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Where are you sleeping tonight?

According to the Japan Complex Cafe Association, as of 2005, there were about 2,740 Internet cafes located across Japan. Based on visits made to 34 Internet cafes in ten prefectures carried out by “local labor unions and private organizations,” the Asahi Shimbun has run a piece with the headline: 75% of Net cafes home to ‘refugees’

Attention grabbing stuff, to be sure. Although the sample size is hardly significant, it does demonstrate that there are underlying problems with Japan’s employment conditions, despite much celebrated recent rises in disposable income and consumer spending.

Although recent data from the Ministry of Health, labor and Welfare shows that the number of people employed nationwide continues to increase slightly each month, the number of jobs per applicant are narrowing: in March, this figure was 1.03, down from 1.05 in February.

In March, more people tend to look for new jobs in Japan than in February, though companies also tend to recruit more heavily, so these two factors should balance each other out of the equation. The question is whether or not companies are finding the people they need (the Bank of Japan’s most recent Tankan survey suggests that they are not), and whether or not there is enough liquidity in the job market for employment seekers to find positions that satisfy them, and thereby allow them to work at close to full levels of productivity.

Will we see a bottleneck or a crunch in the number of jobs being offered in the coming months? It’s well rumored that corporate Japan is fearful of a slowdown in the US economy, so that possibility looms.

How could it be avoided? That’s the tough question: after all, I don’t mind if people read this at an Internet cafe, but I hope it isn’t in the same chair they call ‘futon.’

Citigroup to shake things up?

How much would it be worth to gain control of the third largest brokerage firm in the world’s second largest economy? Factor in that the buyer is the world’s largest financial institution and there are very few opportunities to break into a market that is famously closed and subject to its own set of rules and regulations.

This is why I had been saying that it didn’t really matter if the hedge funds demanded 1,700 or 1,900 yen per share; there was no way Citigroup would walk away from the Nikko Cordial deal. The firm’s tainted image? Lawsuits brought against former senior executives by the firm itself are taking care of that problem, and time should handle the rest.

Today, Michiyo Nakamoto of the Financial Times points out that Citigroup’s acquisition will force Nomura and Daiwa, Japan’s two largest brokerage firms, to change the way they do business. It’s about time for that, although we hope it won’t stop there. If Japan is to truly become the international finance center it wants to be perceived as, deregulation has some bumpy ground to cover. Citigroup might be able to push its competitors, but will they all be able to get together to push Kasumigaseki?

Household spending up 1.0% in March; Income and disposable income up as well

Continuing on with Friday’s economic reports, the Ministry of Internal Affairs and Communications released figures for household spending in March. The report showed that Japan’s household spending increased by 0.1% over a year earlier, showing an increase for the third consecutive month. The average household spent 313,563 yen in March.

Economists had projected an increase of 0.7%, but the final numbers fell much lower than that. February had shown an increase of 1.3% year-on-year. The report also showed that on average, income at households in Japan had increased 3.5% over a year ago, having risen for the sixth consecutive month. Further, disposable income rose by 4.0%, showing its fifth consecutive monthly rise.

We’re waiting to see where all that money went. The man or woman on the street says he’s saving it…one thing we can be sure about is that he or she is not spending it on a new Play Station 3.

Japan March Supermarket Sales: 15th Consecutive Month Down

Japan’s supermarket sales have now dropped for 36 of the past 37 months. Last week, the Japan Chain Stores Association announced that in March, sales at supermarkets open for at least one year declined 1.5% nationwide. According to the report, the figures are based on the combined sales of 83 supermarket chains which together run 8,786 outlets. When new stores are included, revenue rose 0.4 pct from a year earlier.

In terms of yearly totals, sales declined 0.9% at the nation’s supermarkets. When the figures are adjusted on a store-to-store basis, sales fell 2.6% in fiscal 2006.

Broken down by category, March 2007 supermarket sales looked like this:

• Food: +0.5%, 61.1% of total revenue
• Household Products: -3.4%, 19.7% of total revenue
• Clothing: -5.4%, 12.2% of total revenue
• Miscellaneous Items: -1.5%, 6.5% of total revenue
• Services: -47.7%, 0.4% of total revenue

Auto production and domestic auto shipments down in March, exports up

On Friday, the Japan Automobile Manufacturers Association published the results of Japan’s March auto production, and for the first time in 17 months, there has been a fall in domestic auto production. In March, a total of 1,118,009 cars, buses and trucks were built, down 37,821 units (3.4％) from the same month in 2006.

By category, car output declined 2.6% to 937,390 units, the first decrease in 17 months. Truck production fell 10.2% to 133,178 units, the second consecutive month with a drop, and bus production was up fro the 26th straight month, rising 23.8% to 9,620 units.

At the same time, vehicle exports last month increased 8.1% to 568,303 units while domestic shipments were down 8.1% to 767,366 units.

Why was there lower production this March? There seem to be two factors: 1) April, along with August and January, is one of the slowest month for new cars sales in Japan. This would indicate that production should be lower than normal in March and the growth in the market is not anticipated, thereby causing downward pressure on production targets. At the same time, 2) the ongoing decline in domestic sales would seem to increase that downward pressure by giving no reason to increase production. What other factors might be at play here?

US-Japan FTA in the works?

With discussions on setting up a free trade agreement between Japan and Australia getting off to what Australian Department of Foreign Affairs and Trade deputy secretary Peter Grey described as a “very good start” last week, one has to wonder what will happen when they finally get to talking about agriculture. The first meeting did not broach the subject; the agenda for the second meeting, to be held in July in Tokyo, has not yet been set.

We’ve also seen the recent conclusion of a US-South Korea free trade agreement. Despite the fact that many are not one hundred percent satisfied with its terms (especially with regards to agriculture), Claude Barfield of the American Enterprise Institute suggests that the “US/Korea FTA may well be the tipping point that produces” a “domino effect” of FTA signings in the region, as East Asian economies gradually back off from over-protection of their markets.

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A Japan Economy News Widget!

Are you dying to put a Japan Economy News widget on your blog, desktop or MySpace page? We’ve gone ahead and made one up, there’s an example right below. By following this link, you can customize the height and width of the widget and feel free to use it anywhere…

BOJ keeps interest rates steady, hints at future raise

Imagine a central bank raising interest rates while consumer prices are falling.

The idea might seem odd, but it’s starting to look as though it could make sense. Japan’s March Consumer Price Index data was obviously not heartening, showing a 0.3% drop from a year earlier. March was the second consecutive month with a decline after a 0.1% slide in February.

In reaction to this news, the Bank of Japan has reduced its estimated rise of core consumer prices for the financial year ending in March 2008 to 0.1%. If you’ve been following the Bank’s projections, you already know that they had been gunning for a 0.5% increase in CPI. That’s a significant revision and should raise questions concerning the Policy Board’s number crunchers - though it won’t at this point, since we really have to wait until April 2008 to see the final numbers.

For this month, the bank has decided to hold the 0.5% interest rate level, which makes sense given that March CPI “is pretty weak data and combined with shipment and inventory data, it is very, very weak,” According to Morgan Stanley’s Takehiro Sato.

It’s no secret that the Bank of Japan would like to raise interest rates as soon as possible, which means as soon as it is politically possible for the ruling party. As you can see by clicking on the image (courtesy Seeking Alpha), Japan’s interest rates remain far below the levels seen elsewhere in the OECD.

Can the bank raise rates in spite of shaky CPI data? It seems to be building it’s case, with Finance Minister Koji Omi lending support as well: “Today’s data does not change my view that as a whole Japan’s economy is recovering steadily.” I think that should go without saying, as consumer spending has continued to look better. At the same time, Omi’s comment is essentially irrelevant.

What does Bank of Japan Governor Toshihiko Fukui have to say? Luckily Reuters has helped us out with a string of quotes, of which this is my favorite justification for considering a rate hike:

If markets expect the BOJ to keep rates low even while the economy achieves 2.1 percent growth (as forecast by the BOJ), it could distort the BOJ’s policy scenario.

…are you for real? Does it not distort if markets expect a raise in rates as well? Or does it not distort in a way that makes you happy? It would be great to see reporters asking real questions at these news conferences…

NTT DoCoMo reports 25% drop in profits for fiscal 2006

Earlier in the week, telecoms firm KDDI announced a 16% increase in profit for the last financial year, bolstered by the strength of its AU mobile brand. We almost wondered out loud if their competition would be down by greater or less than 16% on the year…

NTT DoCoMo, it turns out, was hit a bit harder. On Friday, the firm announced a 25% loss in profits, after being hit hard by a deluge of customers fleeing after number portability was introduced last October, and massive spending on network upgrades.

Although NTT has spent heavily on building a 3G network, which they were the first to unveil in Japan, the plan is still negative in terms of ROI. Speaking at a news conference, President Masao Nakamura had this analysis of the results:

On the whole, we lost 630,000 subscriptions in the year to March, which isn’t really a good result. The reason is clear. Our customers left us either over the weakness of the 3G network or the expensive fees. We’ve been frantically strengthening our network but it is difficult to erase our customers’ first impression that the FOMA network is weak.

At least he knows what’s wrong and isn’t afraid to say it. That is a big first step. Although the annual report caught all t he news attention, NTT made two other announcements on the same day: NTT DoCoMo Announces Termination of PHS Services and NTT DoCoMo to Terminate CITYPHONE Service.

Dismally yours: David Andrew Tayor’s blog on Japan’s economic reports

Surfing around for blogs writing about the Japanese economy today, I came across a good one that’s very fit to be shared. At his Dismally blog, David Andrew Taylor put together a very informative post entitled JPY: Getting ready for the deluge.

Mr Taylor takes a look at Industrial Production, GDP, Unemployment, and CPI in order to evaluate how this data may “set the tone for the [Japanese yen] in the next few weeks.” With charts and incisive commentary. And yes, he knows a thing or two about technical analysis.

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