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Autos in April: Production Down, Exports Up

It’s becoming a familiar story: Due to flagging domestic sales, Japan’s production of automobiles continues to decline. As that happens, the number of autos being exported each month continues to increase. Reports from the Japan Automobile Manufacturer’s Association show that Japan’s exports of cars, trucks and buses rose 2.3% in April from a year earlier, for the 21st consecutive monthly rise. In all, 484,702 vehicles were shipped to foreign shores, with Toyota leading the way in all categories. The global leader shipped 148,737 cars, 11,339 trucks and 598 buses overseas in April.

On the other hand, production of new vehicles dropped for the second straight month, declining 3.8% in April compared to the same month last year. 870,639 vehicles were built in Japan in April. Again, Toyota led the way, with 214,706 passenger cars having been built. It’s nearest competitor, Mazda, built 61,973 in Japan during the same month.

Reports on Japan’s Wages show very different stories

Over the past two months, we’ve seen household spending in Japan inch up, income and disposable income move up a tad, and electronics shipments increase as flat-panel TVs have flown off the shelves here in Japan.

Yet, in the May version of its monthly economic report, the Cabinet Office warned that “without sustainable increases in wages,” it will be difficult to assume that increases in consumer spending will continue.

On Wednesday, the Nippon Research Institute, which is connected to the Cabinet Office, released data showing that “thanks to an ongoing improvement in employment and wage conditions,” consumer confidence in April reached its highest level in 22 months. Although that seems positive, only 11.9% of respondents stated that they expect to see an increase in wages over the coming year, while 30.3% said they expect to see a decline. According to NRI, “Anxiety about unemployment and wage declines has receded and consumers are more optimistic about the economic outlook.”

The data of the NRI report and its conclusions seem to have little basis in reality, and it seems as though the text was written regardless of what the numbers actually were going to show. Then, the Ministry of Health, Labor and Welfare released its Monthly Labor Survey Report this morning.

According to the report:

Average monthly total cash earnings per regular employee in April 2007 were 278,193 yen, down by 0.7%.

Contractual cash earnings were 271,310 yen, down by 0.8% and scheduled cash earnings were 250,969 yen, down by 1.0%.

The real wage index was decreased by 0.7%.

The average monthly total hours worked per regular employee in April 2007 was 154.9 hours, down by 0.8% compared with a year earlier.

The number of regular employees in April 2007 was increased by 1.6% compared with a year earlier. The number of full-time employees was increased by 0.8%, and the number of part-time employees was increased by 3.6%.

The decline is slight, but shows that there is still trouble brewing under the surface of economic recovery, and perhaps that it is not so widespread, despite BOJ Governor Toshihiko Fukui’s recent claim that the recovery has finally reached small businesses. How this wage data reacts over the next few months will be worth watching.

Consumer spending accounts for about 55% of Japan’s economy.

Industrial Production Falls in April

The Ministry of Trade, Economy and Industry has reported that industrial production was down 0.1% in April, compared to April 2006. The Ministry blamed the drop on lower manufacturing of cars and trucks as well as flat-panel displays and other electronics components. Most analysts had predicted a slight rise in production.

It was the second consecutive drop, after a fall of 0.3% in March. The Ministry, however, has high expectations for the future: It said that manufacturers surveyed expect output to rise 1.8% in May and 1.4% in June.

Tiffany’s to open shop focusing on men in Shinjuku

Well, guys, you now know where to get your jewelry: Tiffany’s announced yesterday that they will open a shop within Isetan’s Shinjuku’s location that will focus exclusively on selling jewelry and accessories to men. According to the press release, “Tiffany & Co. The Men’s Store,” will sell “merchandise designed specially for men such as watches and jewelry designed by luminaries like Frank Gehry, Jean Schlumberger and Elsa Peretti.”

There are currently no plans to open such shops in Europe or the United States.

Electronics Shipments, Household Spending Both up in April

Some good news on the consumer good front for Japan: First, the value of domestic shipments of consumer electronics increased 7% year-on-year in April, showing a rise for the fifth straight month. Plasma and LCD TVs in particular were moving quickly, with shipments of those products up 45.4 and 37.3 percent, respectively.

Also, the Ministry of Internal Affairs and Communications announced on Tuesday that in April, household spending had increased 1.1 percent compared to the same month a year ago. According to the data, household spending on education led the increase, shooting up 15.3% in April.

The average monthly income of salaried households was unchanged at 472,446 yen in April, after having risen for six months in a row. Disposable income shrank 0.4 percent to 399,535 yen, showing the first decline in six months. Although regular income showed a slight fall, income from overtime and bonuses increased in April.

Consumer spending makes up about 55% of Japan’s GDP.

Japan’s unemplyment rate falls to 9 year low

I suppose it’s time for some good news. This morning, the Ministry of Internal Affairs and Communications announced that Japan’s unemployment rate had dropped to 3.8 percent in April, its lowest level since March 1998. Most analysts had predicted that the unemployment rate would land somewhere around 4.0 percent.

The unemployment rate among male workers in the 15-24 age bracket was at 8.0 percent, and was the highest of any age group, though it was down 1.7 percent from last month.

So, the question remains: will the tighter job market lead to wage increases? The Ministry of Health, Labor and Welfare also announced that for every job seeker, there were 1.05 positions available in April (more on that report in a separate post). We’re wondering if this isn’t a temporary upswing as companies fill out positions emptied by retiring baby boomers…

Fukui: India to surpass Japan around 2025; Will that district for foreigners help?

A news release from AFP yesterday announced a prediction that India’s economy should overtake the Japan’s around 2025 to rank third in the world after the United States and China in terms of purchasing power parity.

Who made this prediction? Bank of Japan Governor Toshihiko Fukui, who told a panel in Tokyo:

India continues to achieve high economic growth with price stability. Looking ahead, the Indian economy will likely grow to the same level as the euro zone around 2020.

Fukui didn’t have much to say about the Japanese economy, or what plans the Bank of Japan has for the future.

Speaking of the future, talk continues to swirl around Japan’s plans to build a “foreigner-friendly” district in Tokyo for businesspeople from overseas. This time, XFN-ASIA has picked up the story (about a month after we did, but that’s not too bad).

Some highlights from the article:

…Japan aims to reinvigorate Tokyo as a global financial hub with a lofty goal of developing a new foreigner-friendly high-rise banking district.

The idea has raised eyebrows among foreign fund managers in the region whose biggest complaint about Tokyo is often not the lack of a decent office or apartment but high taxes and strict regulations…

[Yuji] Yamamoto [minister for financial services] did not say whether Japan would tackle high taxes and red tape, the most common complaints about Tokyo from fund managers, many of whom opt to work in Singapore or Hong Kong instead even if they manage Japanese stocks.

“Building buildings doesn’t create a financial system,” said one fund manager based in Singapore…”Japan has an unfavorable tax regime both for financial products and the individual. The overall operating environment in Japan is unfavorable because there is a deep suspicion of capitalism.”

Then, Robert Feldman, a managing director and economist at Morgan Stanley, is reported as saying that foreign managers in Tokyo often bemoan the lack of sufficient staff who are fluent in English. I sort of feel your pain…though I frequently bemoan the lack of foreigners who are sufficiently fluent in Japanese, which is sometimes the only thing that makes them unable to be hired.

The distance from Tokyo to Narita airport was also mentioned in the article, and finally:

The head of the Tokyo Stock Exchange, Taizo Nishimuro, also warned that the plan for a new district for foreign banks, while welcome, will not be enough on its own to boost Japan’s financial competitiveness.

‘We cannot wait until the time when those high-rise buildings are to be built before the Tokyo financial market gets bigger and greater,’ he told reporters recently, noting such ‘hindrances’ as regulations and high taxation.

Well said, from a guy who oversees an operation that uses computer systems that are still a hindrance (though they are actually doing something about that rather than just building a new building).

Sanyo reports more quarterly losses

Electronics maker Sanyo is one firm that has not benefited much from Japan’s booming economy. Today, the firm announced heavy quarterly losses yet again, although not as severe as last quarter.

Sanyo reported losses of 34.4 billion yen (or $283 million) in the quarter ending March 31, which is the eighth loss posted in the past ten quarters. According to Forbes, Sanyo has said, “Heavy restructuring efforts [are] now paying off and [Sanyo] forecasts a net profit for this fiscal year.”

Sanyo has been cutting costs on the production end by slashing jobs, with 16,200 workers getting pink slips over the past two years. According to Bloomberg, nearly 1,000 workers applied for Sanyo’s early retirement program in December, which cost the firm about 11 billion yen to settle.

Sanyo’s projection of a newt profit for this fiscal year may prove impossible unless some large assets are sold off. Naoki Fujiwara of Shinkin Asset Management remains skeptical:

I can’t see from this year’s forecast that the company will increase its efforts for the ongoing restructuring. The company’s operations doesn’t seem to be improving and I’m wondering what will change at this company.

Sanyo suffers from major image problems, with consumers generally viewing the firm and its products as ‘old’ and ’stale.’ In the long run, this is the essential problem that needs to be corrected. Cost-side improvements are certainly necessary, but what plans do they have for the revenue side?

More FDI Headed to Vietnam?

Late last week, Vietnam Deputy Prime Minister Pham Gia Khiem visited Japan and gave a seminar at which he told Japanese businesspeople that now is a great time to invest in his country. Khiem said that not only are bilateral relations better than ever, but that Vietnam is attempting to improve its legal system to facilitate foreign investors.

According to Vietnam News:

The Japan External Trade Organisation’s deputy head Tomoharu Washio said he was glad at the development of ties between Japan and Viet Nam, particularly after Prime Minister Nguyen Tan Dung’s visit to Japan last year. He said Viet Nam’s membership of the World Trade Organisation and the two countries negotiations on the Economic Partnership Agreement would provide further favourable conditions for investment movement from Japan to Viet Nam.

In April, the municipal government of Ho Chi Minh City approved the construction of Vietnam’s first subway system, for which the Japan Bank for International Cooperation pledged to provide $904.7 million.

Total value of shares traded on China’s stock exchanges exceeds that of Japan for first time ever in April

As the OECD issued a warning on Thursday that China’s stock markets face the risk of “a marked correction,” the World Federation of Exchanges released their statistics on global stock market activity for April 2007. Looking at the “Value of Share Trading” data, one thing becomes clear: in April, the total value of shares traded on the Shanghai and Shenzen stock exchanges exceeded the total value of shares traded in Tokyo and Osaka for the first time ever.

In April, the combined value of shares traded on the Shanghai and Shenzhen Stock Exchanges added up to $645.3 billion, surpassing the $512.4 billion total traded on the Tokyo Stock Exchange and Osaka Securities Exchange.

Click on the graphic to see a comparison of Japan and China’s markets, in millions of dollars, from January to April of 2007 (exchange rates are calculated on the average rate for each month).

The OECD warns of a severe correction, and Andy Xie warns of collapse. We’re here to warn of lessons unlearned.

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