The latest midterm earnings reports from Japanese companies listed on the Tokyo Stock Exchange offer a qualified but positive message: Corporate Japan appears to be finally recovering from its protracted slump. Pretax current profits for the six months to September held level with profits from the same period last year in all sectors, excluding financial services. However, sales continued to decline.
This encourages forecasts that profits for all of fiscal 1999, which ends next March, will post their first increase in three years. To keep the momentum, Japanese corporations must take proactive steps, such as investing in new business lines, rather than concentrate on purely reactive restructurings that involve the closing of existing offices and plants.
Two reasons are cited for the reversal in declines in the semiannual period. One is that restructuring measures such as job cuts and other cost reductions, as well as withdrawals from money-losing operations, are beginning to show their effect. The other reason is that a combination of reflationary fiscal and monetary measures -- increased government spending, particularly increased public-works outlays and near-zero interest rates -- helped improve the profit position. Growing exports to Asian nations, now recovering from their economic crisis, also helped.