Most enterprises listed on the First Section of the Tokyo Exchange Market have announced their performances for the business year ended March 31. Increased exports to emerging economies like China and India and cost-reduction efforts have enabled many firms to become profitable — a stark contrast with the business year ended in March 2009 when most firms suffered large declines in both sales and profits due to the global financial crisis.

Improvement appears to be accelerating. For example, all eight major electronics makers expect profits for the current business year (ending March 2011). For the 2009 business year, four were in the black; the other four cut their amount of red ink.

One common condition for Japanese companies is the increasing weight that the Asian market has exerted in their sales. While sales in North America and Europe, which have suffered more from the global recession, dropped greatly, the sales decline in the Asian market was relatively small. According to a Kyodo News survey of 50 major manufacturing companies, the Asian market’s share of sales rose 1.4 points from the previous business year to 19.2 percent. This trend is especially noticeable among auto and machinery makers and chemical producers.

For example, Toyota Motor Corp.’s total sales dropped mainly due to bad conditions in the United States. Yet, its sales in Taiwan and Thailand rose, pushing its Asian market share of sales up from 12.3 percent the previous business year to 13.9 percent. Another common corporate trait has been rigorous cost-cutting efforts, which helped Toyota move into the black for the first time in two years. But such cost cuts can negatively impact subcontractors and the contractors under them.

A Cabinet Office survey shows that some 70 percent of the polled firms will continue cutting personnel costs. Even among listed firms that returned to profitability, those planning to increase employment and capital investment are in the minority. The challenge for firms is to attain a sustainable economic recovery by increasing employment and capital investment, which will in turn expand domestic demand.

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