Profit Slumps and Structural Shifts: Major Japanese Firms Release Cautious FY2026 Forecasts

As the reporting of financial results for the fiscal year ending March 2026 gains momentum, a growing number of major Japanese companies are reporting decreased revenues and profits or issuing cautious outlooks. This trend of stagnation is becoming particularly evident across sectors such as entertainment, construction, and electronics, leading to increased wariness in the market.

KADOKAWA: Structural Reform Triggered by Core Business Struggles

Perhaps the most significant impact came from KADOKAWA's financial report. For the fiscal year ending March 2026, the company reported a consolidated operating profit of 8.1 billion yen, a staggering 51.3% decrease compared to the previous year. Profits in its publishing and IP creation segments were halved, while the anime and live-action film division fell into the red. Even the gaming sector, which had been a consistent growth driver, recorded lower revenues and profits.

In response to these challenges, KADOKAWA announced a voluntary early retirement program for employees aged 45 and older with at least five years of service, signaling a commitment to radical structural reform. Despite the grim figures, the company is looking toward the future; its subsidiary, FromSoftware, revealed that a new title, "The Duskbloods," is slated for release in 2026 on the successor to the Nintendo Switch.

Headwinds in Electronics and Construction

The manufacturing sector is also seeing lackluster numbers. Panasonic Holdings reported a decline in both revenue and profit, partly due to the deconsolidation of its automotive business and ongoing group-wide restructuring. Similarly, SCREEN Holdings and Hokuriku Electric Industry reported downturns, cited by a slowdown in demand for semiconductor manufacturing equipment and decreased sales for industrial and home appliances.

In the construction industry, the momentum enjoyed by major players is beginning to fade. Giants such as Kajima Corporation and Obayashi Corporation have projected lower earnings for the current period, highlighting how rising raw material prices and labor costs are beginning to squeeze margins.

The Post-Expo Outlook and Future Prospects

Geographically, companies based in the Kansai region are adopting a particularly cautious stance. Osaka Metro has projected a decline for the fiscal year ending March 2027, expressing concerns over a post-event slump following the 2025 World Expo in Osaka—often referred to as an "Expo recession."

Furthermore, shifts are appearing in sectors that previously led growth, such as retail; H2O Retailing reported a decline as the surge in inbound tourism begins to stabilize. With many companies setting conservative exchange rate assumptions at 159 yen to the dollar, the volatile global climate and U.S. monetary policy remain critical factors that will continue to influence the performance of Japanese enterprises.

The context

In Japan, the fiscal year typically runs from April 1 to March 31. The current announcements focus on the forecasts for the year ending March 2026. The mention of an "Expo recession" refers to the economic cooling-off period expected after the 2025 World Expo in Osaka, a major international event that has driven significant infrastructure investment. KADOKAWA is a massive media conglomerate famous for its manga and anime, but it is also the parent company of FromSoftware, the developer behind global hits like Elden Ring and Dark Souls. Their announcement of a title for the "Nintendo Switch successor" is particularly noteworthy as Nintendo has yet to officially unveil the hardware details of its next console.

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