A 1 percentage point increase in interest rates on loans outstanding to companies would eat into their combined pretax profit by up to 4 trillion yen, according to estimates released Monday by the Cabinet Office.
The government agency computed the consequence of the possible rate increase on the basis of the combined interest-bearing debts of a total 19,000 companies as of Dec. 31.
The estimates of the impact on corporate profits of credit tightening by the Bank of Japan appear designed to urge the central bank to use even greater caution when considering its future interest action, analysts said.
The combined pretax profits of the 19,000 companies in fiscal 2003 grew by 4.2 trillion yen from the previous year, and a 1 percentage-point raise in private-sector interest rates could wipe out almost all of the increased combined pretax profit in the fiscal year to March 31.