March 2, 2015, 19:00 JST

2015 to be the most profitable year for Japan Inc.

According to the quarterly-released Corporate Statistics, Japanese companies are now the most profitable in the last 30 years. In the October-December 2014 quarter, the sum of current profits made by Japanese corporations exceeded 18 trillion yen (USD 150 billion), renewing the largest figure made in any quarter in the last 30 years. Perhaps more significantly, the current profit to sales ratio reached the highest in 30 years at 5.3% after a seasonal adjustment.

Manufacturers did particularly well. They made 7.7 trillion yen (USD 64 billion) and their average profit margin was 7.6%, both the historical records for manufacturers. As official statistics dates back to 1954 for manufacturers, it means Japanese manufacturers are now the most profitable in 60 years. Non-manufacturers did not do badly in the quarter either, but their profitability was better in the first quarter of 2014 before the consumption tax rate hike.

In our view, manufacturers must be anticipating even better results from the January-March 2015 quarter. In January, real exports grew by as much as 5.0% from December. With the falling commodity prices, their profit margin must have widened even further in the January-March quarter.

While manufacturers seem ahead of the race in 2015, we also expect non-manufacturers' business condition to improve in 2015. The high profitability of manufacturers are likely to cause positive ripple effects throughout the economy. A larger export quantity will require larger labor force, adding fuel to the already tight labor market condition. In January 2015, there are almost twice the number of new job offers than the number of new job applicants. In our eyes, it is merely a matter of time that the tight labor market condition would inflate the wage growth, providing boost to private consumption. 2015 seems a very rosy year for the Japanese economy.