One company after another is announcing good business results for the fiscal year ended March 31, 2006. Firms listed on the first section of the Tokyo Stock Exchange are reporting increased revenues and profits for the fourth consecutive year. They are expected to post record recurring profits for the third straight year.

Strong domestic demand based on steady consumption and capital investment, as well as increases export orders, together have contributed to good performances. Companies have added to their own resilience through sustained efforts to resolve problems caused by surplus work forces, surplus equipment and excess borrowings.

Reports of account settlements also show that corporations appeared to have made a preemptive response to the new Corporate Law, which took effect May 1. The law lets boards of directors decide how much profit to distribute in dividends to shareholders. It also removes a restriction on how many times a year a company can pay dividends.

As of May 15, dividends paid by companies totaled 5.14 trillion yen, an increase of 34.7 percent from the previous year. Dividend payouts (dividend amount divided by earnings per share), at 21.9 percent, increased by slightly more than two percentage points.

Although companies are reporting good business performances, the Japanese economy is facing conditions that may dampen performances in the coming months, including a stronger, yen high oil prices and the prospect of higher interest rates. Executives need to consider how best to use their companies’ high profits so that the Japanese economy and society as a whole can benefit and stay healthy.

Companies in the materials industry, involving steel, oil, coal and nonferrous metals, are showing particularly good results. Also noteworthy is the manufacturing industry for automobiles, electric and electronic appliances, machinery and precision machines. The manufacturing sector in general is expected to see an 18.3 percent increase in profit from the previous year.

Profit increases for retailers, real estate firms and companies in the service industry are in the double digits. As a whole, more than 40 percent of the companies listed in the first section of the Tokyo Stock Exchange are reporting record profits.

Japan’s auto industry has managed to tide over adversities that would ordinarily be expected to push up the manufacturing costs — rises in the costs of oil, steel and other natural resources and materials as well as a trend of rising interest rates.

Helped by boosts in overseas sales in markets such as North America, Europe and Asia and by profits on foreign-exchange transactions, six of Japan’s eight automakers have registered record consolidated profits for the business year ended March 31. Sales at Toyota Motor Corp., the nation’s top carmaker, hit 21.04 trillion yen, up 13.4 percent. (This is the first time that a Japanese company’s sales have topped 20 trillion yen.) The company reported a record consolidated profit of 1.37 trillion yen, up 17.2 percent. Meanwhile, Nissan Motor Co., the nation’s second-largest carmaker, posted a record operating profit of 871.84 billion yen, up 1.2 percent, on sales of 9.43 trillion yen.

A cheap yen and a robust Chinese economy have helped increase the profits of export-oriented enterprises. The recovery of business performance has enabled them to incorporate increases in the prices of natural resources and other materials in the prices of products — a sign that they are getting themselves out of the deflation spiral.

Still, export-oriented companies do have one worry, especially if they rely on the U.S. market: the recent sudden rise in the value of the Japanese yen on foreign-exchange markets. Japanese firms that have experienced these swings in the past appear better able to overcome the problem.

The good business performances come at a time when Japanese society is seeing widening disparities in economic benefits. The number of people who have lost jobs due to restructuring has increased. More than 30 percent of all Japanese workers are considered irregulars, including part-timers and temporary workers, and there is a wide gap in wage levels between regular and irregular workers.

Besides paying dividends to shareholders, companies should use their profits in a way that carries tangible social value. For example, they could increase workers’ wages or improve the working conditions of irregulars. This would help improve the stability of Japanese society. They could also promote capital investment, or research and development, on projects that buoy local economies currently in bad economic shape.

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