Japan’s Most Profitable Industries — Winners in the Japanese Market 2022 — REPORT

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First, we examined the Japanese economy’s total operating profit margin trends, including the two main sectors: Manufacturing and non-manufacturing. To be sure, the fastest-growing industries in the Japanese market are not, in many cases, those winning the profitability game. Moreover, one of our ultimate goals was to discover the Golden Number a Japanese firm must hit to be officially crowned Japan’s Bronze, Silver, or Gold Medalist of Profitability 2022.

Furthermore, beyond identifying the most profitable Japanese industries, we revealed an exclusive club called the Medalists of PROFITABILITY 2022, with the Gold Medalist at the top. To win in Japan, one of the most insightful questions many C-suites and CEOs need to ask is: How much is at stake in the Land of the Rising Sun?

Inspired by the Olympics, we first chose the average annual operating profit margins of each Japanese industry as our measure of profitability. Second, we computed the standard deviation of profitability across all Japanese industries. Third, we analyzed and compared the profitability of all Japanese industries by using their operating profit margins (EBIT), excluding finance and insurance. Next, we computed the standard deviation of profitability (EBIT) of all Japanese industries. Finally, we categorized Japanese firms into three performance groups, with one standard deviation separating each group of performers.

Indeed, the Land of the Rising Sun’s profitability grew significantly post-COVID shutdown. All Japanese companies’ ordinary and net profits grew by 31% and 56%, respectively. However, the profitability is not evenly distributed, given that across industries such as financial product dealers and life insurance institutions, companies’ ordinary profits plunged by 12.6% and 0.7%, respectively, while in banking, firms saw their ordinary profits jump by 24.9% in the same period.

Moreover, our analysis revealed gaps in profitability when we categorized Japanese companies by capital size into four archetypes instead of industry. That is, those with a capital of ¥1billion or more, capital ranging between ¥100 million to ¥1billion, between ¥10 million to ¥100 million and below ¥10 million.

In other words, while firms with capital above ¥100 million grew their ordinary profits by at least 33.6%, those with capital size below ¥10 million saw their profitability plunging by 10.8% in the fiscal year 2021-22 ending March 31, 2022. Our discussions with many business leaders, including CEOs and board members, revealed that the fiscal year 2021-22 was a turning point for many struggling Japanese companies disrupted by COVID-19.Again, in our analysis to uncover Japan’s Gold Medalists of Profitability 2022, we focused on operating profit margins–not the industry’s total profit growth regarding ordinary profit size.

As we all know, the global economy is in a tailspin compounded by inflation, rising interest rate-induced recession, and supply chain disruptions. As a result, companies are struggling to stay afloat through mass layoffs, particularly in the Tech sector worldwide. In this turbulent environment, organizational resilience takes center stage through efficiency, which has emerged as the sine qua non of corporate survival.

The key questions we tried to answer were: What are the top 10 most profitable industries in the Japanese market? Which number must a Japan-based business hit to be officially crowned with Japan’s most distinguished business designation, Japan Gold Medalist of PROFITABILITY? Find out more in this report.