Firstly, despite the rise in import prices, the (non-financial) corporate sector is still looking highly profitable. This indicates that Japanese companies are either dealing well with higher commodity prices or are able to control costs.
Secondly, the sector is likely to replace old facilities in the coming years. Business investment activities have been lower in Japan than other countries in recent years, meaning that old facilities remain that will require replacement investment in the near future.
Finally, Japanese corporations are aware of the necessity to embrace digital transformation and reduce carbon emissions, and many have announced plans to increase investment in these key areas.
Masayuki Kichikawa is chief macro strategist at Sumitomo Mitsui DS Asset Management
