TOKYO: Dentsu, the Japanese advertising holding company, posted a 23% increase in net profits, to ¥1.9 billion ($19.6m; €13.9m; £11.9m), in the last quarter, despite the fact its revenues fell by 18%, to ¥381bn, over this period.

The Japanese ad market is predicted to be one of the hardest hit by the economic downturn, and is set to shrink by 15% this year, according to the most recent forecasts.

More positively, Dentsu said there were "signs of recovery in certain areas" of the country's economy during the three months from April to June.

However, the company added that "consumption remained weak, discouraged by deteriorating incomes and a bleak employment outlook".

“The advertising industry is being severely affected by this business environment as clients continue to be cautious with their advertising spending,” it concluded.

As a result, the owner of mcgarrybown and Attik saw its advertising revenues fall 17.2% on an annual basis, to ¥370bn, with its information services arm down by 21.5%, to ¥11bn.

Magazine advertising registered a decline of 32.4%, with newspapers off by 26%, TV by 15.6%, its creative operations by 13.1%, and marketing and promotion by 14.5%.

Interactive media, including online and mobile advertising, improved by 0.1%, the only division to register any sort of uptick in Q2.

By region, its Japanese sales fell by 16.2%, with overseas revenues tumbling by an even more substantial 39.4% year-on-year.

Recently, Dentsu released its medium-term management plan, which covered the period to 2013, and focused on areas including boosting its capacity to generate consumer insight and developing its digital operations.

It has also announced a reorganisation of its operations in Europe, and is considering making further acquisitions in the UK to heighten its presence in the country.

Data sourced from Dentsu; additional content by WARC staff