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Editorial: Facing poor results, companies urged to carry out reforms for ‘new normal’

  • May 16, 2020
  • , The Japan News , 6:30 p.m.
  • English Press

Companies are facing poor business performance overall amid the coronavirus pandemic. They are urged to implement reforms with an eye on a “new normal.”

 

For the business year ending in March, announcements of financial results have just peaked among companies listed on the Tokyo Stock Exchange.

 

Combined net income among companies listed in the First Section of the TSE, excluding those in the financial sector, is expected to fall short of the previous year’s figure by about 20%. When looking at the January-March quarter alone, the combined net income will likely nosedive about 70%, with Honda Motor Co. and ANA Holdings Inc. among the companies that have posted losses for the period.

 

The situation has worsened further since April. It is essential for companies to secure a larger amount of cash reserves than usual based on the premise that the fight against the virus will be a long one, while at the same time responding promptly to changes in consumption behavior and customer needs.

 

Companies must not have realized how fast the coronavirus would spread to all corners of the world — prompting governments to issue restrictions on going out or requests to stay home — thereby causing a prolonged stagnation of economic activities.

 

Even if the spread of the coronavirus is contained once, a new outbreak could happen. There is no prospect of a V-shaped economic recovery as each country is still struggling over how to carry on with the virus.

 

The way people live and work definitely has to change as well.

 

Telecommuting is on the rise, while business negotiations and sales promotion activities, for which face-to-face communication was taken for granted, will possibly move online more than before. The need for online shopping and home delivery services will undoubtedly remain high in the future.

 

The pandemic has also made us realize anew how fun it is to spend money on live performances and other firsthand experiences. These events may gain fresh popularity once safety is secured.

 

It is time for executives to use their ingenuity in finding business opportunities and deciding where they should focus their investments.

 

A move by Toyota Motor Corp. has drawn attention at a time when many companies have found it difficult to release their earnings forecasts.

 

In what it described as “presenting a benchmark,” the giant automaker dared to release its earnings forecast for the year ending March 2021, in which it expects a consolidated operating income of ¥500 billion, down by 79.5% compared to the previous year.

 

President Akio Toyoda announced that his company will manage to stay in the black and will make desperate efforts to maintain a domestic production capacity of 3 million vehicles per year. As the automobile industry has a broad support base, his remarks will surely have the effect of reassuring Toyota’s business partners. It is hoped that the manufacturer will help maintain employment.

 

Companies must accelerate efforts to review supply chains that have depended greatly on China. This is also important from the viewpoint of economic security.

 

Trade friction between the United States and China could intensify further as the two countries are stepping up their confrontation over issues surrounding the coronavirus. It is important for companies to take countermeasures as soon as possible.

 

To prevent a situation in which companies cannot secure what they need when necessary, it must be effective to have a number of suppliers or to switch to in-house production of necessary parts.

 

The government has also decided to provide subsidies to companies that have moved their production bases to Japan, among other steps. It is hoped that many companies will proactively take advantage of this scheme.

 

— The original Japanese article appeared in The Yomiuri Shimbun on May 16, 2020.

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