Ordinary profits for all industries in Japan, excluding finance and insurance, rose 8.8% year on year to 124.831 trillion yen in fiscal 2025, according to Finance Ministry data released Tuesday. The profits grew as companies increasingly passed on rising costs for raw materials and labor to prices.
Earned surplus, or internal reserves, which indicate the accumulation of corporate profits, rose 2.7% year on year to 654.822 trillion yen, setting a record high for the 14th consecutive year.
However, the labor share -- the proportion of personnel expenses compared to value added -- stood at 63% in fiscal 2025, the lowest level since fiscal 1973, according to the ministry's Financial Statements Statistics of Corporations by Industry for fiscal 2025.
Ordinary profits hit the highest mark since fiscal 1960, the earliest comparable year, and rose for the fifth consecutive year. Of them, the manufacturing sector recorded 43.326 trillion yen, a 7.4% year-on-year increase. With demand in areas such as artificial intelligence, semiconductors and data centers growing, the "information and communication electronics equipment" and "electrical machinery, equipment and supplies" segments performed well.
The nonmanufacturing sector saw a 9.6% increase to 81.505 trillion yen. In the food and beverage service industry, both the number of customers and average spending per customer increased, and the construction industry saw a surge in orders for large-scale projects.
Sales in all industries, excluding finance and insurance, rose 1.6% year on year to 1.72 quadrillion yen, and capital investment increased 4.3% to 57.899 trillion yen. Both figures reached record highs and marked the fifth consecutive year of growth.
The balance of cash and deposits held by companies also set a record high, reaching 314.986 trillion yen.
Regarding the labor share, a 1.2% decline year on year was observed, falling to 63%. This marks the fifth consecutive year of decrease, reaching its lowest level in 52 years.
"The pace of wage increases is sluggish compared to the pace of profit growth. Companies have ample room to raise wages," said Takeshi Minami, an economist at Norinchukin Research Institute Co.
Given their strong financial performance, companies are expected to face increased pressure to raise salaries and make management efforts to boost employee morale and productivity.
According to the ministry's April-June statistics data, ordinary profits for all industries, excluding finance and insurance, rose 24.6% year on year to 44.666 trillion yen, marking the highest quarterly figure on record. The transportation equipment segment, including automakers, and the wholesale segment, including trading companies, performed particularly well.
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This article is from The Yomiuri Shimbun. Neither Dow Jones Newswires, MarketWatch, Barron's nor The Wall Street Journal were involved in the creation of this content.
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