RECORD PROFITS OF JAPAN INC – PART 2

 

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Two weeks ago, I had already reported on the record earnings of Japan Inc. for fiscal year 2017. I had focused on the fact that little of this is reaching the Japan people directly.

Meanwhile all companies have announced their results, the dust has settled and it is worth taking another look and zoom in on some other aspects.

But first things first. The figures of Japan`s top 300 companies show that
– Sales have increased by 8%
– Total sales have reached a record 560 trillion yen
– Net profits have risen by 30%
РNet profits have reached  a record 29 trillion yen (up from 22 trillion yen the year before, which also was a record result)
– Overall earnings rose for 25 of 32 non-financial sectors
– Each forth company broke their former profit record
– ROE, return on equity, has surpassed 10% for the first time and thus reached the same level as Europe and closing in on the 14% of the U.S.

This is quite an achievement for a mature economy. And it has a few note-worthy implications.

First, expect more overseas investment by Japanese companies. Takeda`s recent acquisition of pharma giant Shire for the record figure of 62 billion USD is just one example of what is to come. Softbank is rumored to soon announce a successor to its 100 billion USD vision fund. And again, this is just one more example.

Second, Japanese firms are likely to fare well in capital and R&D-intensive industries. Observers claim that big data and AI bring disruptions to nearly every industry – but there are still some industries where massive investments lie at the core.
Look at the automotive industry where German industry leaders still shy away from substantial investments into battery technology, which threatens to be at the core in the future. The global lead lies with Korean, Chinese makers plus Panasonic from Japan.

A third implication rather lies on the labor market. Japanese firms are more and more willing to hire foreign skilled personnel and pay them globally competitive salaries. This does not only apply to the CEO level and people like Carlos Ghosn and Christophe Weber, the CEO of Takeda.
Japanese firms are also luring more and more highly-qualified and highly-paid foreign managers away from Western competitors. And this is getting easier by the day as Tokyo is more and more seen among foreigners as one of the best places to live.

 

Jochen Legewie

Jochen Legewie

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