Only around half of major companies in Japan expect the country's economy to grow in 2023 given soaring prices of natural resources and raw materials triggered by Russia's war on Ukraine and the weak yen, a Kyodo News survey showed Monday.

In the survey of 117 companies, including Toyota Motor Corp. and SoftBank Group Corp., 65 firms, or 56 percent, expect solid expansion or moderate growth in the world's third-largest economy in the year ahead, sharply down from 84 percent a year ago.


The overall percentage of firms forecasting growth was at its second lowest in 10 years in the survey, with responding companies also cautious about slowdowns in the United States and China in 2023.

File photo taken from a Kyodo News helicopter in December 2022 shows the National Stadium and skyscrapers in central Tokyo. (Kyodo)

In the survey, carried out between late November and mid-December, 40 firms, or 34 percent, said they believe the economy will be flat while seven predicted a moderate contraction. None believed the economy would fall into a recession.

With multiple answers allowed, an overwhelming 92 percent of the companies that expect growth cited a recovery in consumer spending after its plunge due to the coronavirus pandemic.

Of the responding companies that did not expect growth, 70 percent cited rises in prices of natural resources and raw materials, followed by 45 percent forecasting personal consumption would be sluggish. Forty percent of the firms also cited slowdowns in both the United States and China, respectively.

As for companies' evaluation of the rapid depreciation of the Japanese yen against the dollar, 43 percent saw it as having a positive impact on earnings, exceeding 23 percent taking it as a negative.

Exporters can benefit from a weaker yen, which boosts their overseas profits when repatriated.

But when asked about the impact of the weak yen on the Japanese economy, the outcome was reversed, with 32 percent saying it is negative and only 3 percent seeing it as positive. Many companies did not provide answers to the question.

With consumers hit by hikes in prices of daily necessities, including food and energy, due to rising material costs and the weak yen, the nation's annual "shunto" spring wage negotiations between management and labor are expected to attract particular scrutiny.

A total of 36 percent of the firms said they plan to or are considering raising salaries, but 48 percent said they were undecided at the time of polling.

With regard to items in Prime Minister Fumio Kishida's policy agenda, the survey showed that around half of the companies back the promotion of digital transformation and measures to reduce carbon dioxide emissions and promote renewable energies.

Digitalization and decarbonization are both pressing issues companies need to tackle but require long-term investments in research and development and capital spending.

Among nonmanufacturing companies, including those in the retail and service sectors, the largest group called for government measures to tackle declining birthrates and support childrearing, as well as steps to deal with rising prices of daily goods.

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