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Japan November household spending down 0.5% as spending on services stays in the red

According to data released yesterday by the Ministry of Internal Affairs and Communications, Japan’s household spending fell 0.5% in November on a year-on-year basis. November is thus the ninth consecutive month in which household spending has declined.

Average spending at households with two or more persons came to 284,762 yen, down 0.5% from a year ago, while spending at those households with a worker as head of household increased 1.2% to 310,146 yen. Wages at workers’ households fell 0.3% to 439,394 yen.

In terms of spending at households with two or more persons, here’s a breakdown by category:

• Transportation & communication: 37,935 yen (+11.0%)
• Culture & recreation: 30,290 yen (+4.3%)
• Clothing & footwear: 15,547 yen (+1.3%)
• Food: 68,510 yen (+0.5%)
• Housing: 16,992 yen (+0.1%)

• Furniture & Household Goods: 10,136 yen (-1.1%)
• Medical care: 13,544 yen (-2.2%)
• Fuel, electric and water: 20,302 yen (-4.3%)
• Other: 63,002 yen (-7.1%)
• Education: 9,506 yen (-8.7%)

In October, only education spending had shown an increase; in November half of the categories increased while half declined, just as they had in September. While transportation, communication and recreation spending contributed most heavily to the increase in household spending, the source of downward pressure on household spending figures is more difficult to pinpoint, as it lies primarily in the vague “other” category.

To get a better look at where the downward pressure on household spending lies, here’s our table tracking the past year of spending on goods and services:

	Goods and Services	Goods Only	Durable & Semi Durable Goods	Services Only
December 2007	+2.34%	+0.99%	+.97%	+4.20%
January 2008	+4.39%	+2.98%	+8.09%	+6.40%
February	+1.30%	+4.76%	-3.65%	-3.28%
March	-0.90%	-0.51%	-10.41%	-1.43%
April	-1.16%	-0.10%	-6.56%	-2.35%
May	-1.94%	+2.68%	+8.26%	-7.64%
June	+1.08%	+1.31%	-1.92%	+0.75%
July	+0.20%	+0.56%	+2.25%	-0.29%
August	+1.01%	+0.03%	+3.01%	-5.87%
September	+1.51%	+1.23%	+1.54%	+1.89%
October	-0.07%	+1.62%	+5.27%	-2.14%
November	+2.11%	+4.58%	+13.31%	-1.14%

In November, spending on goods and services totaled 251,790 yen. Spending on goods was at 146,570 yen, with durables and semi-durables consisting of 41,836 yen of spending on goods. Meanwhile, total spending on services was at 105,220 yen.

When goods and services spending (251,790 yen) is subtracted from the total figure (284,762 yen), we have a leftover 32,972 yen, which does not correspond to any of the categories listed and remains unexplained on the ministry’s excel sheets. There is a figure labeled “miscellaneous” which lists 21,044 in spending above the total household spending figure. At any rate, subtracting spending on goods and services from total household spending in November 2007 leaves us with a gap of 36,260 yen. Thus, while the drop in spending on services may not seem strong enough to put heavy downward pressure on household spending, it appears to be supported by a 9.07% drop in the mysterious “gap” of spending that lies outside of spending on goods and services, yet is still part of household spending - though apparently unspecified in the data.

Japan’s core CPI up 1.0% in November, flat with energy costs stripped out

After seeing rises of 1.9% in October, 2.3% in September and 2.4% in both July and August, Japan’s core consumer price index cooled to 1.0% in November, according to data released today by the Ministry of Internal Affairs and Communications. November was thus the fourteenth consecutive month in which Japan’s core consumer prices have seen an increase.

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

Merry Christmas! Isuzu cut your salary!

With Toyota cutting 750 billion yen from its fiscal 2008 profit projections, and seeing its output drop for the fourth straight month in November, it’s no longer any surprise that Japanese automakers are cutting back on just about any and all expense.

But Isuzu takes the cake, leaking to the Nikkei on Christmas Eve that it plans to cut salaries for all employees by about 8,000 yen. Of course, this is better than staging mass layoffs - if they can be held off, and we do find some solace in the fact that executive compensation will be cut by about 30%. Still, the average unionized Isuzu employee makes only about 300,000 yen per month, and previous pay cuts in 2002 only generated greater profits for the firm, which makes one wonder about the competence of union leaders - Isuzu’s operating profit hit an all-time high in FY2007, after increasing for five consecutive years.

In November, Isuzu decided to eliminate every contract worker - all 1,400 of them. Pressure from workers, however, has led the firm to not terminate work contracts for contract workers before they expire.

Japan supermarket sales up 0.6% in November - though down 2.8% when all shops counted

While the yen’s recent strength against the dollar has been a cause for worry amongst Japan’s exporting industries, a few of the nation’s supermarkets have turned the situation to their advantage. Aeon, Japan’s largest retailer, has been holding “Strong Yen Sales” with markdowns on imported wines, meat and fish.

Has this marketing strategy been successful? It’s difficult to gauge its direct impact on supermarket sales, but according to the Japan Chain Store Association, supermarket sales in Japan rose 0.6% in November, showing their first rise since this July - and only the third rise in the past 35 months.

While headlines announced a rise in supermarket sales for November, it’s worth noting that these are the adjusted figures, and do not include supermarkets opened within the past 12 months. When those shops are included, we see a 2.8% fall against figures from a year ago - and the same was true in both July and February, the other two months this year in which a “rise” in supermarket sales was reported.

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

Japan department store sales slide 6.4% in November

According to a report released by late last week by the Japan Department Store Association, sales at Japan’s 280 department stores fell 6.4% in November, to about 649.13 billion yen. Nationwide department store sales have now fallen for nine consecutive months, and there was one less shop in operation than last month.

Here is the breakdown of sales by individual categories:

* Clothing: 36.9% of total sales, down 9.1%
* Personal Effects: 11.2% of total sales, down 9.6%
* Miscellaneous Goods: 13.4% of total sales, down 9.5%
* Household Goods: 4.7% of total sales, down 14.5%
* Food: 28.7% of total sales, up 0.6%
* Services: 1.0% of total sales, down 0.6%
* Other: 1.6% of total sales, up 4.4%
* Gift Certificates: 4.1% of total sales, down 9.7%

Yet again, the only increase in a major category was seen in food sales. Sales of clothing, jewelry and artwork continue to slide as consumer sentiment remains at all-time lows.

In Tokyo itself, sales at the major 28 department stores dropped 7.2% from last year for the ninth consecutive month of decreased sales.

McDonald’s Japan to surpass 500 billion yen in sales for first time in 2008

Just a few years ago, things were looking grim for McDonald’s Japan. A nasty price war back in 2000 helped lead to the departure of Burger King from the Japanese market (though Burger King has been resurrected), but took its toll on McDonald’s ability to profit heavily from economies of scale.

The tables have turned. Yesterday, McDonald’s Japan announced that it expects sales at its 3,754 Japan locations to top 500 billion yen for the first time ever in 2008. This would make 2008 the fifth consecutive year in which McDonald’s sales have risen. November sales were reported to have been 14.4% higher than a year ago. Read more

Japan Economy Watch sums up the dreadful state of Japan’s macro data, debt levels and political paralysis

Although Japan’s macro indicators are tracked here, it sometimes helps to see everything put together. Over at Japan Economy Watch, Edward Hugh has done just that, and the data shown collectively in his post is simply breathtaking. Revised GDP data, industrial output, machinery orders, consumer confidence, the Economy Watchers Index, wages, household spending and the Tankan are all covered in one post, with the yen’s rise and a look at Prime Minister Aso Taro’s continuing fall in approval rating also included in this must-read post.

Mr Hugh weighs in with some very accurate comments on Japan’s national debt:

…[W]e have reputedly just been through Japan’s longest running expansion in I don’t know how many years, but if you look at the chart you will find that net debt didn’t cease to rise at any single point, while of course, as life expectancy went up even more than anticipated, the implicit liabilities in the social security system also rose. Well basically, I claim this is unsustainable, since to show evidence of sustainability you need to be able to establish that Japan can (with a median population age of 43 and rising) still have expansions which generate enough sustained growth (after you turn the juice of zero interest rates and substantial fiscal injections off) to be able to bring the trend percentage of net debt (that is the one between the trough of one cycle and the trough of the next) down. We are a long long way from this at this point, and as such any claim that Japan will be able to bring the net debt dynamic under control should be treated as purely hypothetical and speculative. What we need is evidence, but Aso’s recent policy initiatives suggest that things are now, rather, about to move in the opposite direction.

The red lights on the console are madly blinking, and the alarm is piercing. As each day passes, it seems more and more clear that the LDP, on whom much of this mess can be pinned, will need to pass on in order for any real progress to be made. Of course, as the LDP loses its grip on power, the risk that the bureaucracy will strengthen looms larger.

For a closer look at the disaster of the Aso premiership, see the recent article “2008: Change and Politics” by Tobias Harris at Neojaponisme.

Tokyo area new condo sales to increase 11.6% in 2009: Real Estate Economic Institute

Earlier today, the Real Estate Economic Institute released a report predicting that sales of new condominium units will increase by 11.6% in the Tokyo area and 7.6% in the Osaka area in 2009.

Sales of new condos in the Tokyo area alone fell 26.0% in October and 14.9% in November, according to data released earlier this week by the same institute. The report released today predicts that 2008 sales will show a 31% fall when all is said and done. That would put 2008 sales at 42,102 units.

If sales in the Tokyo area do increase by 11.6% in 2009, that would mean a total of about 47,000 units will be sold next year. The estimates for the Osaka area would see an increase from 23,231 units in 2008 to about 25,000 in 2009.

(Side note: Why are these projected numbers so perfectly rounded?)

Is this possible? Read more

Tokyo condo sales down, Mitsubishi to raise rents in Marunouchi, and Louis Vuitton pulls the plug on a new Ginza location

According to a report released yesterday by the Real Estate Economic Institute, condominium sales in the Tokyo area dropped 14.9% in November, following the 26.0% fall seen in October. At the same time, the number of units sold decreased 16.0% in November, as 11,085 unsold condos remained on the market. The average price of a condo unit in Tokyo increased 7.1% in November, to 50,180,000 yen (about $550,000).

The most popular size sold in November was the 3LDK, with 1,987 units being sold in the area including Tokyo, Kanagawa, Saitama and Chiba. The price range seeing the greatest number of sales was from 25 million to 30 million yen, with 333 units. Nine condos priced above 200 million sold in Tokyo in November, while none sold for over 300 million yen.

In other real estate news, Mitsubishi Estate has announced that it intends to raise rents in the Marunouchi area by about 15%. The firm’s 30 office buildings in the Marunouch area are comprised of about 1.4 million square meters, and Mitsubishi apparently boasts an ultra-low 0.15% vacancy rate in those buildings. That rate compares to the 4.5% vacancy rate seen in the five wards of central Tokyo at the end of November, according to Miki Shoji.

Meanwhile, French fashion giant Louis Vuitton has reportedly decided to give up on plans to open a flagship store in Ginza. In the nine months ended September 30, Louis Vuitton’s Japan sales have fallen by about 7%. A few weeks ago, Louis Vuitton also announced a 7% cut in prices for the Japanese market, in order to reflect the yen’s strength against the euro.

Tankan shows fundraising woes mixed with a surplus of equipment and workers

Earlier this morning, the Nikkei opened its article concerning today’s Tankan figures with a flurry: “The Bank of Japan’s latest tankan survey made it clear that companies are finding it increasingly difficult to raise funds, and are carrying more equipment and workers than necessary.”

According to the survey, which was released this morning by the Bank of Japan, the diffusion index measuring confidence at large firms fell 16 points to -16, while the score fell 12 points to -22 at medium-sized firms, and dropped 7 points to hit -28 amongst small enterprises.

Amongst manufacturers of all sizes, the diffusion index fell 14 points to -25. At non-manufacturers, the score slid 7 points to -23. Amongst all firms of any size in any industry, the diffusion index fell 10 points to -24.

We can expect to see pressure put on the Bank of Japan to lower interest rates even further, though there isn’t much wriggle room down from 0.3%. Some commentators expect to see a return of the Zero Interest Rate Policy that was abandoned in an attempt to return to “normalcy.”

Unfortunately, we are bound to see further waves of job cuts and pullbacks in capital spending. It’s not quite yet time for normalcy.

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