Japan Companies Expectations: Update Nov. 10, 2023.

 Article Source:  https://mainichi.jp/english/articles/20230813/p2g/00m/0bu/014000c

Article:

TOKYO (Kyodo) -- Over 80 percent of major companies in Japan expect the country's economy to expand in the next one year, supported by a recovery in personal consumption following the removal of COVID-19 restrictions, a Kyodo News survey showed.

In the survey of 114 companies, including Toyota Motor Corp. and the Uniqlo clothing chain operator Fast Retailing Co., 82 percent said they project economic expansion, up from 55 percent the previous summer, when firms were concerned over price surges.

Ideas:

An economy is very complex with many different sectors. Some sectors and companies may see growth but some sectors and companies might not see the much growth., or very little growth.

Personal consumption or consumer spending has neve as strong in Japan as in the US. As such its always a area of concern for the Bank of Japan.

The challenge is of course the continued inflation situation which could reduce or slow consumer spending in the future.

Article:

The results showed optimism over the economy even as firms grapple with rising material and energy costs, with 94 percent of those forecasting an expansion citing recovery of consumer spending as one of the main drivers.

With multiple answered allowed, 67 percent cited recovery in capital expenditure, while 55 percent chose departing from the coronavirus pandemic. A significant number also pointed to hopes for increased spending by foreign tourists visiting Japan.

Ideas:

A forecast is nothing more than "best guess" as to what might happen in the future. Yes, there are computer programs and data being used to try and predict what might happen in the future, but forecasts are just guesses at what might happen.

Consumer spending might be stronger but can it remain strong in the future if inflation continues in Japan. 

But using the US as a possible example, inflation is sill strong there must consumers spending remains strong in the US.

The one bright spot is international tourism and the weak Japanese yen, which gives more purchasing power to tourists to spend even more in the Japanese economy.

A companies see the economy improving in the future they will increase their capital investments which is good for the Japanese economy.

Article:

The percentage of respondents that expect economic conditions to remain unchanged or contract moderately dropped to 15 percent from 42 percent a year ago. Among such firms, the largest number cited expectations of a slowdown of the U.S. economy as a reason behind their response.

While 59 percent said their business performance is on an expansionary trend, around the same number said rising material and energy costs are pressuring their profits.

Ideas:

Again, an economy is a very complex organism, and as such there are going to be different ideas about what is going on and what the future might be. 

For example in one sector companies might feel and think all is OK, and their business is going to expand and grow, while in another sector they might see the opposite.

At the present time, there are not many signs that the US economy is slowing down or going to slow down, despite the US Federal Reserve increasing the key interest rate.

Japanese companies need to just stay the course despite increasing material and energy costs increasing as there might be better situations in the next coming year.

Article:

About half of the companies surveyed said they plan to raise the prices of their goods and services through next fiscal year starting April.

Nearly half said they are short-staffed, but only 24 percent said they are considering pay hikes, the survey found.

Ideas:

For a very long time, many Japanese companies were reluctant to increase prices as they felt they would lose their customer base and just absorbed their costs with lower profit margins.

But these days, as profit margins continue to decrease because of inflation, many companies are not passing-on their costs to the next in the supply chain including the final customer.

It would be interesting to see which sectors and companies are short-staffed as maybe its the companies and sectors that many young people, these days, at don't want to work in such as anything that requires too much labor, too much time, and not enough work/life benefits, and of course, if a company doesn't meet their salary needs.

Increasing wages are an important incentive for the economy, but if companies are challenged because of smaller profit margins from inflation, then if understandable if they can't increase wages in the future.

Article:

As for desirable foreign exchange rates, many said they want the yen to trade between 120 and 140 against the U.S. dollar.

Asked about the accomplishments of Prime Minister Fumio Kishida's government, 25 percent cited its effort to secure domestic production bases for advanced semiconductors.

Ideas:

As long as the variance between the US dollar and Japanese yen is big, the weak yen is going to remain.

And as the US Federal reserve continues to increase is rate and the Japanese Central Bank keeps it rate a near zero, the yen is going to remain weak.

Its seem maybe Japan has lost some of its advantage in semiconductors as Taiwan and South Korea seem to have most of the market in semiconductors.

But at the same time, the semiconductor market is huge with almost all kinds of electronics, including cars needing semiconductors to operate. As such the market is still wide open for expansion and the Japanese government should do all it can to secure more production bases in Japan.

Article:

On the government's goal of increasing the proportion of female executives in major companies to over 30 percent by 2030, only 5 percent said they have achieved or will attain that target by the end of the year.

The survey covered representative companies in each industry from early July to early August.

Ideas:

The challenge seems to be that Japanese companies are too conservative and are not flexible enough for working women with children.

If more Japanese companies allowed for better work/life situations for working women with children, like the Northern European countries do, then the 30 percent goal maybe could be reached easily.

And then there is the situation of equal pay for women in Japanese companies. Of course this is still a challenge in US companies too and there is big different between the pay for women and men there too.

But unfortunately, most Japanese companies are controlled by older men who might not see the need for more women in executive positions. What they don't see or don't want to see is that the Japanese economy would grow so much more with working women in higher level executive positions. 

Have a nice day and be safe!