The profits of Toyota Motor Corp., Japan’s leading carmaker, soared on a consolidated basis in the period from April through June, thanks to the cheaper yen brought about by the Bank of Japan’s massive monetary easing, a key component of the Abe administration’s economic policy.
Toyota’s operating profits climbed 87.9 percent from the same three-month period in 2012 to ¥663.3 billion. Japan’s car industry as a whole also benefited from the weaker yen. In the April-June period, a decline in the yen’s value helped the nation’s eight major carmakers increase their operating profits by about ¥510 billion.
Toyota has revised upward the expected consolidated operating profits for the business year ending March 31, 2014, from the previous ¥1.8 trillion to ¥1.94 trillion. Now that they have been liberated from the shackles of an extremely strong yen, which prevailed during the rule of the Democratic Party of Japan government, carmakers and other export-oriented businesses should make efforts to increase wages and employment.
Toyota’s accumulated earnings stood at ¥13.0613 trillion as of the end of June, an increase of ¥372.1 billion from three months earlier and an increase of about ¥940 billion from a year earlier.
There are various reasons for companies like Toyota to decide to accumulate internal reserves, but large manufacturers in general should consider how to best use their internal reserves to help generate a virtuous cycle in the nation’s economic activities. If they use their internal reserves to raise workers’ wages, for example, it will have a desirable impact on other businesses.
Statistics by the Health, Labor and Welfare Ministry show that the average monthly wage, including overtime pay, in June marked a 0.1 percent increase from the same month in 2012 — the first increase of any kind in five months.
The ministry explained that it cannot be sure whether the increase should be attributed to the Abe administration’s economic policy. It is too early to conclude that the Abe administration’s economic policy has brought about overall wage raises.
The government plans to create a forum to be attended by representatives of labor and capital and the government to discuss issues related to wages.
Although the Japan Business Federation, the nation’s most influential business lobby, is against the idea of using the forum as a venue to decide on wage raises, Prime Minister Shinzo Abe should stress at the forum the importance of raising wages as a means of securing steadfast economic recovery.
Clearly Japan’s manufacturing industry has moved beyond the previous difficult business environment, but this is solely due to the cheap yen caused by the Abe administration’s economic policy.
To ensure good performance irrespective of the yen’s exchange rate, manufacturing firms need to make strenuous efforts to improve their competitiveness against foreign manufacturers by improving their resources, including personnel and equipment, and striving to develop new technologies and attractive products.