Japan is gearing up for its most important reporting season in over a decade, with investors closely watching for signs of whether Prime Minister Shinzo Abe's radical policies to kickstart the economy, also known as 'Abenomics,' is filtering through the nation's corporate sector that has been marred by sluggish domestic demand in the recent years.
Key industry bellwethers including Toyota, Honda, Sony and Panasonic, are due to report their earnings for the April to June quarter this week. And what will be key, say analysts, is whether rising profits are being driven by more than just a favorable exchange rate.
"If people see most of the earnings are coming down to a weaker yen and overseas demand, it may suggest domestic consumption isn't as strong," said Evan Lucas, market strategist at IG Markets.
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"On the other hand, if we see macro policies boosting demand on the domestic front, we can finally believe that Abenomics is filtering through to where it needs to go," he said.
Electronics manufacturers, Sony and Panasonic, will provide a clearer picture of consumer demand, said Lucas.
"One of the hardest hit by Japan's lost decade of deflation domestically, Sony, has also had to battle the likes of Apple and Samsung for market share internationally in portable music, smartphones, computing - it has finished last almost every time. Will this Thursday's results see it finally breaking out of this spiral? Estimates suggest they will," he said.
