U.S. stock prices have continued to steadily increase even after the start of 2018. The Dow Jones Industrial Average, which is regarded as a mirror of the U.S. economy, has surged to a record $26,000.
One factor behind this stock price increase is that profitable U.S. companies are increasing wages, employment, and investments. The U.S. companies’ using this money to improve business operations will also serve as a model for Japan, which is striving to end deflation.
According to a Thomson Reuters survey, profits of major U.S. companies in the October-December 2017 quarter were up by some 10% over the same period in the previous year. Reflecting worldwide economic expansion, many of these companies performed better than analysts’ forecasts.
Many companies are also increasing human resource investments, and there are many cases of active investment in equipment and R&D.
President Donald Trump’s tax reforms will slash U.S. companies’ corporate taxes and facilitate the repatriation of accumulated surplus capital overseas. It is believed that U.S. companies are moving to increase various forms of investments because they see the Trump tax cuts as a good opportunity to consolidate their business bases.
There has been criticism that businesses in the U.S., where stockholders wield strong power, tend to place too much emphasis on short-term dividends to stockholders and not enough emphasis on domestic investment in human resources and facilities. More attention needs to be given to the fact that U.S. companies are now changing the way they spend money.
Stronger business bases will improve investors’ appreciation of long-term attributes such as pensions. Making good use of money in business management is also in the stockholders’ interest.
Japanese companies listed on the stock market have reserves of over 100 trillion yen, so they are fully capable of investing more in people and goods. Investors’ demands not only for greater dividends but also for securing and nurturing human resources and enhancing R&D are the same as in the U.S. market.
The key to economic revitalization is the better flow of money starting with businesses. Japanese companies should get this message from the U.S. stock market enjoying all-time high prices. (Slightly abridged)