Over 70% of firms expect Japan economy to keep growing in 2024

More than 70 percent of major Japanese companies expect the domestic economy to grow in 2024, believing solid consumer and capital spending are set to overcome the impact of inflation, a Kyodo News survey showed Tuesday, underlining more optimistic corporate sentiment than a year earlier.

In the survey of 113 companies, including Toyota Motor Corp. and SoftBank Group Corp., 72 percent said they expect moderate growth and 1 percent see solid expansion in 2024.

The combined 73 percent is higher than a year before when 56 percent said they expected moderate or solid growth even as soaring raw material and energy prices presented as significant risk factors.

The upbeat view coincides with the Organization for Economic Cooperation and Development's growth projection for Japan of 1.0 percent in 2024, a slower pace than 1.7 percent estimated for 2023.

In a multiple-choice questionnaire asking why the companies expect growth, 85 percent of respondents predicting economic expansion cited a recovery in private consumption and 65 percent pointed to spending by the increasing number of foreign visitors.

Some 62 percent said capital spending should pick up. In the semiconductor sector, for example, Taiwan Semiconductor Manufacturing Co. is building an $8.6 billion plant in Kumamoto Prefecture and Rapidus Corp. plans to construct a cutting-edge chip plant in Hokkaido.

Meanwhile, 22 percent expect zero growth while 3 percent said Japan's economy will contract moderately, with 54 percent concerned about a contraction in consumer spending. Slowing overseas economies and geopolitical risks such as the Israel-Hamas war were also raised, among other concerns.

No company stated that it expects a recession in 2024.

Prime Minister Fumio Kishida has repeatedly called on corporations to deliver wage hikes above price increases to combat inflation.

A total of 43 percent of the respondents said they are either considering or planning pay hikes, while 45 percent said they are undecided.

Wage hikes will be particularly crucial in 2024 as the Bank of Japan, which has long maintained a monetary easing policy, is watching spring wage negotiations this year closely to determine whether it should end its negative interest rate policy.

As the BOJ's massive easing policy weakens the yen against major currencies, 33 percent said the central bank should scale back monetary stimulus and normalize policy, while calling for action to strengthen the Japanese currency. Some 9 percent said the BOJ should continue with its current monetary policy.

While 27 percent said the weakness of the Japanese currency has a negative impact, 7 percent said it is a positive.

"The weaker yen pushes up prices of imported goods and energy costs, though it is attracting more inbound tourists to Japan," a railway company said.

Some 17 percent said the U.S. dollar's most desirable range is from 120 yen to below 130 yen and 12 percent said from 130 yen to below 140 yen. The dollar traded at around 141 yen recently.

The survey was carried out on major Japanese companies between late November and late December.

© Kyodo News