Extreme Weather Takes Toll: 44% of Japanese Companies Report Earnings Impact - Reuters Poll

17 Sep, 2023

Extreme Weather Takes Toll: 44% of Japanese Companies Report Earnings Impact - Reuters Poll

Around 44% of Japanese corporations have reported experiencing a negative impact on their earnings due to the increasing frequency of extreme weather events worldwide, as revealed by a recent survey conducted by Reuters. This underscores the far-reaching consequences of scorching heatwaves and heavy rainfall on businesses within the third-largest global economy.

The survey also indicated that over three-quarters of Japanese companies are either currently implementing or contemplating various strategies to address the challenges posed by extreme weather. Popular responses include energy-saving initiatives and cost-cutting measures.

Climate experts have repeatedly warned of the extensive risks climate change poses to the global economy, including adverse effects on production and workforce productivity. Japan, a country prone to natural disasters such as typhoons, floods, and intense heat waves, is no stranger to the disruptive impact of extreme weather events.

One manager from a transportation company pointed out, "Infrastructure is likely to be disrupted due to extreme weather conditions, which could result in emergency spending and lower productivity."

The monthly Reuters Corporate Survey, which involved 502 large and medium-sized non-financial Japanese firms (with 248 providing responses), indicated that the majority of non-manufacturers had already experienced or anticipated adverse effects on their earnings due to extreme weather. A similar concern was expressed by more than a third of manufacturers.

The survey, conducted by Nikkei Research from August 30 to September 8, allowed companies to respond anonymously, promoting candid feedback. A manager from a machinery company noted, "Investment earmarked for capital expenditure is being redirected toward environmental measures and business continuity plans, which exerts downward pressure on earnings."

Japanese businesses have been particularly troubled by flooding incidents. While a January 2020 corporate survey found that 77% of companies had established business continuity plans for disasters, only 45% had taken concrete steps to safeguard their facilities.

In response to the current survey, 58% of companies identified energy-saving measures as a key response, while 25% stated they had already implemented or were considering more flexible working arrangements, including shift scheduling. Additionally, 23% chose cost-cutting measures, a strategy often adopted by Japanese corporations during challenging times. Only 23% of respondents had not yet considered any specific measures.

In a separate finding, 57% of firms expressed skepticism that a cabinet reshuffle would enhance the popularity of Prime Minister Fumio Kishida, whose approval ratings were on the decline.