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Japan’s consumer price index jumps 2.4% in August; retail sales showing slow growth

Data released last week by the Ministry of Internal Affairs and Communications showed Japan’s core consumer prices up 2.4% compared to a year ago, matching the figures seen in July. Core consumer prices have now risen for 11 straight months.

Because Japan includes energy prices as part of its core CPI, it’s also helpful to look at what the CPI looks like with energy stripped out. Here’s a breakdown of CPI categories for August: Read more

Draft of the Emergency Economic Stabilization Act of 2008

For those eagerly awaiting an exciting read, here’s the most recent draft of the “Emergency Economic Stabilization Act of 2008.” (PDF)

Full name: “A Bill for the Federal Government to purchase and insure certain types of troubled assets for the purposes of providing stability to and preventing disruption in the economy and financial system and protecting taxpayers, and for other purposes.”

“Protecting taxpayers” is buried pretty far down that list, it seems to me.

BizCast #15 published at Trans-Pacific Radio

Happy Monday! Just a quick announcement that BizCast Japan #15 has been published over at Trans-Pacific Radio.

I was also interviewed for a piece in this week’s Newsweek magazine on the potential impact that new Prime Minister Taro Aso might have on Japan’s economy.

Japan’s convenience stores loving the Taspo card; sales up 7.5% in August

Despite the continued fall in department store and supermarket sales, Japan’s convenience stores have held up fairly well over recent months. This summer, an additional windfall hit the nation’s convenience stores. The implementation of the Taspo ID card, which must be used to purchase cigarettes at vending machines nationwide, has driven consumers to make their purchases at convenience stores, as adoption of the Taspo card apparently remains low.

After seeing a 14.0% rise in sales in July, Japan’s convenience stores saw a 7.5% rise in August, according to the Japan Franchise Association. Unlike supermarkets, which are contracting in number, the number of convenience stores in Japan increased by 1.5%, from 41,047 a year ago to 41,645 last month. To put that in perspective, Japan has about 1 convenience store for each 3,000 residents.

Japan supermarket sales down 1.0% in August

After seeing a 0.9% rise in July, Japan’s supermarket sales slid 1.0% in August to 1.11 trillion yen. With the decline in August, Japan’s supermarket sales have now fallen for 20 of the past 32 months.

Here is a breakdown of August’s adjusted figures (not including stores opened within the past twelve months): Read more

Subprime buyins: Nomura at Lehman’s, Mitsubishi at Morgan Stanley

As I noted in the most recent edition of Seijigiri over at Trans-Pacific Radio, on September 16 Lehman Brothers failed to make a 121 billion yen payment to the Ministry of Finance for 2 year bonds that it had agreed to purchase at auction. In addition, another 288.5 billion yen in 5 and 10 year government bonds were bid for but never paid for. The Ministry of Finance, however, apparently does not plan on making any addition bond issuances, as the non-payment for these bonds amounts to about 0.3% of this year’s total planned issue.

In other news, it appears that Nomura has bid successfully to take over Lehman’s Asia operations. Lehman was also the lead underwriter for the Urban Renaissance Agency’s planned issuance of 40 billion yen worth of bonds later this week (Remember them? Chaired by former Prime Minister Shinzo Abe, the Urban Renaissance Agency were leading the operation to build a foreigner-friendly financial district in Tokyo). Nomura will now manage the issue of these bonds.

At any rate, the Nomura buyout of Lehman’s operations reportedly cost the firm just over 20 billion yen. From December to May, Lehman’s Asia-Pacific operations posted revenues of about 147 billion yen. Although the purchase does not include real estate assets, it still gets Nomura a boost in the Asia market, where it has made some inroads in recent years. The big question now will be how many of Lehman’s former 3,000 employees in the region Nomura will be able to keep on deck. Read more

Japan’s consumer confidence hits all-time low for third straight month in August

Last month we noted that it was in the government’s best interest to show the public that it was serious about putting together some form of economic stimulus package if it hoped to restore confidence in Japan’s consumers, whose spending makes up about 55% of GDP. Nothing of the sort happened.

Thus, it comes as no surprise that in August, Japan’s Consumer Confidence Index declined for the fifth month in a row and hit a new all-time low for the third consecutive month.

The Consumer Confidence Index itself contains five scores, each of which is considered positive when above 50, and pessimistic when below the 50 mark. Here’s a breakdown for August figures, with the change from last month:

• Consumer Confidence Index: 30.1 (-1.3)
• Overall Livelihood: 28.5 (-0.8)
• Income Growth: 35.0 (-1.3)
• Employment: 28.4 (-2.3)
• Willingness to buy durable goods: 28.3 (-0.9)

Once again, all five scores have fallen. The “Employment” category has been battered over the last three months, having fallen 6.5 points over that time. For the sake of comparison, let’s take a look at how each score has changed compared to where they were a year ago:

• Consumer Confidence Index: -13.9
• Overall Livelihood: -13.4
• Income Growth: -7.4
• Employment: -18.6
• Willingness to buy durable goods: -17.2

The drops in “Employment” and “Willingness to buy durable goods” are particularly worrisome. Once again, it cannot be said that the government is taking any concrete steps to reassure consumers, although its options are heavily limited. Last month we noted that the government would have put some believable proposal on the table in order to help restore public confidence.

In the interim, Prime Minister Fukuda announced his resignation and the ruling party has been focused almost entirely on itself as it goes through the process of finding a new leader. It seems clear now that Taro Aso will be the next prime minister, and his penchant for deficit spending (ie, public works, pork and favoritism) versus fiscal control is unlikely to win confidence points amongst the public at large. In October we will likely hear that the Consumer Confidence Index dipped below 30 points for the first time ever in September.

Central Tokyo office vacancies up for seventh straight month in August

In late August, real estate consulting firm Miki Shoji announced that average office rents in Tokyo had fallen for the first time in 25 months when compared to the figure from the previous month. Although the decline was slim - 0.03% - it speaks volumes about the state of Tokyo’s office rental market.

Vacancy rates in the downtown Tokyo are have been on the rise for seven straight months, and they hit 3.86% at the end of August, again according to Miki Shoji. In July, central Tokyo’s vacancy rate went above 3.5% for the first time since early 2006. At the same time, Miki Shoji’s August data shows that advertised rents increased slightly on July’s, by 0.18%.

Compared to year-on-year figures, rents are still high: August’s 22,901 yen per tsubo (about 3.3 square meters), is 8.56% higher than a year ago.

Miki Shoji’s report hints that companies are downsizing to smaller offices, or holding off on any expansion. At the same time, a rise in vacancies has been noted at luxury offices.

Japan department store sales down 3.1% in August

According to data released yesterday by the Japan Department Stores Association, sales at the nation’s 280 department stores fell 3.1% in August, showing a decline for the sixth consecutive month.

Once again, the JDSA is citing bad weather as a contributor to the decline in sales, and there was quite a stretch of rain and thunderstorms at the end of August. Here’s a breakdown for August sales figures by category:

• Clothing: 31.6% of total sales, down 4.3%
• Personal Effects: 12.9% of total sales, down 3.6%
• Miscellaneous Goods: 15.7% of total sales, down 1.6%
• Household Goods: 5.3% of total sales, down 8.9%
• Food: 28.0% of total sales, down 0.3%
• Services: 1.2% of total sales, down 3.4%
• Other: 1.6% of total sales, down 12.5%
• Gift Certificates: 3.3% of total sales, down 12.2%

Notably, food sales fell for the second month in a row after having had several strong months of increase.

Japan’s markets spared from Monday trading

Japan’s markets are closed for the national holiday, and Steven Towns explains why that’s a good thing over at Seeking Alpha. Still, Tuesday might not be much better. The US markets open in a few hours and large drops are expected. It’s not crazy to suggest that the Nikkei could move back below 12,000 points sometime before Tuesday’s lunch break.

And over at Alpha Sources, Claus Vistesen has posted a must-read entitled Japan - The Recession is Here.

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