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Companies urged to aim for growth through continued reform efforts

The Yomiuri ShimbunCorporate earnings have been solid as a whole despite negative factors, such as China’s economic slowdown. Companies should not ease up on reform with an aim for new growth.

Most of the earnings announcements for the year ending in March 2019 made by companies listed on the Tokyo Stock Exchange have been released. The combined full-year profit of nonfinancial companies listed on the TSE’s First Section is likely to be on par with that for the previous year, which marked a record high, or slightly lower.

One distinctive point about the latest earnings is that profit falls were conspicuous in the automobile, electric and other key industries. Such factors as trade friction between the United States and China appear to have had a significant impact.

Meanwhile, some companies like Sony Corp., which saw upbeat results on its gaming and music businesses, reported record-high profits by focusing on growth areas. It can be said that drastic structural reform is imperative while catering to changes in customer needs.

It is striking that company leaders have expressed grim perceptions of the current circumstances.

Toyota Motor Corp. has posted annual sales of more than ¥30 trillion, becoming the first Japanese company to do so. However, President Akio Toyoda said, “There will be no future if we rely on the past successful model.” This remark was made apparently in the face of a wave of vehicle electrification and information technology companies making inroads into the auto industry.

Automakers cannot survive unless they continue far-sighted research and development and capital investment, even though that would reduce their near-term profits. Such a serious approach can be a reference point for other companies.

Prepare for economic changes

The years to come will see the use of 5G — the next-generation, high-speed, high-capacity communications standard — spread at an accelerating pace. Advanced technologies such as artificial intelligence will continue to progress, and industrial structures will likely change dramatically. It is essential not to miss the business opportunities.

Toyota and Panasonic Corp. have announced a plan to merge their housing businesses. Behind the merger is the shrinking market due to a declining population. Such a cross-industrial alliance might hold the key to improving competitiveness.

According to a tally by the Japan Business Federation (Keidanren), the average pay-scale increase agreed by major companies in the shunto spring wage negotiations has exceeded 2 percent this year, marking a sixth straight year of pay hikes. High-performing companies are urged to continue investing in human resources to shore up consumption.

A concern is the escalation of the U.S.-China conflict. In April, the International Monetary Fund lowered the growth outlook for the world economy for 2019 to 3.3 percent, a 0.2 percentage point drop from the forecast released in January.

If trade becomes further stagnated, that would put the existing outlook — that the Chinese economy will pick up in the second half of this year — into jeopardy. Such a case would fuel fears that the global economy will slow even more, with Europe and Asia also suffering from the impact.

Amid growing tensions over Iran, concerns cannot be dispelled about soaring crude oil prices as well.

In October, the consumption tax rate is expected to be raised. The government and the Bank of Japan should make preparations to be able to respond to economic changes quickly in order to develop an economic environment that can weather the tax increase.

(From The Yomiuri Shimbun, May 11, 2019)Speech



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