First Year of a New Era

2019 will be the first year of a new era name in Japan. Looking back on the 30 years of Heisei era, many people will feel that it was a tough period of adjustment following the collapse of the economic bubble to an environment totally different from the one that had existed until that point. How will the next new era be remembered?

The outlook for the global economy in the first year of that new era will be far from plain sailing. Some of the uncertainties that were apparent just one year ago have become a reality as predicted, and the adverse impact on the global economy is a serious concern. The policies of the Trump administration in the United States, the future of the United Kingdom's withdrawal from the European Union (Brexit), political instability in continental European countries, and emerging economies at a turning point ... . There is no shortage of negative factors for business.

If we take an overly pessimistic view of the future, we will not be able to harvest the fruits of business that we would normally be able to reap. Conversely, if we take only an optimistic view, when the global economy enters the adjustment phase we will pay a large cost. It may be a cliché, but in the end there is no other way but to strike the right balance between the two.

Fortunately, there is currently no clear evidence backed up by macroeconomic statistics that the global economy is slowing significantly. Therefore, you could expect a grace period until adjustment really begins and it will be crucial to expand business as much as possible with the awareness that the grace period may be short. Also, as expressed by the words "The time to repair the roof is when the sun is shining," it is also important to repair the balance sheet where necessary while the company is running smoothly. If we do this, worries about future cash flow leaks will decrease.

Further, we need to be more attentive to transitions in the global economy. Once an unstable economic situation is observed, many factors will cause sales to fall, so we must put aside any regrets and shift to business strategies based on entering the adjustment phase. Otherwise, we will pay unexpected costs.

When the global economy enters the adjustment phase, a deterioration of the day-to-day business environment is unavoidable. But in terms of obtaining management resources for future growth, on the other hand, the situation may be expected to show improvement. That is because the adjustment phase of the economy will be an opportunity to acquire the skills and personnel necessary for future business expansion. Needless to say, the cash flow required at that time must be prepared while the sun is shining.

The economic cycle is inevitable. No-one wants an economic downturn, but in reality that is not the way it works. In this case, there is no other way but to prepare ourselves for it and then work as hard as possible while the weather is good. That would be what we can expect in the first year of the new era.