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

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

Subscribe

Japan household spending down 1.8% in June; Spending on durables in negative territory

According to the Ministry of Internal Affairs and Communications, Japan’s household spending fell by 1.8% in June. Although the drop was smaller than had been generally forecasted, it does represent the fourth consecutive month in which household spending has fallen year-on-year.

In May we saw a fall of 3.2% after a drop of 2.2% in April and 1.6% in March. The Ministry also tells us that average household income declined 2.1% against June of 2007, falling to 737,166 yen. June income seems high when compared to other months due to the summer bonus being received in June. This year saw the average bonus falling for the first time in six years, though the decline was only 0.08%. A separate report from the Ministry of Health, Labor and Welfare showed overall wages falling 0.6% in June.

Here’s a breakdown of spending per category, along with changes against June of last year: Read more

Japan’s consumer price index up 1.9% in June, for 9th straight monthly increase

With a 1.9% jump in June, Japan’s core consumer prices have now risen every month so far this year, and for nine consecutive months overall, according to data released by the Ministry of Internal Affairs and Communications last week. Until September 2007, we had seen the exact opposite; Japan’s core consumer prices had fallen for nine consecutive months until that point.Last summer, Bank of Japan officials shrugged off the continually falling CPI by saying that lower energy prices had not yet been worked out of the CPI

Of course, Japan includes energy prices as part of its core CPI, and we have now seen for two straight years that it is necessary to keep track of not only “core” consumer prices, but also what the CPI looks like when energy is also stripped out. Here’s a breakdown of CPI categories for June:

• June general nationwide consumer price index: +2.0%
• June general nationwide consumer price index (excluding rent): +2.3%
• June nationwide core CPI (excluding fresh food): +1.9%
• June nationwide consumer price index (excluding fresh food and energy): +0.1%

Thus, with fresh food and energy prices stripped out (Japan also strips out the prices of alcoholic beverages, which have been on the rise), we see a 0.1% increase for the second time this year. This is only the second increase seen in this category over the past decade.

Here’s a breakdown of price increase by major category:

• Fuel, light and water charges +6.8%
• Transportation and communication +4.3%
• Food +3.6%
• Education +0.7%
• Miscellaneous +0.6%
• Clothes and footwear +0.5%
• Housing +0.2%
• Furniture and household utensils -0.4%
• Medical Care -0.5%
• Reading and recreation -0.6%

These figures are little changed from May. The same categories that rose in May rose again in June. Those that fell in May also fell in June. The largest differences can be found in the top three rising categories, which all saw increases at least 1% higher than a month ago.

Looking at individual categories, about 60% of products surveyed saw a rise in prices. Transportation expenses are pushing up the prices of fresh food as well; carrots, negi and spinach all cost over 10% more than a year ago.

The big question now is whether or not core CPI will see a jump above 2.0% in July, as 2.0% is what the Bank of Japan’s policy board considers to be the upper limit of price stability. We are looking for a boost above the 2.0% level. Few expect to see a rate hike in August or September, but could the BOJ’s hand be forced by its own policy?

Record number of foreign tourists visit Japan in January-June 2008 period

In 2007, 8.35 million foreign tourists visited Japan. According to data released today by the Japan National Tourist Organization, the first half of 2008 saw about 4.33 million foreign tourists enter the country, which was a 10% gain on 2007 figures.

The Japanese government has very clearly stated its goal to continue seeing an increase in the number of tourists coming to Japan from foreign shores. As we covered previously, the government has set targets of 10 million visitors by 2010 and 20 million by 2020.

In terms of numbers, visitors from South Korea made up the largest group, with 1.32 million visiting Japan from January to June That figure was up 8.1% on the year. The largest percentage rise was seen from Hong Kong, which sent an increase of 36.7% more travelers, to hit 267,000. Read more

Is Japan really headed for recession?

This is obviously a huge question right now. I have held that Japan might experience slow GDP growth, and perhaps another negative quarter or two over the coming year, but using the traditional definition of two negative quarters in a row - I have found that result difficult to believe so far. Stock market drops and yield curves, combined with Japan’s unemployment rates seem to make a recession (according to the traditional definition) a difficult position to project with full certainty. Nonetheless, leading economic indicators are not positive, and that certainly leaves the door open to speculation.

Edward Hugh has a very convincing argument that recession might hit Japan, and his analysis is based upon data showing sluggish exports, which absolutely might impact Japan’s GDP in a negative direction. Mr Hugh’s thoughts are very much worth a read at this point in time. I agree that sluggish consumer spending is going to hurt Japan for some time to come, but will these declines in exports hold up? Will Japan be hit with negative GDP growth for two consecutive quarters? Only time will tell.

Japan convenience store sales up 4.2% in June, higher sales projected for July

While sales at both department stores and supermarkets continued to flounder in June, sales at convenience stores rose 4.2% year-on-year in June after having posted a 3.7% increase in May. According to data released by the Japan Franchise Association, sales at the nation’s convenience stores came to 648.7 billion yen in June, which was just lower than the 648.8 billion yen seen in May.

The future looks even brighter for convenience store sales. Reuters is reporting that the Taspo ID system, which must now be used nationwide to purchase tobacco products at vending machines, is providing a boost to tobacco sales at convenience stores. July’s sales increases are projected to surge into the double digit range.

Share prices at major supermarket chains Family Mart and Lawson are up 22% over the past quarter, as the market anticipates what could be the highest sales growth posted in the past decade at many convenience store operators.

One interesting part of the Reuters article: While department stores and supermarkets continue to blame bad weather for their decline in sales, “price hikes at supermarkets and favourable weather have helped sales [at convenience stores].”

Of course, growth from tobacco sales will be filtered out of the system in a year’s time, and Japan’s convenience store chains are still going to have to find ways to continue increasing revenue, which means we still expect to see Japanese convenience store firms make further attempts to establish overseas operations.

Japan’s June supermarket sales down 0.9%

Japan’s supermarket sales fell for the third consecutive month in June, sliding 0.9% to 1.08 trillion yen, according to the Japan Chain Stores Association. These figures follow a 1.1% fall in May. Actually, when new shops (those opened within the past year) are included in the data, supermarkets saw a 5.0% decline in sales.

As we continue to see almost every month, outside of food sales, supermarkets are not doing very well at all. Here is a breakdown of June’s adjusted figures:

• Food: +2.4%, 62.0% of total revenue
• Household Products: -4.5%, 19.6% of total revenue
• Clothing: -9.8%, 12.2% of total revenue
• Miscellaneous Items: +2.0%, 5.9% of total revenue
• Services: +0.2%, 0.4% of total revenue

Sales per square meter fell 2.8% to 47,745 yen. Read more

Japan’s labor force: Lower bonuses, more part time workers

The Ministry of Health, Labor and Welfare’s most recent report on the state of Japan’s labor force is not encouraging. According to the report, 6.2% of Japan’s workers are satisfied with their current pace of pay increase, compared to 15.7% in 1990. We also see that since 2001, the proportion of Japan’s workforce categorized as part-time workers has increased from 38% to 44%.

Those reporting seeing an increase in salary fell from 23.7% in 1978 to 6.2% in 2005, while those who found their jobs to be meaningful fell from 30.5% to 16.6% over the same time.

For those workers who are lucky enough to be on salaried status, this summer’s average bonus will be down on the average for the first time in six years, though the decline is only 0.08% to 909,519 yen. In the food industry, however, bonuses are projected to fall 5.38% to 781,057 yen. This might give something of a clue as to how food companies are managing to avoid passing on the full costs of increased production directly to consumers in the form of higher prices.

Bonuses appear to be split right along the manufacturing line. Those working at manufacturing firms will see an average 0.2% rise in their bonus, to 932,782 yen. On the other hand, those working at non-manufacturing firms will see an average 1.51% fall, to 840,098 yen.

The ministry also said that merit-based wage systems are contributing to an erosion in worker satisfaction, as they are often being used by firms as a cost-cutting measure. The ministry would like to see more transparent evaluation systems as well as the limiting of merit-based pay systems to those sectors in which it helps to increase worker satisfaction.

The government is also planning to push small and medium sized firms into adopting corporate pension plans. Currently, some 32,826 firms make use of the government’s qualified pension plan. Most of them are small and medium sized enterprises. The plan is set to be abolished in 2012.

Meanwhile, more trouble has been found at the ironically-named staffing company Goodwill Group. According to the Yomiuri, the firm booked 1 billion yen in hush money as an expense when making a 3 billion yen retirement payoff to the president of Crystal, a company it acquired in 2006.

Koizumi’s dream of a balanced budget officially dead: Cabinet Office

Just over two years ago, Prime Minister Junichiro Koizumi announced his goal that Japan would have its national budget balanced by 2011. That isn’t going to happen.

Although most observers probably never expected it to happen, the Cabinet Office announced today that rather than having a balanced budget, it expects to see Japan saddled with a budgetary shortfall of 3.9 trillion yen in fiscal 2011. At the same time, this year’s GDP growth forecast was reduced from 2.0% to 1.3% (Last week, the Bank of Japan revised its projections down to 1.2% from 1.5%). Predicted growth in capital spending for this year was revised downward from 3.3% to 0.6%. The rise in consumer prices was revised upward from 0.3% to 1.7%. Consumer spending was revised downward from 1.3% to 1.0% - we need to bear in mind that household spending was down 3.2% in May, down 2.7% in April, down 1.6% in March, flat in February and up 3.6% in January. That looks like a nasty trend.

In January, the Cabinet Office estimated Japan’s national debt at 700 trillion yen. That’s now estimated to be at 778 trillion yen by fiscal 2009.

The real killer from the government’s perspective is that tax revenues are expected to be down, and that this could lead to hikes in consumption and other taxes. While this talk is going on, we also see that the Cabinet Office wants to encourage Japan’s households to dump their 775 trillion yen in deposit assets into the financial markets. Read more

Shibuya’s Butlers Cafe makes CNN

Financial markets are closed today, so here’s the latest mass-media fluff piece to be done on Japan:

CNN is reporting on the “Butlers Cafe” staffed with western men in Shibuya with the sub-headline, “Japan’s women go ga-ga over a cafe filled with Western servers.” ¹

The two customers definitely could have played along and seemed a bit happier to be there.

¹ The headline itself is actually, “White man cafe in Tokyo.”

Butlers Cafe website

Japan’s department store sales down 7.6% in June

Despite strong gains in department store sales in Shinjuku immediately following the opening of the new Fukutoshin subway line on June 14, department store sales fell 7.4% in Tokyo and 7.6% nationwide in June. According to the Japan Department Stores Association, 588 billion yen in sales were rung up across the country in June, at 280 department stores owned by 93 companies.

June was the fourth consecutive month with a decline in sales, and five out of the first six months of this year have seen a decline so far. Once again, the JDSA is citing bad weather as a reason for the decline in sales. Here’s a breakdown for June sales figures by category: Read more

Next Page »

Copyright © 2006-2008 Japan Economy News

Disclaimer