According to the "Nihon Keizai Shimbun" on December 12, the profitability of Japanese companies continues to improve. The net profit from April to September 2023 has set a new record for the same period for three consecutive years. The main reason for this is the resumption of the flow of people that have been stalled due to the pandemic. So, what industries are experiencing profit growth and for what reason? This is discussed in conjunction with issues such as the impact of exchange rates.
The 1,074 companies listed on Tokyo's ** Main Board reported a combined net profit of 23 trillion yen ($162 billion) from April to September. The manufacturing and non-manufacturing sectors account for about half of the total. This is the first time in 15 years that the net profit of the manufacturing industry has exceeded the net profit of the non-manufacturing industry.
The reason for the good profitability of the manufacturing sector is the depreciation of the yen. When the yen depreciates, the amount of foreign earnings converted from foreign currency to yen increases. Toyota Motor Corporation said it had increased its profit by about 260 billion yen as the yen depreciated by nearly 7 yen against the dollar in the same period last year. The impact of product price increases is also significant. Nine major food companies, including Meiji Holdings, have increased their profits by about 106 billion yen due to higher product prices.
In addition, in the non-manufacturing sector, the improvement in bank earnings was very pronounced. As overseas countries such as the United States raise interest rates, the profits from loans are also growing. The combined net profit of the five major banking groups, including the Mitsubishi UFJ Financial Group, reached 1At 996 trillion yen, it is the highest level since the establishment of the three major banking systems in 2005.
One of the main reasons for the growth of corporate profits is the depreciation of the yen, which is dangerous. For example, Honda's profit for the year ending March 2024 is expected to be 200 billion yen higher than the previous value, but if the effect of foreign exchange is excluded, it will be 94 billion yen lower. The key to this will be the ability to improve "earning power" that is not affected by the exchange rate, such as the development of attractive new products.
To strengthen profitability, domestic consumption needs to be strong again. The "labor distribution rate," which translates corporate profits into wage ratios, is currently 60 percent, down 6 percentage points from 10 years ago. Whether or not workers can get the most out of it is also an issue. (Compiled by Liu Jieqiu).