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.
TAKING STOCK: A Taiwanese cookware firm in Vietnam urged customers to assess inventory or place orders early so shipments can reach the US while tariffs are paused Taiwanese businesses in Vietnam are exploring alternatives after the White House imposed a 46 percent import duty on Vietnamese goods, following US President Donald Trump’s announcement of “reciprocal” tariffs on the US’ trading partners. Lo Shih-liang (羅世良), chairman of Brico Industry Co (裕茂工業), a Taiwanese company that manufactures cast iron cookware and stove components in Vietnam, said that more than 40 percent of his business was tied to the US market, describing the constant US policy shifts as an emotional roller coaster. “I work during the day and stay up all night watching the news. I’ve been following US news until 3am
UNCERTAINTY: Innolux activated a stringent supply chain management mechanism, as it did during the COVID-19 pandemic, to ensure optimal inventory levels for customers Flat-panel display makers AUO Corp (友達) and Innolux Corp (群創) yesterday said that about 12 to 20 percent of their display business is at risk of potential US tariffs and that they would relocate production or shipment destinations to mitigate the levies’ effects. US tariffs would have a direct impact of US$200 million on AUO’s revenue, company chairman Paul Peng (彭雙浪) told reporters on the sidelines of the Touch Taiwan trade show in Taipei yesterday. That would make up about 12 percent of the company’s overall revenue. To cope with the tariff uncertainty, AUO plans to allocate its production to manufacturing facilities in
Six years ago, LVMH’s billionaire CEO Bernard Arnault and US President Donald Trump cut the blue ribbon on a factory in rural Texas that would make designer handbags for Louis Vuitton, one of the world’s best-known luxury brands. However, since the high-profile opening, the factory has faced a host of problems limiting production, 11 former Louis Vuitton employees said. The site has consistently ranked among the worst-performing for Louis Vuitton globally, “significantly” underperforming other facilities, said three former Louis Vuitton workers and a senior industry source, who cited internal rankings shared with staff. The plant’s problems — which have not
COLLABORATION: Given Taiwan’s key position in global supply chains, the US firm is discussing strategies with local partners and clients to deal with global uncertainties Advanced Micro Devices Inc (AMD) yesterday said it is meeting with local ecosystem partners, including Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), to discuss strategies, including long-term manufacturing, to navigate uncertainties such as US tariffs, as Taiwan occupies an important position in global supply chains. AMD chief executive officer Lisa Su (蘇姿丰) told reporters that Taiwan is an important part of the chip designer’s ecosystem and she is discussing with partners and customers in Taiwan to forge strong collaborations on different areas during this critical period. AMD has just become the first artificial-intelligence (AI) server chip customer of TSMC to utilize its advanced
RSS