Japan Economist, Japan Macro Advisors

Takuji Okubo

Japan Economist

Concise and Insightful Analysis on Japan Economy

Japan Macro Advisors

Our mission is to provide a concise and timely analysis on the Japanese economy for the benefit of global audiences. Communication, especially in foreign languages, has always been a weakness for the Japanese, which was fine when Japan's economic might attracted foreign media and various other institutions to study and report on Japan - such days are long gone. In the last two decades, we saw foreign institutions reallocating their resources from Japan to other more exciting parts of the world. As a result, when we read reporting on Japan in foreign media, we sense a subtle but noticeable decline in the depth of understanding what is actually happening in Japan.

Macroeconomics

<p>For years, ROE among Japanese companies languished in low single digits. No more. The average ROE rose to 9.1% in the fiscal year 2017, clearing the 8% "minimum" target set by the influential government commission Ito Report published in 2014. The Japanese companies managed to raise their ROE not through financial leverage but through higher ROA and fatter profit margin. We find it remarkable that non-manufacturers, long considered an inefficient part of Japan Inc. are enjoying an unprecedented level of ROA in recent years. In our view, the rise in ROE is combined results of the cyclical upturn in the economy and the improvements in the corporate governance in Japan. </p>

For years, ROE among Japanese companies languished in low single digits. No more. The average ROE rose to 9.1% in the fiscal year 2017, clearing the 8% "minimum" target set by the influential government commission Ito Report published in 2014. The Japanese companies managed to raise their ROE not through financial leverage but through higher ROA and fatter profit margin. We find it remarkable that non-manufacturers, long considered an inefficient part of Japan Inc. are enjoying an unprecedented level of ROA in recent years. In our view, the rise in ROE is combined results of the cyclical upturn in the economy and the improvements in the corporate governance in Japan. 

Japan Entering a New Era of Capital Efficiency