Japanese companies have reported record combined profits in the latest April-June quarter proving the strength of Japanese corporate sector despite troubled times. This great performance is at a time Japan’s economy is facing diverse challenges such as declining yen, increase in inflation rates and global economic volatility.
These include among the following; increased efficiency in operations, methods of cost reduction, and gradual revival of domestic and foreign demand. Some Japanese companies have achieved good practices for the new coronavirus business environment by utilizing digital tools and changing their organizational structure to increase profitably.
Nevertheless, such positive picture with corporate performances is not quite so rosy if looked from the perspective of some of the broader economic benchmarks. Remarkably, Japan’s keystone machinery orders dropped by 0.1 percent in July, a sign of some restraint on part of businesses in relation to future capital expenditure. This slight dip of the machinery orders brings to light again the concept of the dual recovery of the Japanese economy, where different indices and sectors present the different facets of recovery of this country’s economy.
The above analysis has adequately shown that the BOJ remains central to the determination of the economy’s future. Despite continuing with the ineffective ultra-low interest rate policy the central bank is aware of inflation rates and economic growth. Core consumer prices in Tokyo which removes the volatility of fresh food prices, increased at a 2.8 percent year on year which is just above the BOJ target of 2 per cent inflation. This persistent inflation is causing a pressure to the central place by enabling it to possibly change with regard to monetary policies.
To these economic challenges, the Japanese government is proving strategies that may help in the boosting of the economy as well as development of the Japanese economy. One of the many attempts at doing this is through the stimulation of the local domestic used EV market. The primary objective of this exercise is to ensure that the valuable metals and materials used in the construction of EV batteries are sourced domestically, thereby enabling Japan to advance on its green technology goals and wean itself off expensive foreign imports.
The agriculture sector is not devoid of its own challenges; as of now, and there has been a shortage noted for rice among the others. The shortage has necessitated price hikes such that newly harvested rice has been pushed up by between 30% and 50%. Minister of agriculture, commercial farmers and industries’ associations, and food processors and manufacturers have met on this matter and how best to ensure that this staple food is always available within the country.
Internationally, Japan is moving to improve and provide its economic cooperation and backing for initiatives internationally. One of the primary challenges for Japanese companies operating in Ukraine is a lack of access to information on the country’s reconstruction; consequently, the Japan External Trade Organization intends to establish an office in Kyiv, Ukraine, to facilitate Japan-related companies’ involvement in Ukraine’s post crisis development. This has not only an objective of promoting international cooperation but also creates a need for reconstruction where Japanese firms may find business opportunities.
Nowadays, the position of the labor market in Japan extends more and more; more companies are beginning to actively seek foreign students. This trend is justified by the ageing population in the country as well as the demand for more specialized talents in the job market. Local companies and local governments are already starting programs that would allow the foreign students to gain the skills and language ability to work in Japan.
The shares released in the Japanese financial markets have reached a high that has not been witnessed in the last twenty years irrespective of the instabilities in the recent past. This increase in the number of share sales has been occasioned by policy makers encouraging firms to increase returns to their shareholders. The emphasis on shareholder value along with corporate governance reforms is an indicator that more and more investors are attracted to the Japanese market although they are facing problems because of fluctuations on the world economy.
These are the ever shifting waves that Japan needs to ride on as it steers its economy forward; the relative performance of its corporations, the direction and policies of its government and the direction of world economy will dictate the direction that the Japanese economy will take. Albeit the fact that record corporate earnings may offer some comfort, there is more confusion than certitude about other aspects of the world’s third largest economy as risk and reward remain balanced in many areas hence the need to remain more innovative and sensitive to change by both the government and corporate managers.