TOKYO - Japanese shipping firms Nippon Yusen KK and Mitsui O.S.K Lines Ltd. reported bumper profits on Friday but gave soft forecasts for profits in the year ahead as higher costs eat into gains from robust demand and higher freight rates.

The nation’s biggest marine transport firms, which also include Kawasaki Kisen Kaisha, reported strong annual results on strong demand, led by China, for iron ore, coal, steel and cement that stoked demand for dry bulk carrier transport.

But higher fuel costs and the rapid appreciation of the yen against the dollar are expected to keep profits from rising further.

"The market is very good, but costs are going have a huge impact — the yen and fuel costs are going to hurt us in equal measure," Nippon Yusen managing corporate director Makoto Igarashi told reporters, after reporting an 85 percent leap in recurring profit for the year to March 2008.

Nippon Yusen forecast virtually flat earnings for both its dry bulkers and container lines but said it expected a recovery at its air cargo unit would boost income, predicting a 6 percent rise in recurring profit, which before tax and exceptional items, to 210 billion yen ($2 billion) for the year to next March.

Rival Mitsui O.S.K, where recurring profit jumped 66 percent in the past year, said it expected recurring profit to dip 0.7 percent to 300 billion yen.

After a 97 percent leap in the just completed year, Kawasaki Kisen said its recurring profit would fall 4 percent to 121 billion yen this year.

The lower profit outlooks from Mitsui O.S.K. and Kawasaki missed expectations. The Nikkei business daily reported earlier this month that the shippers would still post modest growth in pretax income.