Japanese margins hit new peak
Over the past five years, Japanese companies’ average pre-tax profit margin has risen from 4.5% to 7.7%.
Over the past five years, Japanese companies' average pre-tax profit margin has risen from 4.5% to 7.7%, says Leo Lewis in the Financial Times. That's miles ahead of the figure seen at the peak of the bubble era in the late 1980s, "when market valuations were stratospheric". Japan Inc has spent years making itself leaner and meaner, but the latest jump in corporate profitability stems from cost-cutting following the global financial crisis.
Japan may have a reputation for being mired in deflation and stagnation, but the good news is coming thick and fast these days. The world's third-largest economy expanded at an annualised pace of 1.9% in the second quarter of 2018. Japan's GDP in 2025 is likely to be 17% higher than in 2017, according to a Morgan Stanley report which also predicts that labour productivity will grow from 1% in 2013-17 to 1.7% in 2021-25. This will be driven by advances in artificial intelligence, robotics and automation sectors where Japan has long been a leader. Both labour-force participation and skilled immigration have already increased and are set to rise further.
Corporate governance changes have made Japanese companies more investor-friendly. What's more, Japanese dividends increased 14.2% in the three months to the end of June, according to the Janus Henderson Global Dividend Index. Throw in low valuations, and Japan remains one of the world's few compelling equity markets.
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Marina Gerner is an award-winning journalist and columnist who has written for the Financial Times, the Times Literary Supplement, the Economist, The Guardian and Standpoint magazine in the UK; the New York Observer in the US; and die Bild and Frankfurter Rundschau in Germany.
Marina is also an adjunct professor at the NYU Stern School of Business at their London campus, and has a PhD from the London School of Economics.
Her first book, The Vagina Business, deals with the potential of “femtech” to transform women’s lives, and will be published by Icon Books in September 2024.
Marina is trilingual and lives in London.
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