Few strong performers in 2011

Listed major companies are announcing their business performance for fiscal 2011. As a whole, they are expected to show the first decrease in recurring profits in three years, mainly due to the effects of the 3/11 disasters, floods in Thailand, the strong yen and rises in the prices of imported raw materials, including fuel, and the European sovereign debt crisis.

Although export-oriented firms suffered, some companies keyed to the domestic market enjoyed strong sales. This suggests that if companies are keen to the needs of consumers and develop appropriate goods and services, they can make healthy profits.

After the 3/11 disasters, convenience stores showed their usefulness. Four major convenience store chains achieved higher operating profits in fiscal 2011 than in the previous year. Three of them even achieved record operating profits. This exceptional performance is attributed to an increase in the number of women and senior citizens who buy fresh food and daily necessaries in convenience stores. All major mobile phone firms also enjoyed increased profits thanks to strong sales of smartphones, which boosted data communication-related profits.

It is hoped that domestic market-oriented firms will develop products and services with the added value that can help put the Japanese economy on a stable path of recovery.

Carmakers and electronic makers, which have traditionally underpinned the Japanese economy, suffered due to the strong yen and increased competition from emerging economies. Electronic makers suffered a defeat in the TV market due to inroads into the market by South Korean makers.

Japanese electronics makers need to strive to develop quality and attractive products with which makers from emerging economies cannot hope to compete.

Attention should be paid to the fact that manufacturers with products that can compete well in foreign markets and those that made serious efforts to find new overseas markets did well. These include industrial robot and air conditioner makers, and firms that took advantage of increased demand for hygiene supplies in Asia.

Although the overall performance of automakers was not good for fiscal 2011, they expect their operating profits to bounce back in fiscal 2012. For example, Toyota expects an increase of 2.8 times and Honda 2.7 times.

But for export-oriented firms, the business environment is still very fluid. It is not certain whether the yen will depreciate enough. The European sovereign crisis is likely to continue. The government should consider ways to help export-oriented companies and to develop new growth industries.