Core Insights - The core driver of profit momentum in Japan's Q3 performance is overseas demand, while domestic sectors remain relatively weak [1][5][6] - Approximately 30% of companies in the Tokyo Stock Exchange Prime market have reported Q3 results, showing significant improvement over Q2, with revenue up 2.8%, operating profit up 11.0%, and net profit up 28.7% year-on-year [1][5] Sector Performance - The electronics and precision instruments sector, including companies like Hitachi, Fujitsu, NEC, and Advantest, has been a major contributor to net profit growth, alongside the power and gas sector [5] - In contrast, the automotive sector saw a net profit decline of 0.6%, and the food sector experienced a slight drop of 0.1% due to weak consumer demand [5] - Over 50% of companies exceeded Bloomberg consensus expectations, with export-oriented manufacturing firms outperforming domestic firms significantly (15.4% vs. 7.2%) [5][6] Market Expectations and Guidance - Export-oriented companies performed better partly due to conservative market expectations influenced by tariff impacts and uncertainties in the U.S. economy [6] - 52 companies have raised their full-year earnings guidance, although automotive manufacturers have yet to report, leaving tariff impacts unclear [6] - Japanese companies maintain a USD/JPY exchange rate assumption of 144 yen for FY2025, lower than the current market level of 154 yen, providing a buffer for overseas business profitability [6] Stock Buybacks - There are signs of recovery in stock buybacks, with TSE index constituents announcing a total of 0.7 trillion yen in buyback plans since October, matching levels from the same period in 2024 [6] - Advantest announced a buyback of 150 billion yen (2% of outstanding shares), while Recruit Holdings plans to buy back 250 billion yen (3% of outstanding shares) [6]

Core Viewpoint - Leading battery manufacturers are intensifying their investments in lithium iron phosphate (LFP) production, with CATL making a significant investment in a subsidiary of Fulin Precision, aiming to secure high-density LFP capacity in response to strong market demand [1] Industry Summary - Major LFP manufacturers are initiating a new round of capacity expansion driven by robust downstream market demand [1] - The current expansion trend is characterized by a shift from competing on price and scale to focusing on value and technology, reflecting a more rational approach in the industry [1] - Capacity planning is becoming increasingly globalized, indicating a strategic shift in the industry's operational focus [1]

Group 1 - The U.S. Treasury plans to issue a total of $183 billion in new interest-bearing government bonds, coinciding with a recently passed fiscal bill that significantly increases the national debt, raising market sensitivity towards debt outlook [1] - The auction of $69 billion in two-year Treasury bonds saw a yield of 3.955%, slightly lower than pre-auction market levels, indicating decent investor demand [1] - The auction is the first key benchmark debt issuance since Moody's downgraded the U.S. sovereign credit rating on May 16, raising concerns about the debt trajectory [1] Group 2 - Indirect bidders, primarily foreign central banks, accounted for 63.3% of the two-year bond auction, with total bids reaching $177.3 billion, 2.57 times the supply, although below the average of 2.65 from the last six auctions [1] - Last month, foreign participation in the two-year bond auction dropped nearly 20 percentage points to 56.2%, significantly below the six-auction average of 73%, indicating a need for improved confidence among overseas investors [2] Group 3 - The U.S. two-year Treasury yield stands at 3.977%, while the ten-year and thirty-year yields are at 4.444% and 4.948%, respectively, as market participants await the upcoming release of the Federal Reserve's May policy meeting minutes and April's core PCE inflation data [3] - A tax and spending bill pushed by President Trump is set to enter the Senate, with the Congressional Budget Office estimating it could increase the fiscal deficit by approximately $3.8 trillion over the next decade, further exacerbating the debt burden [3]