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October consumer price index up 1.0 percent, first rise this year

Earlier today, the Statistics Bureau announced that Japan’s core consumer price index had risen 1.0% in October. This was the first rise seen in 2007.

The rise, however, appears to be on the back of increased fuel costs, especially for gasoline. Core CPI in Japan excludes fresh food but includes energy costs. Gasoline prices rose 3 percent in October, while household electric bills went up 1.4% on average.

With energy costs stripped out, CPI was down 0.1 percent.

When food costs are factored in, the CPI saw a rise of 0.3 percent.

Downward pressure on prices continues to be provided by home electronics. In October, flat-panel TV prices fell 17.1 percent, laptop prices fell 28.4 percent, and desktop computers saw a 16.6 percent drop in prices.

We don’t see these figures as providing the Bank of Japan with grounds enough to raise interest rates in December.

At a press conference this afternoon, Minister of Economy and Fiscal Policy Hiroko Ota stated that Japan was still in deflation, telling reporters, “The consumer price situation basically hasn’t yet changed.” Concerning the consequences of higher food and fuel prices, Ota expressed fear that they “could erode consumer confidence and business sentiment at small and medium-sized enterprises.”

At his press conference, Finance Minister Fukushiro Nukaga stuck to stating the obvious:

The consumer price index rose from a year earlier. I would like to keep closely monitoring how high oil prices will affect overall price conditions. I will do the same for job conditions.

In other words, he plans on showing up at work.

Industrial Output up 1.6 percent, reaches all-time high

Export demand is still strong, apparently. According to figures released by the Ministry of Trade, Economy and Industry today, industrial production rose 1.6% in October against the same month last year, and hit an all-time high.

With Toyota leading the charge by raising production by 12.9 percent, the ministry said that exports of autos and semiconductors are on the rise, and expressed hope that industrial production would remain high in the coming months. Exports have remained strong despite the fear of slowdown in the US economy, as Japan continues to move more products into developing countries, and especially into Asia.

Domestic consumption, however, remains a back-burner worry; wages are down on the year and unemployment slightly up over the past few months. With unemployment and household spending figures due out tomorrow, a better picture of projected year-end domestic expenditures will start to come into focus.

2008 Tokyo Michelin Guide sold out already

This year’s easy Christmas gift is gone from the shelves, at least for now.

It seems that Michelin understands the pattern well: get ready to roll your product out in Japan, have the PR people place (or provoke) a few quotes in the media about how foreigners ‘don’t understand’ or ‘can’t understand’ some aspect of Japan to pique interest, and then hit the shelves with an under supply of product.

The 2008 Michelin Tokyo Guide has already sold out. It only took two days. The Krispy Kreme model, which still has people standing in line outside of a doughnut shop (now 2), seems to have been adjusted and put into play well here. The second printing should sell out like hotcakes as well.

The Nikkei also tells us that Hiramatsu, a restaurant group that had five of its restaurants awarded one star by the guide, is rushing to open more locations. Company President Hirotoshi Hiramatsu told the Nikkei, “Like Moody’s ratings for industry, these stars are a sign of excellence and directly influence the restaurant business.” No mention of quality management strategies during expansion is made in the article, probably for a good reason.

A quick look at Michelin’s Japanese website shows a nice first page, followed by some fairly rough looking design. I also couldn’t get the ‘concept movie’ to load.

If you’re interested in seeing which restaurants in Tokyo were ranked, there’s a list online at the Michelin site. That one shouldn’t sell out.

10% of Japan’s population now over 75: Statistics Bureau

In 1950, 1.3% of Japan’s population was over the age of 75. Today, that same group of people make up over 10% of the population, according to the Ministry of Internal Affairs and Communications. Thus, as the Japan Times sums it up, “As of Nov[ember] 1, Japan’s population was estimated at 127.79 million, with 12.76 million…aged 75 or older.”

On the other side of the birthday cake, those aged 14 or younger accounted for 13.5% of the population as of November 2007. In 1950, that same age group represented 34.5% of the population.

As the chart to the left (click for a full-size view) indicates, Japan’s population is growing increasingly top-heavy. In a draft copy of its annual policy statement released yesterday, the Cabinet Office stated:

The state of the country’s public finances is extremely severe and it is apparent that future generations will be forced to bear a bigger burden as the population further shrinks and ages.

The paper goes on to recommend a 3 percent cut in public spending, which may leave some scratching their heads, since Japan’s politicians - especially in the ruling Liberal Democratic Party - have been calling for the exact opposite; they would like to put public spending on the rise, in order to please their constituencies with jobs and money, with the endgame being to hold off the rising opposition Democratic Party of Japan.

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Japan Economic Reports Page

We’ve finally added it to the menu above - the page listing Japan’s economic reports, websites where they can be found, and links to commentary on the reports here at Japan Economy News. The list isn’t quite completed - I still have to get the automotive and some of the retail reports in there, but once the categories are re-organized, it will all be up there soon. For now, they’re arranged alphabetically, but I’m open to suggestions on other ways to organize them…

Two links added to our blogroll

Actually, I should have added these two links a long time ago, but I’m just getting around to the housecleaning I need to do. For those who follow Japan’s economy, Japan Economy Watch is an excellent source of commentary that posts a good amount of helpful charts. It’s a group blog with three contributors, so there is some collaboration going on.

One of those contributors is Claus Vistesen, who writes his own blog called Alpha-Sources-CV. Claus’ blog does not focus solely on Japan, so there is a wider viewpoint of the global economy being commented on here.

Future of Japan’s workforce looking gloomier than expected: Ministry of Health, Labor and Welfare

On Friday, the Ministry of Health, Labor and Welfare announced more gloomy news for the future of Japan’s economy. According to the Ministry, Japan’s labor force stands to fall by 4.4 million workers over the next decade, and could lose up to 10.7 million workers by 2030. The ministry also stated that if measures were taken to allow women, elderly people and young people to find work more easily, the loss to the workforce over the coming decade could be limited to one million workers.

The ministry reported that in 2006, 48.5% of the nation’s women of working age held jobs, a decline of 1.5% from 1996. The ministry also claimed that workers facing mandatory retirement ages see less and less of an incentive to return to work, as companies continue to re-hire them at lower wages.

Immigration was not mentioned as a potential step to take against the reduction of the size of the workforce, and thus we find little reason to suspect that any sort of immigration plan or reform will be included in government plans to prevent the size of the workforce from shrinking at a slower rate.

New Michelin guide names 8 3-star restaurants in Japan

Last week, French tire maker Michelin released the first-ever Tokyo edition of its restaurant guide. In all, the reviewers named 8 three star, 25 two star and 117 one star restaurants in Tokyo. This compares to 39 restaurants with at least one star in New York, and 64 in Paris.

Those reading the story would be forgiven for instantly understanding that market pandering that is going on; Michelin had to do something to stroke the ego of the home country in this case in order to actually move copies off the shelves. The trouble seems to be that professionals are actually fooled by this marketing tactic. The Asahi quotes Toyoo Tamamura, 62, an essayist well-versed in French food culture as saying, “The quality of Tokyo cuisine is higher than in Paris.”

We don’t know anything about Tanamura’s qualifications, but we wonder if she was part of the group that just a few weeks ago complained that that Michelin had no place doing a restaurant guide in Tokyo because there was no way their people could understand Japanese food.

On the other hand, is it possible that Tokyo cuisine is better than in Paris? I think so, but that’s a matter of personal taste. One thing’s for sure: I don’t need a guidebook to tell me that I cook my favorite food in the city.

More food for thought on Japanese wages

Morgan Stanley’s Takehiro Sato and Takeshi Yamaguchi published a must read for those interested in wages in Japan over at the Global Economic Forum. A sample:

[T]he primary characteristic of the current economic expansion has been the lack of macro wage upside despite improved employment, mainly due to issues at small businesses. Monthly Labor Survey data indicate that wages have not dropped much at businesses with 30 or more employees but are clearly lower for businesses with less than 30 employees. We think that wage softness at small businesses is a factor hurting consumption activity. Yet there is no obvious solution at this point, considering the direct adverse impact of the upswing in resources and energy prices on these small businesses.

They also expect core CPI to be on the rise from November, though this rise seems primarily tied to higher oil prices. Will this mean even lower scores in the Economy Watchers’ Survey and for the Consumer Confidence Index come year-end?

Disney and Softbank partner to offer cellular services

This isn’t exactly brand new, but we thought it might have been an April Fool’s gag in November: Disney, Softbank to Start Japan Mobile-Phone Service.

Bloomberg quotes an analyst from Nomura as saying that the challenge here would be in keeping down the prices of the handsets, but no figures are stuck to the article. Japan Marketing News has offered its thoughts on the plan in a post worth reading. A short bit:

Given the ever-present popularity of things cute in Japan, and the broad appreciation for all things Disney, the idea of Mickey Mouse and Donald Duck phones and services is certainly feasible, perhaps more so than in any other country. After all, it is not at all unusual to see Japanese adults carrying Disney-branded bank cards or office supplies, and many Japanese are already using Disney phone straps and downloading Disney mobile content to their existing DoCoMo and au phones.

I’m wondering if we’ll see Brad Pitt, Cameron Diaz, Aya Ueto, Hello Kitty, a bunch of Disney characters, the ni-chan guy, the white dog they call dad and the mom all together in a Softbank/Disney ad that might just vaporize viewers with its sheer incomprehensibility. As we know, Dentsu makes Softbank’s ads.

They also make DoCoMo and AU’s ads.

This really, seriously, better make money for all partners involved.

I’m also vaguely remembering that Disney and Apple are at odds. Still waiting for AU to announce that they’re bringing the iPhone to Japan…

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