Bridge the gap between corporate performance and public sentiment

The Yomiuri ShimbunCorporate performance is brisk, while the general public feels no clear sense of an economic boom. How can the gap be bridged? It is an issue that should be tackled jointly by the public and private sectors.

Announcements of settlements of accounts for the business term ending March 2018 by companies listed on the Tokyo Stock Exchange have passed their peak.

Taking advantage of robust economies in foreign countries and the weak yen, as of Thursday, the sales of those companies listed on the First Section of the TSE as a whole increased by 8 percent compared to the same term of the previous fiscal year, with net profits up 26 percent on a year-on-year basis. The total sum of their net profits is expected to reach a record high for two consecutive years. The positive performances of export-oriented companies, such as automobile and electronics manufacturers, are accelerating.

Sales increases in overseas markets and cost reduction contributed to the performance of Toyota Motor Corp. Sony Corp. took advantage of its dominance in the fields of imaging sensors and game consoles. Hitachi Ltd.’s construction machinery business in China and railway project in Britain were brisk.

The “earning power” of these companies has increased abroad, thus supporting their profits. The phenomenon is a positive omen for a full-scale recovery of the Japanese economy.

In the manufacturing field, in which Japan is strong, the rise of China has been remarkable. Without a national focus on future investments in the development of new technologies, such as artificial intelligence, it would be difficult for the country to survive.

Toyota Motor President Akio Toyoda expressed a sense of urgency, saying that the automobile industry has entered a phase of a major change and faces a “life-or-death battle” to survive.

Refine growth strategy

With respect to domestic demand, there are some companies that have had sluggish business performances. They include department store operator Isetan Mitsukoshi Holdings Ltd., which posted a net loss.

Boosted by the tailwind of an increase in the number of foreign tourists coming to Japan, business performances of major retailers are brisk. On the other hand, the willingness of Japanese consumers to spend remains low. There are many companies that are being forced into large-scale restructuring in order to strengthen their management bases.

As real wages have not recovered, there has been no boost to individual consumption, which accounts for 60 percent of the nation’s gross domestic product. The way things stand, sustainable growth cannot be hoped for.

In this year’s shunto labor-management negotiations, the average rate of pay increases remained around 2 percent. The labor share, or the rate of corporate profits that are used for personnel expenses, has also been sluggish.

Returning corporate profits to employees stimulates consumption, which encourages new production. Such an economic virtuous cycle should be created.

In addition to sufficient pay increases, corporate managers are asked to make efforts to improve employment multifacetedly, such as providing employees with training sessions to enhance their ability and making nonregular workers permanent members of staff.

The government must take measures to urge corporations to invest domestically. With a labor shortage resulting from the falling population in mind, refining the nation’s growth strategy, such as by taking measures to support the development of AI and robot technology and actively using human resources from abroad, has become an urgent requirement.

(From The Yomiuri Shimbun, May 13, 2018)Speech


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