Companies must pass on benefits to employees, business partners

Major Japanese companies involved in exports and overseas businesses have posted strong results one after another, even as the weak yen has had various adverse effects on Japan’s economy.

It is hoped that companies doing well will strive to return profits appropriately in the form of higher wages and other benefits, and play a role in stimulating the economy as a whole.

Business results announcements have reached a peak among companies listed on the Tokyo Stock Exchange whose first-half business year ended in September 2022. As of Thursday, the combined net profit of non-financial companies that were listed on the TSE’s First Section before the stock exchange was restructured into Prime and other markets was up by about 14% compared to the previous year.

Among the companies that had completed their announcements, about 300, nearly 30%, revised upward their full-year forecasts for the business year ending March 31, 2023. Overall net profits are expected to reach a record high.

Good earnings results from listed companies are encouraging news. The Japanese economy is still midway through its recovery from the coronavirus pandemic, and the companies posting good results are expected to play a role in buoying the economy.

Amid surging energy prices, Daikin Industries, Ltd. saw an increase in overseas sales of its air conditioners, which are known for their energy-saving performance. Komatsu Ltd. saw improved business performance by raising the prices of construction machinery overseas.

The weak yen also contributed to an increase in overseas profits in yen terms, and both companies are expected to post record net profits for the business year ending March 2023.

The benefits of the weak yen are being felt not only in the manufacturing sector such as the automobile industry, but also in the nonmanufacturing sector. Mitsubishi Corp. expects its net profit for the business year ending March 2023 to exceed ¥1 trillion for the first time, due in part to soaring resource prices. NYK Line and other shipping companies that earn income overseas are also forecasting record profits across the board.

On the other hand, the weak yen has also led to increased prices due to higher import prices. Many industries, such as electric power and food, are suffering from soaring fuel and raw material prices.

Therefore, companies whose profits have increased due to the weak yen should contribute to mitigating the effects of higher prices by raising wages and through other means.

In next year’s spring labor-management wage negotiations, the Japanese Trade Union Confederation (Rengo) plans to demand a wage increase of about 5%, the highest level since 1995.

It has been pointed out that the significance of labor unions has declined due to the continuation of the government-led wage negotiations in which the government has encouraged companies to raise wages. Labor unions are urged to fulfill their social responsibility to realize substantial wage increases.

Meanwhile, many small and midsize companies are suffering from rising prices of such items as ingredients and raw materials.

In its first-half business results, Toyota Motor Corp. logged net profits exceeding ¥1 trillion, but profits were down from the same period last year. One factor is said to be that Toyota accepted an increase in auto parts prices to enable parts companies to pass on the burden of increased costs.

Major companies need to make an effort so that the burden of increased prices does not fall entirely on their subcontractors. It is hoped that this will create a trend that will spill over into higher wages for small and midsize companies.

(From The Yomiuri Shimbun, Nov. 12, 2022)