According to the “Japan Economic News” website reported on May 10, the net profit of listed manufacturing companies in Japan hit a record high. In the fiscal year 2023 (ending March 2024), the net profit of these enterprises increased by 20% year-on-year, exceeding that of non-manufacturing enterprises. The automotive and machinery sectors performed strongly due to higher product prices, higher sales and a weaker yen. Manufacturing, which covers a wide range of industries, has begun to return profits to customers, including small and medium-sized enterprises.

330180-51-00 The net profit of about 170 companies listed on the Topix Prime market that reported results through May 9 rose 23 percent to 14.8 trillion yen ($690 billion), outpacing non-manufacturing companies (up 7 percent to 11.6 trillion yen), according to the Nikkei. This is the first time since fiscal year 2021 that manufacturing outpaced non-manufacturing. Prior to the 2020 fiscal year, manufacturing profits were lower than non-manufacturing for 10 consecutive years. The revival of Japan’s manufacturing sector will act as a catalyst for higher wages and employment.

Higher prices, higher sales and a weaker yen have boosted manufacturing profits. Manufacturing’s net profit margin on sales reached a new high of 6.7 per cent.

Leading the growth is the automotive industry. Toyota’s net profit doubled to nearly 5 trillion yen. Although Toyota’s vehicle prices rose, its hybrid cars sold well worldwide, especially in the United States, generating a profit increase of about 2 trillion yen. Nissan Motor Co., which announced its financial results on Tuesday, posted a 90 percent increase in profit thanks to increased sales in the United States.

In the machinery industry, Komatsu has made record profits. The profit growth effect brought about by the price increase of construction machinery is about 130 billion yen, accounting for all the profit growth of the construction machinery sector. In the food sector, Kikkoman’s soy sauce sales in North America and other places have increased, and it has achieved a record profit for 11 consecutive years.

330180-51-00 The yen fell by about 10 yen against the dollar in fiscal 2023. A Y1 fall in the yen against the dollar boosts the regular profits of big Japanese companies by about 0.4 per cent, according to Daiwa Securities.

The recovery in Japanese manufacturing is significant. Hikaru Yasuda, chief equity strategist at SMBC Nikko Securities, said, “Good results from large manufacturers, in particular, will help small and medium-sized companies raise wages and increase hiring.”

Toyota will spend Y300bn to help suppliers cope with rising costs. The funds will be used to fund labor costs, drive changes in working practices and digitalize business.

Nikon CEO Tokusei Tenryo said, The Japanese economy will improve if the profits are returned to employees, consumption is stimulated, and expenses are properly paid to partner companies.

Many companies remain wary of the yen’s exchange rate in fiscal 2024. Koshiro Kudo, Asahi Kasei’s president, said excessive yen depreciation “would also deal a heavy blow to the Japanese economy”.