• Home
• About/Contact
• Economic Reports
• Research
• Advertising

• Business
• Economics
• Reports
• Finance
• Marketing
• Politics
• Real Estate
• Services
• Retail
• Tech

Subscribe

Woes continue at Nissan: Recalls and downsizing

In February, Nissan warned investors that due to lackluster domestic sales, net profits were expected to slide by over 11 percent in the year to March 2007. Then, two weeks ago the automaker announced that it would be slashing domestic production for at least six months starting from April.

Since then, the news coming from Nissan hasn’t gotten any rosier. On Tuesday the automaker announced that it intended to halve the size of its domestic workforce, currently at 2,300, by 2010.

And yesterday, Nissan announced that it would recall more than 1 million March and Cube compact cars to fix faulty fuel tanks, which will cost the company somewhere in the neighborhood of 3 billion yen ($25 million). Nissan has said that the cost of the recall would be covered by cash reserves that were set aside for dealing with quality issues.

The recall is not expected to be any effect on the company’s earnings, though Nissan is expected to show its first earnings drop in seven years for fiscal 2006.

Japan’s household spending up 1.3% in February; unemployment unchanged

On Friday, the Ministry of Internal Affairs and Communications announced that February household spending in Japan increased by 1.3% compared to February 2006, reaching an average 272,763 yen per household. The increase was greater than estimated by most observers, this one included. We projected a 0.2% increase in February household spending, while Bloomberg’s survey of 29 economists predicted a 0.6% rise.

A quick breakdown of some key numbers:

• Overall household income rose 2.3% year-on-year, up for the fifth straight month
• The income of household heads increased 2.2%, rising for the eighth straight month
• Disposable income was up 2.8% from February 2006

In a separate report on employment, the Ministry also announced:

The number of employed persons in February 2007 was 63.02 million, an increase of 300 thousand or 0.5% from the previous year…The number of unemployed persons was 2.70 million, a decrease of 70 thousand or 2.5% from the previous year. The unemployment rate, seasonally adjusted, was 4.0%.

That represents the fourth straight month with the unemployment rate at that level.

‘Advance Warning System’ for takeovers approved by Sapporo shareholders; What will be Steel Partners’ next move?

On Thursday, shareholders of Sapporo Breweries voted to approve an ‘advance warning system’ for takeovers that will provide the company’s board of directors with the means to thwart takeover attempts. If you’ve been following the news, you’re already aware that the board is attempting to avoid being taken over by Steel Partners Japan Strategic Fund, which is currently Sapporo’s largest shareholder.

In a statement released on March 22, before the vote, Steel Partners addressed the shareholders of Sapporo directly, informing them:

You, as shareholders, are the owners of Sapporo. Management itself says: “shareholders should decide whether to approve significant purchases of the Company’s shares”. But the [proposed] AWS does not do that…

The new AWS proposed by Sapporo puts management in a position to frustrate offers being made to you, its shareholders. Management can demand virtually any information from an offeror and management can do so repeatedly. After that, an offeror has to wait while management decides if it is satisfied with the offeror’s responses. This process could take many months or longer. In certain cases, the new AWS may preclude interested parties from even considering making an offer to you.

After the AWS was voted in, Steel Partners issued another statement to shareholders, with Warren Lichtenstein, a managing partner of the Fund, saying:

While we are disappointed that the proposed ‘advance warning system’ has been approved, we are extremely pleased with the large number of
shareholders that supported us by voting against the proposal.

Here is part of what Steel Partners had to say to the shareholders at the general meeting, before the vote was to be taken:

Japanese law already provides a carefully considered and effective framework for all relevant information an offeror must provide, a mechanism for management to ask for more information and the timetable for any tender offer. Why is this not sufficient for management? We cannot see why management needs information that goes well beyond what the Japanese Legislature thinks is reasonable or needs a period of time that is around double the time the Japanese Legislature deems to be reasonable for shareholders to consider an offer.

The Company asserts that an “independent committee” set up by management during the AWS process will ensure the process is carried out fairly, but do not be misled. The “independent committee” does not achieve this purpose. There are no directors on the committee. Its members do not owe any duty to shareholders and the new AWS does not allow shareholders to hold them accountable for their actions. Further, the Company’s Board makes the appointments to the committee. This committee is accountable to the Board, not shareholders, and merely makes recommendations to the Board.

Ladies and gentlemen, this vote comes down to one major question; do you want the right to decide when and to whom you sell your shares, or do you want management to have the ability to deprive you of this right by going beyond what is already required by Japanese law?

Reading the statements, it seems clear that Steel Partners has made a rational, logical argument in favor of rejecting the AWS. It’s approval might even be seen as the antithesis of what Scott Callon of Ichigo Asset Management was able to pull off at Tokyo Kotestsu back in February. That case also involved shareholders rejecting a takeover bid, but the essential difference was that Mr Callon helped put the decision in the hands of the shareholders, and thereby be able to act in their own self-interest against the wishes of the board of directors.

Steel Partners has yet to say whether it will take the option of initiating a hostile takeover bid for Sapporo.

Japan’s Consumer Prices fall in February

Ok, we called it, but we exaggerated a bit: on March 25 this website predicted a 0.4% decrease in Japan’s consumer prices. This afternoon, the statistics bureau announced that in reality, Japan’s consumer prices fell 0.1% against February of last year.

Although this is the first decline in 10 months, most observers remain bullish on consumer prices, with BOJ governor Toshihiko Fukui among them. Mr Fukui said this week that he believes cheaper oil prices are causing the CPI to look lower than it actually is. Although Japan’s core CPI data strips out fresh food, it does not remove oil from the equation.

Bloomberg quotes Azusa Kato, an economist at BNP Paribas Securities, as saying:

Prices won’t show a clear gain until the fourth quarter, and that’s when we expect the next rate hike. The economy’s expansion is still slow, and the thrust from goods and services to inflation will remain sluggish.

Finance Minister Koji Omi said he doesn’t think the economy is still experiencing deflation, although the Cabinet Office has prudently not yet officially declared an end to deflation.

Japan’s retail sales boosted; Japan’s retail sales drop

You would be forgiven for raising an eyebrow at the two headlines published by Bloomberg today: 1) Japan’s Large Retailers Boost Sales on Warm Weather and 2) Japan Retail Sales Drop; Heating-Fuel Demand Declines.

The first headline refers to a Ministry of Economy, Trade and Industry report released today that shows sales at large shops in Japan increasing 0.5% in February versus a year earlier. This is the first such increase in five months. If data from new stores is included, sales rose 1.6% (new store data is usually excluded from market research).

This is certainly an improvement, albeit slight, and looks like a positive sign for the future of consumer spending. Bloomberg quotes Hiroshi Shiraishi, an economist at Lehman Brothers Japan, as saying:

Large retailers are losing market share, so the fact that the number comes in strong says something positive about spending. The contribution of exports will fade and household spending will pick up a bit.

The Ministry said that retail sales are basically flat, though there are some positive signs, including the fact that this report excludes spending on services and the Internet, both of which are believed to be healthy.

The second headline, despite being somewhat more negative in tone, actually covers the same set of reports from the Ministry. Overall, sales at shops in Japan declined by 0.2% in February from a year earlier. The mood of those quoted in the article, however, is still positive:

Akira Maekawa, economist at UBS Securities Japan:

Private consumption will underpin stable economic growth, even though we’re expecting a slowdown in exports and capital spending.

Why the bearishness on capital spending? I’d like to see the indicators showing that it’s about to go into a slowdown. As for exports, they’ve been on the rise as a percent of GDP for some time now; why the sudden expectation of a slowdown? Is it due to an expected slowdown in the global economy?

Naoki Murakami, senior economist at Goldman Sachs Japan:

The retail survey has a slightly negative bias, so I’m not worried about a negative number. Department store sales are a better reflection of actual consumption.

Department store sales comprise 8% of the total retail figure. Is this to mean that sales results at other retail outlets are expected to follow? Unfortunately, Bloomberg doesn’t provide us with any more of the quote.

Seiji Adachi, a senior economist at Deutsche Securities:

[The report] doesn’t tell a whole story of consumer spending as more people are spending on services. This is a minor drop and still indicates consumer spending is recovering. Corporate profits are gradually spreading to households.

I’d really like to believe this, but simply saying that people are spending more on services isn’t very convincing. Is there any data to back that up?

Yamazaki Baking to become Fujiya’s largest shareholder

Last weekend, after just over two months of near-total shutdown, embattled confectionery maker Fujiya resumed limited sales of its cakes. On Tuesday, it was announced that Yamazaki Baking will purchase a 35 percent stake in Fujiya for about 16 billion yen, and thus will become Fujiya’s largest shareholder.

Publicly, the companies say that Yamazaki will lend better corporate governance and help Fujiya ensure that sanitation standards are followed. Both counts, though especially the latter, seem like hogwash. Sanitation standards, of course, are set out in print. They simply have to be read, understood and enforced by management. Fujiya’s problem seems to have been with the enforcement part.

Will Yamazaki help with that? Almost certainly. Will Fujiya recover?

No one died from eating a Fujiya product. Not a single person got sick from eating a Fujiya product. At home, we frequently use eggs that might be a few days past the freshness date - they’re always marked a bit early, right?

When Fujiya re-opened one of their shops in Suidobashi, Tokyo, a few weeks ago, there was an hour-long wait in line. Six months from now this will all be forgotten.

BizCast Japan debut release

The debut release of the BizCast Japan streaming audio/podcast has been released on Trans-Pacific Radio . Albrecht Stahmer and I touch on a range of issues concerning the business scene in Japan…we’d be eternally grateful if you have time to check it out.

Blogosphere: Foreigners buying your company? Marketing LOHAS?

Time for another trip into the blogosphere…

What Japan Thinks has recently published a translation of an interesting survey measuring how Japanese people feel about foreigners (and foreign companies) buying shares in the (Japanese) companies they work for.

In a recent post at the Clast Blog, Marxy takes a deeper look into a Nikkei Business article that attempts to summarize recent trends in the consumer behavior of Japanese men who fall in the U-35 (under 35) demographic.

Marxy looks at the rise of LOHAS as a marketing tool and concludes:

This may mean that some products like tobacco could be headed towards a long-term decline, but others like alcohol have a chance of revival. The challenge now is to create new cleaner and fresher contexts for the products which generational and environmental associations have ruined. Alcohol may only be “unrefreshing” because of the traditional locations in which it is served and the general manner in which it is consumed.

Or, it could be somewhat of a turnoff due to the long-term damage to the liver and other negative effects on the body, not to mention the family. Perhaps the generation that grew up in the recession now sees a future with possibilities rising up and doesn’t want to waste it being drunk and destroying themselves from the inside out; After all, self-destruction is not rebellion. I’m not sure how to re-contextualize alcoholism, domestic violence and liver disease, but perhaps that’s my weakness.

US Beef Coming to Wal-Mart Owned Seiyu Supermarkets

In a small announcement on its website yesterday, Seiyu announced that it is set to begin selling US beef at about 20 of its shops in the Kanto area (the area including Tokyo and its surroundings).

Japan originally banned American beef imports in December 2003 , after the first case of mad cow disease in the US was discovered. The ban was lifted in December 2005, but was reimposed a later, after prohibited spinal bones were found in a shipment of veal.

Seiyu has since followed up with a press release in English, giving details concerning which beef products will be sold, and which shops they will be sold at.

US Ambassador to Japan Thomas Schieffer is quoted in the press release as saying:

I’m very pleased to help Seiyu celebrate their new promotion of US beef. We have worked very hard to make sure that safe US beef is available once again to Japanese consumers. US beef is not only safe, but it tastes really good, and I think Seiyu’s customer’s will find that it is a great buy.

Items to be sold include US beef chuck for steak (298 yen per 100 grams), thin sliced US beef chuck (498 yen per 200 grams) and sliced US beef chuck for barbecue (680 yen per 200 grams).

Yes, you’ll be able to get US beef at Seiyu-owned Food Magazine in Roppongi Hills.

Bad news for the banking industry

Shinsei Bank has found out the hard way that Japan’s Fair Trade Commission may be enfeebled, but it’s not fully asleep. The FTC is apparently about to take the unprecedented step of ordering Shinsei to stop printing misleading advertisements, and require Shinsei to submit a report on what happened and what steps have been taken to ensure that it does not happen again.

The Japan Times also tells us that the “Financial Services Agency will strengthen its supervision of financial institutions on advertisements for derivative products.”

Shinsei has 30 days to appeal the decision.

Back in April of 2006, the Financial Services Agency handed Shinsei a one-year ban on undertaking any new real estate trusts as a punishment for the bank’s alleged use of manipulated building surveys, as part of a raid into several financial institutions operating in Japan.

Shinsei Bank is managed by Ripplewood Holdings, a US-based private equity firm. It was formerly known as Long-Term Credit Bank, but had its name changed to Shinsei in March 2000 after being purchased by Ripplewood for $1.13 billion. Ripplewood’s turnaround of Shinsei has been one of the strongest success stories of the post-bubble banking era. If you don’t believe me, just ask William Pesek.

Next Page »

Copyright © 2006-2008 Japan Economy News

Disclaimer