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In today’s briefing:
- Isn’t It Not Strong Enough to Raise ROE by Higher Profit Margin Due to Escape from Deflation?
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Isn’t It Not Strong Enough to Raise ROE by Higher Profit Margin Due to Escape from Deflation?
- Since 2020, there has been a divergence between P/B and TOPIX movements, complicating matters for listed companies that have been asked to raise their P/Bs.
- Expectations are high for a rise in ROE, which has a certain correlation with nominal GDP, which is also increasingly correlated with TOPIX, as deflation exits.
- If price pass-through fails, escaping deflation may not lead directly to higher profit margins. If profit margin increase is insufficient, reducing cash on hand is essential to increase ROE.