Business enterprises in general are reporting good results for the business year through March 2013 on the back of a weaker yen and brisk stock transactions. It is important for both the government and companies to make efforts to translate the good business performance into increased employment and wages. To ensure sustainable economic growth, expansion of consumption supported by better wages and employment is indispensable.
While the weak yen is helping export-oriented companies, it is adversely affecting companies that have to import a large amount of raw materials. The government must consider ways to offset the negative effects that an excessively cheap yen will exercise on the whole Japanese economy.
Toyota Motor reported consolidated operating profit of ¥1.32 trillion for the 2012 business year, about 3.7 times the corresponding figure for the 2011 business year. Toyota’s car sales worldwide increased by about 20 percent to 8.87 million units. This shows that the weak yen resulting from the Bank of Japan’s massive monetary easing greatly helped Toyota increase its operating profit.
According to data compiled by SMBC Nikko Securities on and before April 29, the aggregated current account profit of 186 companies (excluding financial companies) listed on the first section of the Tokyo Stock Exchange grew 14 percent from the previous business year to ¥5.619 trillion.
While transport machinery companies, including carmakers, posted a 51.4 percent increase and electronic and electric manufacturers a 16.3 percent increase in their aggregated current account profit, steel makers suffered a 62 percent dip because the weak yen pushed up the prices of imported iron ore and coal.
Japan’s 10 major power companies, which rely on imported fuel for their thermal power plants, suffered an aggregated current account deficit of ¥13 trillion or 20 percent more than in the previous business year.
If the yen weakens further, there is the possibility that power and gas companies, which must import a large quantity of fuel from abroad, will experience a great blow. An excessively cheap yen will lead to price rises of imported items and will negatively impact employment in some sectors, thus causing economic stagnation.
The negative effects of the cheap yen are already seen in people’s daily lives. Gasoline prices have settled at a high level, and prices of wheat flour, edible oil and printing paper are rising.
The government should be aware of the fact that many export-oriented companies, having faced the strong yen for several years, have already moved their production facilities abroad and that a cheap yen does not necessarily benefit them.
It should consider how to help increase domestic capital investment by companies that retain production and operation centers in Japan. Executives of companies whose performance has improved, on their part, should give priority to increasing workers’ wages and employment opportunities.