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| The Trading Industry |
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| Current State |
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| Signs in the Air that Trading Companies May Finally Come Out of Prolonged Stagnation and Rise Again |
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The Tsukiji Market, Tokyo Metropolitan Central Wholesale Market of fisheries products |
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Trading companies, which were symbolic of Japan's economic growth, finally came out of the prolonged state of stagnation that began in the 1990s, and they are now showing signs of revival. According to the consolidated financial results for FY2003 (year ending March 31, 2004) for the five major trading companies in Japan (namely Mitsubishi Corporation, Mitsui & Co., Ltd., Sumitomo Corporation, Itochu Corporation and Marubeni Corporation), all but Itochu, which saw deficits, posted record-making profits. In addition to the sharp global appreciation of natural resource and energy prices, profits also improved through high stock prices. |
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| These companies are shifting their focus from trading operations, where profit margins are slim, and are restructuring their businesses by making the income from dividends (from companies towards which they have made investments) as well as capital gains the backbone of their profits. All five trading companies are expected to set a new record in their profits in FY2004 (year ending March 31, 2005). |
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| Business Integration between Trading Companies Progresses at a Swift Pace After 2000 |
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With the globalization of the economy and the financial Big Bang, Japanese companies entered into an age of consolidated accounting, and trading companies, like some other companies in Japan, were forced to integrate. Business integration between trading companies proceeded at an especially swift pace after 2000.
Itochu and Marubeni, which traces their corporate histories back to the same founder, consolidated their steel products operations in October 2001 and established Marubeni-Itochu Steel Inc. |
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In February 2002, Mitsui & Co., Ltd. and Sumitomo Corporation integrated their lumber and building materials business and established Sumisho & Mitsuibussan Kenzai Co., Ltd. Mitsubishi Corporation and Nissho Iwai Corporation also consolidated their steel product industry in January 2003 and established Metal One Corporation.
Meanwhile, equity participation in retail companies has also been taking place. Sumitomo Corporation has invested in Seiyu, Ltd., while Mitsubishi Corporation has invested in Lawson, Inc., and Itochu in FamilyMart Co., Ltd.
Trading companies have also been focusing on new technology (e.g. nanotechnology) and are proactively making investments in order to nurture firms into future sources of revenues. They are also taking a positive stance towards the resource development business.
After the collapse of the bubble economy, major trading companies had a difficult time disposing the losses resulting from investment in real estate and financial products, as well as their less profitable businesses. However, they are at a state where they are endeavoring to build a structure that will enable a new strategy of growth. In this movement, they are shifting their business model from a commission-based business to a business investment model in which they will invest in areas that show potential for rich growth and earn income through dividends and capital gains. |
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