2025 [8][22] - The average effective tariff rate for US consumers has reached 15.8%, the highest since 1936, indicating a substantial increase in trade costs [9][46] Summary by Sections Key Forecasts - Global GDP growth is forecasted to slow from 2.8% in 2024 to 2.5% in 2025 and further to 2.3% in 2026 [22] - Developed economies are expected to grow at a slower pace compared to emerging markets, with the US GDP growth projected at 1.8% for 2025 [22] Economic Environment - The report highlights the volatility in global trade data due to frontloading ahead of US tariffs, which has led to a surge in imports followed by a sharp decline [12][52] - US tariffs are anticipated to slow trade growth, with global trade growth projected at just 1.8% in 2025 and 0.6% in 2026 [12][71] Tariff Implications - US tariffs are described as a multi-purpose tool that will likely lead to higher inflation and lower growth in the US, with ongoing uncertainty regarding future tariff negotiations [11][50] - The report notes that countries with lower exposure to US tariffs may benefit, particularly those positioned to supply components currently sourced from mainland China [13][74] Consumer Spending and Inflation - US consumer spending is expected to slow due to weaker employment and slower real wage growth, while inflation pressures may persist despite a general slowdown in growth [15][16] - The report anticipates sticky core inflation in the US, influenced by supply shocks from tariffs and lower immigration [16] Central Bank Actions - The Federal Reserve and European Central Bank are expected to pause rate changes during the summer, amidst ongoing global economic uncertainty [17][31] - Divergences in central bank policies are noted, with the Fed likely to cut rates modestly by the end of 2026 [17] Fiscal Policy and Trade Negotiations - Ongoing US fiscal negotiations are highlighted as critical, with potential implications for economic growth depending on the outcomes [18][19] - The report emphasizes the importance of monitoring trade negotiations and their impact on global economic dynamics [20][33]

Investment Rating - The report does not explicitly provide an investment rating for the consumer electronics sector in Japan Core Insights - The potential for a decline in US consumer spending due to tariff costs being passed on to consumers warrants attention, although there are positives for companies investing in the US [1] - Companies with significant production in China are likely to face the largest impacts from tariffs, particularly in the smartphone and PC categories [2] - Companies aggressively investing in US manufacturing may benefit from tariff policies aimed at reviving the US manufacturing sector [3] - The appreciation of the yen could provide benefits that outweigh the negatives from tariffs for certain companies with low sales exposure to the US [4] Summary by Sections Consumer Spending and Tariffs - There is a risk of decline in US consumer spending as tariffs increase costs for consumer electronics, with global smartphone shipments rising 1.5% year-on-year to 304.9 million and PC shipments increasing 4.9% to 63.2 million [1] Impact of Tariffs on Production - A significant portion of smartphones and PCs are produced in China, while large appliances are primarily made in Mexico. The US has imposed additional tariffs of 145% on China and 10% on other countries, with temporary exemptions for smartphones and PCs [2] Opportunities for US Investments - Companies like Panasonic Holdings and Fujifilm Holdings are making substantial investments in US manufacturing, which may provide them with a competitive advantage over rivals lacking a US presence [3] Currency Effects - Companies with low sales exposure to the US may benefit from yen appreciation, potentially improving their cost of goods sold (COGS) ratios and profits despite tariff impacts [4]