Japanese companies that made tough decisions about exiting businesses, closing factories and revamping management led a doubling of corporate earnings last quarter to the highest level since 2007.
Net income jumped to about ￥5.5 trillion (US$55 billion) at more than 1,280 of the largest listed non-financial firms, the most since a credit meltdown sparked a global recession six years ago, based on data compiled by Bloomberg. Profit climbed from ￥2.25 trillion a year ago, the fastest jump since 2010.
Companies showing profit surges include Panasonic Corp, which has cut 71,000 jobs; Mazda Motor Corp, which is shifting car production to Mexico; and Toyota Motor Corp, which overhauled management and halted new factory construction. The gains, also fueled by a weaker yen, contrast with disappointing results at firms such as Sony Corp, which resisted calls to spin off assets or close failing businesses.
“Companies that made efforts to cut costs and restructure before the yen started to weaken are the ones really showing growth,” Mizuho Research Institute chief economist Tetsuro Sugiura said. “Japanese companies had fallen back in global competition because they weren’t able to cut businesses and cut people, or were late in doing this.”
Panasonic has undergone one of the more dramatic makeovers, shifting its focus from consumer electronics to alternative power products, such as solar panels and batteries. The company, once a leading television maker along with Sony and Sharp Corp, plans to stop making plasma TVs by March.
Operating income at Sharp beat estimates in the second quarter after cutting costs under a multiyear restructuring plan that included shutting some facilities and selling assets. The company last month reported its first net income since 2011 as a weaker yen and reduced costs helped its display business return to profit.
At Toyota, Japan’s largest manufacturer raised its full-year net income forecast 13 percent to a record ￥1.67 trillion. Profit in the three months ended September jumped 70 percent to ￥438 billion, more than that of the next five biggest Japanese carmakers combined.
The Japan Inc’s profit increases come as pressure mounts on Japanese Prime Minister Shinzo Abe and his so-called “Abenomics.” Monetary easing and fiscal stimulus have not been enough to accelerate the economic recovery, even as a weaker currency stokes some exporters’ profit.
GDP rose at an annualized 1.9 percent in the three months ended in September, down from 3.8 percent the previous quarter, the Cabinet Office reported on Thursday last week.
The growth slowdown draws attention to the lingering question of whether companies benefiting from Abenomics will return the favor by investing more to stimulate the broader economy.
Cash per share for all companies on the TOPIX climbed to ￥597 in the three months ended in September, 49 percent more than a year earlier, the fastest growth and the highest since at least 2004.
A sustainable economic recovery requires automakers to increase capital spending, spreading new business from partsmakers to materials producers and construction companies, SMBC Nikko Securities Inc quantitative strategist Keiichi Ito said.
The increase in profit last quarter has not been enough to spark such a surge across the economy. Japanese companies eased off on capital-spending growth in the second quarter and failed to step up exports. Corporate investment increased 0.7 percent, down from 4.4 percent.
To add momentum to the recovery, Abe is backing legislation in the parliamentary session ending on Dec. 6 for tax incentives to encourage corporate investment and the establishment of strategic economic zones for reduced business regulation.
Abe needs to motivate companies that are still in cost-cutting mode, Ito said.