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Japan Economic Reports Roundup: The Good, Bad and Ugly of This Past Week

The Good:

Industrial output has soared to an all-time high, according to the Ministry of Economy, Trade and Industry. August figures showed a rise of 3.4% against the previous month and an increase of 4.3% over the same month last year. This was the first increase posted since May, but the second record-setting high seen this year. According to the ministry, the increase was led by the transport equipment and electronic parts and devices industries. Production is forecast to show a 0.8% decline in September, as much of the August gain was due to the restarting of auto parts factories in Niigata that had been shut down after an earthquake.

Household spending rose 1.6% in August to stand at 296,035 yen per household with two or more occupants. This is the sixth consecutive monthly rise, according to data published by the Statistics Bureau. Spending on ‘culture and recreation’ showed a gain of 10%. According to the same report, average household income was down 1.7% in August and stood at 467,786 yen.

Retail sales were up 0.5% in August, showing their first rise in three months, according to the Ministry of Economy, Trade and Industry.

The Bad

Unemployment inched up by 0.2 points to 3.8% in August, according to the Statistics Bureau. 64.46 million people were employed in Japan in August, 190,000 more than a year ago. On the other side, 2.49 million people were out of work, which was a decline of 230,000 people, or 8.5%, from a year ago. This was the first increase in the unemployment rate seen in 11 months.

Consumer prices fell 0.1% in August, according to the Ministry of Internal Affairs and Communications. Core CPI has now fallen for seven consecutive months, even as the Bank of Japan continues to predict rises in their statements. Japan’s core CPI does not include fresh food costs. Energy costs, however, are included. Given August’s figures and the shrinking of GDP in the April-June quarter, one has to assume that the BOJ will not be making any move to raise interest rates in September.

The Ugly

Housing starts fell by a record 43% in August. Ground was broken on 63,076 new units last month, according to the Ministry of Land, Infrastructure and Transport. Stricter regulations that were put in place following revelations that data had been falsified to show that many homes were earthquake resistant was blamed. Those regulations came into effect on June 20. Housing starts had shown a 23.4% decline in July

Nikkei: High Corporate Taxes Putting Ceiling on Capital Spending, Debt Payments, Salaries

This Nikkei headline pretty much speaks for itself: 70% Of Firms Would Hike Investment If Corporate Tax Cut: Poll

The survey, which was conducted by the Ministry of Trade, Economy and Industry and is available here, asked companies how they would use extra funds should the corporate tax be cut. According to the ministry, 68.7% replied that they would invest in their plants, facilities or equipment, while 48.5% stated that the funds would go towards debt repayment. 37.3% would increase salaries or the number of employees, 26.4% said they would boost rewards to shareholders. At the bottom, 13.7% stated they would low prices on their goods and services.

With lower prices already kicking in (consumer prices fell -0.1% in August), that one’s not so much of an issue. The poll also found that 72% of firms believe the current corporate tax rate to be excessive while 50.3% stated that a cut in corporate tax would allow them to be more competitive internationally.

I’m skeptical of that last stat, but it’s the 72% who think the current corporate tax rate (the highest in the G-8) is excessive. I’d really like to ask a few questions to the other 28%, such as, “How many members of your board of representatives came from the public sector?”

The Nova Watch

Articles from the Japanese media on September 28:

The Osaka Labor Standards Bureau is pressuring Nova to pay its employees their salary on time. This article from the Yomiuri discusses the fact that both Japanese and foreign employees have not been paid or have been paid late. This wire article was also carried by the Nikkei, as well as others.

A judge at the Nagoya High Court has ruled that Nova needs to refund a student who claimed that the closure of her school violates the advertised policy of being able to take classes at any school. This could open a new floodgate of cancellations as the pace of school closures picks up.

And from us: The payment of salary for foreign instructors and contracted Japanese part-time workers, which was due on September 15, was finally completed this afternoon. Compensation was thus nearly two weeks late.

Pay for salaried workers was due on September 27, and has not yet been effected. It is now just over 48 hours late.

News and information continues to dribble from the Japanese media, and they are starting to pick up on the story as Nova’s management continues its downward spiral of bungled business decisions. The pressure to declare bankruptcy will only mount as the days pass, especially should the media seriously start twisting the blood out of the towel. If you think of the media as insatiable hounds, count on their ability to detect the stale whiff of fear, cowardice and corruption in the coming days and weeks.

Can’t afford to do background checks on your clients? Fuhgettaboutit

The top headline on the Yomiuri’s English site today was Brokerages aim to cut ties with gangs, which may or may not sound more sensationalist than it really is. At any rate, it is a tad misleading. The brokers themselves are not behind this effort, as the article’s first sentence points out: The “Japan Securities Dealers Association (JSDA) will prohibit securities firms from letting gang members open brokerage accounts and punish violators of the rule.”

We then learn that a mechanism for identifying accounts that should not be allowed is hoped to be in place “as early as fiscal 2008.”

The JSDA has no formal rule banning its members from dealing with known criminal groups.

“Keep moving, nothing to see here…”

Japanese robots in the news again; elderly aren’t buying them

Personally, I never bought the line that Japan was in a rush to develop robots to care for its elders in order to provide them with personal care and attention that would not have to possibly be provided by a foreigner. Of course, with Japan’s upcoming demographic crunch, it’s probably not a bad idea to mechanize some repetitive, low skill tasks - such as…ahem…making sushi.

Ok, that’s half tongue in cheek. But the point is this: over the past two years or so, I have seen several articles in the foreign media, including a notable one by the Economist, state that one of the driving factors behind Japan’s research and development in the robotics field was due to the fact that elderly Japanese people would rather be taken care of by a robot than a foreigner.

This is hogwash, of course. Last week, a article entitled Japanese wrinklies spurn robot helpers appeared in The Register. My first reaction was, “Well, they can’t afford them right now.” My second reaction was, “Who let that headline through?”

The article cites a recent Reuters article that dealt with the issue of poor robot sales. Reuters quotes Ruth Campbell, a social worker in Tokyo, as saying:

Most (elderly) people are not interested in robots. They see robots as overly-complicated and unpractical. They want to be able to get around their house, take a bath, get to the toilet and that’s about it.

What do they want? Simpler, easier tools with big buttons and loud audio (Hey Apple, get the iPhone over here now). But seriously, the problem seems to be that Japan’s manufacturers simply don’t know what the market actually needs or wants. Reuters tells us:

Kitchenware maker Zojirushi Corp. offers the i-pot, an electric kettle equipped with a radio transmitter that sends e-mail twice a day to relatives to let them know if Grandma has made tea. Some 3,300 of the devices are in use across Japan.

That’s stupid. How could people sit in meetings and say, “That will sell” to each other? These products are still expensive and too difficult for elderly people to use. Also, it doesn’t help when their functionality is stupid to begin with.

Zojirushi, free advice: Find out what the market wants and build it for them. You’re not a particularly innovative firm, never have been, and you don’t need to be - nor do your customers expect it. Your products make hot water; by all accounts, Neanderthals pulled this one off. Make a pot with a huge button that says, “ON” and “OFF.” Hell, I’d buy it.

Another simple lesson: Keep products and services in tune with needs and desires.

Daylight savings coming to Japan? And Korea?

Back in August, it was announced that Japan and Korea would work together in order to explore options for putting in place a daylight savings system (which is called “Summer Time” in Japan). Obviously, Japan and Korea have had trouble working together in the past, but could this be an issue they manage to get something accomplished on?

It might seem like an easy project: daylight savings would save energy, and with Japan falling short of its Kyoto Protocol goals, progress needs to be made. With the sun rising just past 4am in Tokyo during the summer, daylight savings seems like a no-brainer.

Now, the Japanese government is considering the idea, with the Ministry of Economy, Trade and Industry leading the push.

Opposition to daylight savings time, however, remains. It has been tried before in Korea, in 1986 and 1988. In Japan, Hokkaido has experimented with a voluntary daylight savings time. At the same time, unions oppose the idea on the grounds that it will lead to more unpaid overtime, since workers will feel as though they will have to work an hour later.

I’ve heard the same for farmers as well. I’ve also heard that Japan’s rice will not know when to grow if the clocks change. Hopefully Japan and Korea can get the ball rolling on this obvious step towards reduction of energy consumption.

NHK reports on Nova teachers unpaid; no mention of staff going unpaid today

Sales at chain restaurants up by 1.7% in August

Earlier today, the Japan Food Service Association announced that sales at the nation’s chain restaurants rose 1.7% in August against the same month last year. Sales at fast food chains led the charge, showing a 7.4% rise, with a massive 18.6% increase at Japanese-style fast food chains.

This is great news for the industry, as chain restaurants have generally been seeing a decline in sales over the past five years. In July, we saw a 1.3% increase year-on-year. We will be watching carefully for this one next month to see if a trend can take hold.

The Nova Situation: Japan Economy News in the Japan Times and on Radio New Zealand

First, word is out that Nova’s titled instructors have not yet received the pay that was due September 15. With staff pay being due in two days, how much longer is left for Nova?

Over the weekend, I was interviewed for an article by Ben Stubbings of the Japan Times called Is it all over for Nova? And about fifteen minutes ago I finished a phone interview with Corin Dann of Radio New Zealand’s Morning Report. That will air on Radio New Zealand tomorrow morning from 8am NZ time - 5am in Japan.

And finally, if anyone’s interested: Trans-Pacific Radio is looking for people who work for Nova to be interviewed for an upcoming piece on the company. Details on their site.

New issue of Japan Inc is out!

I have to apologize for the spotty posting over the past week or so, but I’ve just returned from a productive trip to the US. Hopefully things will get more on the track to normalcy over the next few days.

At any rate, the new issue of Japan Inc is out, along with the first edition of my new back page column, called “Back & Forward.” This edition of the magazine is the legal special, and includes articles on the lay judge system, intellectual property law in Japan, and a legal services directory.

It’s a good read, so pick up a copy if you get a chance!

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