To help get economy back on track, companies should invest if they can

The Yomiuri Shimbun

12:18 JST, April 2, 2021

The diffusion index of the Bank of Japan’s Tankan quarterly economic survey for March shows that business confidence among large manufacturers rose 15 points to plus 5 from the previous survey for December last year.

The index turned positive for the first time in 1½ years, returning to the pre-pandemic level of September 2019.

The improvement was mainly due to an increase in exports caused by economic recovery in the United States, China and elsewhere. The index for the automobile industry rose 23 points to plus 10, while the index for electrical machinery manufacturers improved 19 points to plus 18 due to brisk sales of information technology equipment and electronic components, thanks in part to the spread of telecommuting.

The recovery of the manufacturing sector, home to many of Japan’s leading companies, is a positive factor for the economy. It is hoped that the improvement in business sentiment will lead to more active investment.

The trend of decarbonization, or eliminating greenhouse gas emissions, is accelerating in the world. The coronavirus crisis has revealed that Japan is lagging behind in digitization. It is urgent for the government to deal with such issues.

The Tankan survey also found that major manufacturers’ capital investments in their fiscal 2021 plans are higher than private-sector projections. It is hoped that companies with surplus capacity will step forward to make aggressive investments, thereby shoring up the economy as a whole. There is also an urgent need to address the global shortage of semiconductors.

On the other hand, the index for large nonmanufacturers, which depend mainly on domestic demand, was minus 1, although it did rise four points. In terms of confidence, the polarization between manufacturing and nonmanufacturing industries has been advancing.

In particular, the index for accommodation, eating and drinking services, which have been hit by a sharp decline in the number of foreign visitors to Japan as well as people refraining from going out as a coronavirus countermeasure, fell 15 points to minus 81. The index for services for individuals, which include cinemas and stage theaters, was also low at minus 51, down eight points.

In such industries, the proportion of non-regular employees is high, and it is feared that the number of unemployed people will increase.

In addition, concerning small and midsize companies, which account for the majority of employment, their indexes are far below those of large companies in both manufacturing and nonmanufacturing sectors. Government support will be essential.

Regarding employment adjustment subsidies to help companies pay allowances to workers who have been put on leave due to the coronavirus crisis, the government has taken special measures, such as raising the upper limit of the subsidies. Although it plans to scale back the special measures from May, it intends to treat companies in difficult situations due to the pandemic as special cases. Detailed government support should be maintained for that purpose.

Financial institutions need to support the cashflow of financially troubled companies through such measures as considering a moratorium on their repayments.

With coronavirus infections expanding rapidly again, there is a strong view that the influence of the pandemic will continue for a long time. However, online shopping and home delivery services are booming because of strong demand from people staying at home. IT companies also have many business opportunities.

It is important for companies that do not see demand return to look into the possibility of business restructuring from a long-term perspective.

— The original Japanese article appeared in The Yomiuri Shimbun on April 2, 2021.