Coronavirus Spawning Winners and Losers in the Japanese Business World

Covid continues to wreak havoc on some industries while sparing others. What’s going on?

February 11, 2021

Even as the coronavirus continues to wreak havoc on the industry after industry, some companies are enjoying unprecedented growth. While there are always winners and losers in the business world, lately, there have been some strange developments in Japan. Due to extraordinary losses, there is talk of unlikely bedfellows JAL and long-time rival ANA teaming up. Former industry bellwethers like cosmetics giant Shiseido have been temporarily knocked off their pedestal, while previously underperforming businesses like McDonald’s Japan are recording record sales and profits. Others like Nintendo have been given a boost by the trend for people to ride out the coronavirus while staying at home. What is going on? Let’s take a closer look at some of the latest developments during these tumultuous times to better understand how things may turn out when we conquer Covid and the dust settles.

Japan’s Airline Giants Could Merge…Really?

Japanese businesspeople often identify as either “JAL-ha” (JAL派) or “Zenniku-ha” (全日空派), meaning that they either have a preference for flying on Japan Airlines (JAL) or All Nippon Airways (ANA).  ANA is known as “Zenniku” in Japanese.  JAL and ANA are really the only options for business travel unless you are willing to put up with various minor inconveniences and the common practice of nickel and diming for just about every value-added service by Japan’s “low cost carriers” (called “LCCs” in Japanese).  Thus, JAL and ANA have long been rivals both in the domestic market and on international routes.

A JAL plane trying to evade more stormy weather, Image sourced from Pixabay

What Do the Numbers Show?

It’s bad—real bad.  Along with all of their competitors in the airline industry, the coronavirus has decimated the bottom line at both JAL and ANA.  JAL is expected to have a final loss of 240-270 billion JPY (approximately US $2.3 ~ $2.6 billion) in the fiscal year ending March 2021.  ANA is expected to do far worse.  Consolidated financial results for the fiscal year ending in March 2021 are expected to be a record negative of 510 billion JPY ($4.9 billion).

Clearly, these results are not sustainable.  While domestic demand is also way down, the real problem for both firms is related to the almost complete suspension of international flights.  ANA is instituting massive cost-cutting measures, including streamlining more than half of its fleet and eliminating all winter bonuses.  Both airlines are also seconding thousands of their employees to businesses in other industries.  Even if the demand for domestic flights gradually recovers in the near future, few expect demand for international travel to get back to pre-Covid levels at any point soon.  If the coronavirus—including its new variants—can not be contained soon, negative operating profits on international flights may, in fact, result in an across-the-board restructuring of both airlines.

ANA had a very disappointing year due to Covid, Image sourced from Pixabay

Rumors on the Street

Both airlines must reduce their fixed costs dramatically.  Everything is, apparently, on the table.  The management teams at both firms are attempting to cut costs by reducing the number of flights, equipment, and personnel.  Despite the intense rivalry between JAL and ANA, there have even been rumors since last summer that the two airlines may end up somehow merging their international businesses to try to break even.

Such a dramatic move would, however, not be easy.  There is a huge difference in the corporate culture among these two firms.  For example, ANA is said to operate according to a male-dominated culture in which female employees are encouraged to leave by their mid-thirties.  There are, apparently, fewer issues with gender equality at JAL.  It abolished age limits on personnel decades ago. Crew members are allowed to continue working after marriage and maternity leave.  Corporate culture is, naturally, only one aspect that the two airlines would need to reconcile in the event of a merger or some sort of cooperative agreement.

Like a chapter out of the hit Japanese TV show Hanzawa Naoki, the Japanese government may, in fact, be encouraging discussions behind the scenes. There is precedent for the potential of a merger between JAL and ANA.  In neighboring South Korea, the national carrier, Korean Air, will soon merge with Asiana Airlines. This impending marriage of two rivals was, apparently, coordinated by the government of South Korea.  Therefore, we will have to keep a close eye on Japan’s aviation sector to see what happens.

The airlines are hardly alone with their struggle in the Covid economy.  Long a giant in Japan’s ultra-competitive cosmetics industry, Shiseido now finds itself in dire straights.

Shiseido May Need a Face Lift

The numbers are grim.  Shiseido announced on February 9 that its consolidated financial results for the fiscal year ending December 2020 (January to December 2020) are as follows:

  •  Sales:  Decreased by 18.6% year on year to 920.8 billion JPY ($8.8 billion)
  •  Operating Income:  Decreased by 86.9% to 14.9 billion JPY ($143 million)
  •  Negative Bottom Line:  In the red by 11.6 billion JPY ($111 million) vs. a surplus of 73.5 billion JPY ($703 million) in the previous fiscal year.
Image result for 資生堂 会見
Shiseido President Masahiko Uotani presenting dismal financial results, Image sourced from

What Is Causing the Mascara to Run?

Due to the impact of the coronavirus, the number of consumers visiting retail stores has decreased sharply.  Accustomed from benefitting from the tendency of visiting Chinese tourists to buy in bulk, a practice called “explosive purchasing” or bakugai (爆買い) in Japanese, the Japanese blue-chip has been cut off at the knees by immigration restrictions. Foreigners are simply not being allowed into the country. Online revenue increased slightly, but sales of premium brands decreased due to the continued temporary closure of retail stores and shortened business hours in Japan.

Some Glimmer of Hope for a Recovery

Although overseas sales in most of Asia-Pacific, the Americas, and Europe have also been anemic for the past year, sales are starting to improve in China, the company’s second most important market.  Shiseido is benefitting from fewer infections in China, the planned expansion of physical stores, and a steady increase in e-commerce revenue.  Sales increased 9.0% in China to 235.8 billion JPY ($2.3 billion) in 2020.

Operating income fell, however, 37.1% to 18.4 billion JPY ($176 million) due to ongoing investments in marketing to expand in the growing Chinese market.

Shiseido event in China, Image sourced from Kokusai Shogyo Online

If China is a leading indicator for Shiseido’s global business, without a solution to the coronavirus, a full recovery is unlikely in the near term.

It is not all gloom and doom in the Japanese business world.  Some segments of the economy are having a banner year in part due to the coronavirus.

Micky D-s Selling Lots of Happy Meals

McDonald’s Holdings Co., Ltd., McDonald’s subsidiary in Japan, is performing exceptionally well, thanks to strong sales at the drive-through and a growing home delivery service.  Operating income for the fiscal year ended December 2020 reached a record high of 31.3 billion JPY ($300 million) for the first time in nine years.  All-store sales also reached a record high of 589.2 billion JPY ($5.7 billion).  This was an improvement of 40.2 billion JPY ($390 million) from the previous year.

McDonald’s cheeseburger, Image sourced from UpSplash

McDonald’s has had to remain flexible as consumer demand has been warped by the effects of the coronavirus.  In-store dining declined significantly as consumers curtailed visits to their local McDonald’s.  This trend resulted in fewer sales of morning coffee and other drinks.  However, these changes were more than made up by customers who used the drive-through to take their food home to eat.  McDonald’s has, moreover, found a way to increase the average spend-per-consumer.  Sales were buoyed by its own growing McDelivery service and substantial growth by home delivery partners Uber Eats and Demaekan.

McDonald’s french fries, Image sourced from Pixabay

Do You Want More Fries with That?

Ronald McDonald is aiming to sell a lot of Big Macs and Chicken McNuggets this year, too. The outlook for all-store sales is 613 billion JPY ($5.95 billion) during the current fiscal year ending December 2021. McDonald’s must be remaining bullish because people are continuing to spend more time at home.

Besides wolfing down cheeseburger after cheeseburger, what are people doing with all of this extra time at home? News Flash: It turns out that people worldwide are playing a lot more video games.

Super Mario is helping Nintendo to generate record sales and profits, Image sourced from UpSplash

Super Mario on a Roll

Nintendo Co., Ltd., the Kyoto-based video game developer responsible for Super Mario and Pokemon, is raking in cash. On February 8, the company reported stellar financials for the first three quarters of its fiscal year. From April to December 2020, sales rose 37% to 1.4 trillion JPY ($13 billion). The bottom line almost doubled from 196 billion JPY ($1.9 billion) during the same period in 2019 to 376.6 billion JPY ($3.6 billion) during the last 9 months of calendar 2020. The company is on track to record full-year profits of 400 billion JPY ($3.8 billion) for the fiscal year through March 2021.

Nintendo Switch, Image sourced from UpSplash

Its new console called Switch is selling out, which, in turn, is driving sales of new video games like “Animal Crossing: New Horizons,” “Mario Kart 8 Deluxe,” and “Super Mario 3D All-Stars.” All of these games can be played online 24/7 from anywhere in the world. Thus, at least until the coronavirus is tamed, it seems as though Nintendo is poised to continue to record sales and profits.

Image sourced from Pixabay

Crystal Ball for 2021 and Beyond

Nobody has, of course, a crystal ball for the rest of this year and beyond. With Japan’s vaccination effort set to begin shortly, only time will tell which businesses continue to thrive during the ongoing crisis and which will crash and burn. Until we all get back to an economy that looks similar to what life was like before the coronavirus, it is going to be a long slog for many Japanese businesses with plenty of ups-and-downs along the way.

Links to Japanese Sources:,,, and

Mark Kennedy

Mark Kennedy is a native of Chicago who has spent more than 20 years living, studying, and working in Japan. By day he is Country Head - Business Development, Nexdigm - Japan but becomes a writer after work. Mark is a lifelong student of the Japanese language and culture. He loves to travel throughout the country. Mark also is the author behind the "Real Gaijin" Substack,, as well as the Country Roads Japan and Coastal Sailing Japan YouTube channels. Photo supplied courtesy of the author who had stopped to check out the free-roaming horses and cows about half-way up to the summit of Mt. Aso, an active volcano in the center of Kyushu.

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