• Yomiuri Editorial

Strong Corporate Increases: Now is The Time to Accelerate Wage Hikes, Investment

Listed companies are performing well. Rather than just accumulating profits, firms with strong earnings are responsible for allocating them to significant wage increases and active investment.

According to the financial results of firms listed on the Tokyo Stock Exchange for the six-month period ended September 2023, the combined net profits of about 1,300 non-financial companies, including those listed on the Prime section that are components of the TOPIX, exceeded the previous year’s interim results to hit a record high.

For the yearly financial results ending March 2024, overall net profit is expected to increase by about 10% from the previous year and reach another record high for the third consecutive year.

The weak yen has boosted the yen-denominated export earnings of manufacturing industries, while non-manufacturing industries such as services have also seen a positive turnaround in performance due to the increase of foreign visitors to Japan.

The auto industry in particular, which has a broad industrial base and many business partners, has seen strong results that are a positive factor. In addition to the weak yen, the alleviation of the semiconductor shortage has led to a pickup in production and sales growth.

Toyota Motor Corp. estimates that its core business will post an operating profit of ¥4.5 trillion for the year ending March 2024, the highest ever for a Japanese company.

In the annual shunto spring wage negotiations, the automotive industry has an influence on other industries. The hope is that the industry will lead the others in next year’s shunto by raising wages as high as possible.

For non-manufacturers, Isetan Mitsukoshi Holdings Ltd. posted its highest-ever operating profit thanks to an increase in overseas visitors to Japan. ANA Holdings Inc. and East Japan Railway Co. are among those in the transport services sector also showing a clear recovery in performance.

Firms mainly in the food industry are improving their earnings by passing higher raw material costs onto selling prices. Nisshin Seifun Group Inc. has revised its earnings forecast upward for the year ending March 2024.

It is important to extend the positive earnings to small and medium-sized enterprises (SMEs). It will be essential to make it easier for SMEs to reflect in their prices the increased costs of raw materials and labor in their dealings with large enterprises.

Investment in growth areas also should not be overlooked. The retained earnings of Japanese firms totaled about ¥555 trillion in fiscal 2022, marking a record high for the 11th consecutive year. There is strong criticism of this situation where, despite strong business performance, retained earnings continue to grow instead of the funds being used for investment.

There are many areas in which investment should be prioritized, such as decarbonization and digitization from the shift to electric vehicles, as well as efficiency measures to tackle labor shortages. The government must analyze what causes firms to retain earnings and strengthen measures to encourage companies to invest, such as through the tax system.

The Japanese economy is at a critical juncture in its efforts to pull the nation out of deflation and return to vibrant growth. Now is the time for companies to play their part by raising wages and investing.

(From The Yomiuri Shimbun, Nov. 27, 2023)