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Business performances have clearly become further polarized. It is hoped that companies with upbeat earnings results will drive the Japanese economy by making aggressive investments in new fields.
Most companies listed on the Tokyo Stock Exchange have reported their earnings for the fiscal year ended in March. Excluding the financial sector, the combined net profit of about 1,300 companies listed on the First Section rose 28.1% from a year earlier.
However, when excluding SoftBank Group Corp.’s ¥5 trillion net profit due to rising share prices driving up the value of its stock holdings, the combined net profit becomes a year-on-year decline of about 3%.
Amid the novel coronavirus pandemic, the nation’s real gross domestic product for fiscal 2020 logged the largest contraction since the end of World War II, but it can be said the overall performance of listed companies was solid.
About 280 companies posted record profit, partly due to an increase in sales of products such as home appliances and game consoles as well as the growth of distribution services, thanks to vigorous, so-called stay-at-home demand.
In the manufacturing sector, the combined net profit increased more than 30%, owing to a recovery in exports as overseas economies picked up. Many companies have earned results backed by their business restructuring.
Hitachi, Ltd. saw its net profit exceed ¥500 billion for the first time after shifting its focus from sales of hardware, such as devices and equipment, to information technology services. Sony Group Corp.’s net profit broke the ¥1 trillion mark on increasing sales of software including flat-rate music streaming services.
Toyota Motor Corp., one of the leading companies in the manufacturing sector, secured a net profit of more than ¥2 trillion through steady cost reductions among other efforts.
With the trends of decarbonization, which calls for not emitting greenhouse gases, and digitization, global competition is fierce. As teleworking is becoming more common, consumer behavior has also changed. Implementing measures to secure semiconductors is also an urgent task amid a chip shortage.
Companies with strong earnings are urged to create new products and services without hesitating to make investments.
On the other hand, non-manufacturing companies saw their combined net profit drop by nearly 40% as their businesses were hit directly by the pandemic.
Airlines and railway operators, including ANA Holdings Inc., Japan Airlines Co. as well as Japan Railway Group companies and private railway operators, were all in the red. Travel agencies and department store operators also reported severe earnings results.
However, household savings have been on the rise for such reasons as people refraining from going out. If COVID-19 vaccines become widely available, consumption in the service sector could recover quickly. Until then, it is crucial for companies to survive by exhausting all avenues, such as cutting costs and selling assets.
Corporate debts are ballooning as the pandemic has been prolonged. The injection of capital that does not require repayment is being called for.
There have been moves in the travel and other sectors to seek financial institutions for capital support. The government-affiliated Development Bank of Japan has launched a fund for the restaurant and lodging industries. It is hoped that the public and private sectors will continue efforts to provide various funding assistance.
— The original Japanese article appeared in The Yomiuri Shimbun on May 24, 2021.
