While Japan’s economy continues to expand, corporate profits are rising but household wage growth remains sluggish, and retained earnings have swelled to levels above those of the past.
Amid a reportedly prolonged economic boom, excluding the impact of COVID-19, conditions in the corporate sector are strong. Ordinary profit was 2.6 times higher from FY2012 to FY2025, setting a new record every year. The ordinary profit margin also rose, and retained earnings grew to ¥654.8 trillion.
In the household sector, ordinary profit increased 2.6 times over the same period, while labour costs rose only 1.2 times and average pay increased by about 1.13 times from FY2012. Despite the increase in employment, households have not strongly felt the economic boom.
Over a longer period, ordinary profit has reached 6.1 times its level after the collapse of the bubble economy, while average pay has changed little, rising only 1.1 times. As companies continue to restrain wage increases even when profits rise, the labour share has declined regardless of company size.
How retained earnings are used will be key. The increase itself is not viewed as a problem; rather, whether the funds are directed toward investment or converted into cash is seen as a factor affecting economic growth. The increase in retained earnings and delayed wage growth are affecting how households experience the economy.