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Japan household spending down 3.5% in February

According to data released today by the Ministry of Internal Affairs and Communications, household spending in Japan fell 3.5% in February on a year-on-year basis. February is thus the twelfth consecutive month in which household spending figures have fallen when measured against those of a a year ago.

Average spending at households with two or more persons came to 266,044 yen, down 3.5% from a year ago, while spending at those households with a worker as head of household fell 1.0% to 295,494 yen. Wages at workers’ households fell 2.4% to 464,665 yen.

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

More on the iPhone in Japan

Over at Mobile in Japan, Paul Papadimitrou has written a good post on the perception that the iPhone has been a failure in Japan. His post looks into the structure of the Japanese mobile market while debunking many of the claims that the iPhone has been a failure, while my own article on the subject published at Japan Inc four months ago takes a look at the practical problems holding the iPhone back from dominance in the Japanese market.

It’s unfortunate, however, that one has to sign up for an account simply to post comments at the Mobile in Japan website.

McHotDog prices cut by 30 yen, but still only on the breakfast menu

A couple of weeks ago, I pointed out an ad for the new McDonald’s McHotDog to a friend as we rode the Ginza Line in Tokyo. While it seemed to make sense for McDonald’s to sell hot dogs, what didn’t make sense what that they were listed as a breakfast item to be sold only until 10:30am.

We both thought this was a stupid idea - who the hell eats hot dogs before 11 o’clock in the morning? After all, they’re not exactly breakfast sausage. Earlier today, McDonald’s announced that it would cut the price of a McHotDog by 30 yen, to 190 yen - and that two can be bought for 330 yen. Are they not selling well? This would seem like a logical conclusion, but the Nikkei quotes a McDonald’s official as saying, “Because sales have been strong, we want to offer savings and attract more customers during breakfast hours.”

“Sales have been strong” is a vague statement at best. Is this official referring to overall sales? What about sales of the McHotDog itself? How much inventory has been purchased and needs to move? We don’t have those figures. The McHotDog is not being positioned as a seasonal or temporary item, so why the price cut after only being on the menu for three weeks?

The decision to put the hot dog on the breakfast menu appears to be a huge mistake and a massive deviation from the firm’s recent marketing successes, including the recent giveaway of folders that came with a purchase of a Quarter Pounder and featured members of Japan’s World Baseball Classic team. In the stands at the Tokyo Dome during the WBC, I saw hundreds of fans waving their McDonald’s folders during games, essentially giving McDonald’s more free advertising.

Will the McHotDog still be on the menu three months from now? Will McDonald’s take the obvious step and at least make it part of its lunchtime menu? Another story to follow.

Addendum: Hot dogs are usually called “doggu” in Japan and are very popular at coffee shops. Doutor sells a “German hot dog,” a “Hot dog with sauerkraut” and a “Hot dog with spicy caponata - Tomato and vegetable relish.” What’s interesting is that the heading on the menu is ホットドッグ (hot dog) in katakana, but each product is named ジャーマンドッグ (German Dog), ザワークラウトドッグ (Sauerkraut Dog) and ピリ辛カボナータドッグ　(Spicy Caponata Dog). Of course, Doutor sells them all day long.

By the way, if you’re an Italian speaker, please help me out with “caponata,” which I believe is “capunata” in Sicilian - I know this is a an eggplant-tomato dish with vinegar added, but I don’t think I’ve had it in that style before. The word seems more Spanish than Italian to me, and I imagine it having olives, capers and perhaps some seafood thrown in from its name - but I have no idea how to prepare it in the southern manner - does it differ from Naples to Palermo? If you have a recipe, I’d love to hear it (And if you could teach me how to prepare it I would be eternally grateful). I somehow doubt the word is related to “capo nato,” which means “born leader” in Italian, but sometimes I have to wonder.

Restaurant sales fall for third straight month in February

In 2008, McDonald’s Japan became the first restaurant company to surpass 500 billion yen in sales over a year. 2008 was the fifth consecutive year in which sales had grown for McDonald’s. November 2008 alone saw a 14.4% increase in sales, and it looked as though McDonald’s would be one of those firms uniquely positioned to hold their ground during the economic downturn.

The rest of the restaurant industry, however, looks to be some trouble. According to data released today by the Japan Foodservice Association, sales at restaurants fell 3.6% against a year ago in February, showing a decline for the third consecutive month. Of course, last February fell in a leap year, and the loss of one day is estimated to account for 3% of the drop in sales. Still, pubs and izakayas saw a 7.1% drop in sales, while they fell 6.1% at family restaurants and 5.7% at coffee shops. Fast food shops saw a 0.3% decline, for the first fall in five months.

The JFA also noted that customer numbers fell 4.9% in February while the average purchase increased by 1.4%.

BOJ looking at pumping another trillion yen in loans into banks

Just a year ago we were hearing reports on the supposed health of Japan’s banking system. There were even members of Japan’s parliament suggesting that Japanese banks could be in position to take over US and European banks in an effort to put Japan on top (oops). While that view was mocked in some small circles, it seems to have come round to expose the Japanese banking industry as still not being on proper footing.

On Tuesday, Bank of Japan governor Masaaki Shirakawa told reporters that “coupled with the downturn in the domestic economy, a decline in the health of financial institutions could have a negative impact on financial system stability.”

No shit, Sherlock. In other words, Japanese banks have continued their record of failure in overseas markets. That’s been discussed out in the open for at least a decade.

The Bank of Japan is now looking at pumping about 1 trillion yen into the banking system as the continued decline in share values means that BOJ purchases of shares held by banks isn’t going to have much effect. Japanese banks are seeing their capital bases further erode, and this will have an effect on their ability to lend. Should the state step in to help the banks? The answer to that question depends on whether you believe in socialism or capitalism.

But what you believe in barely matters; the Bank of Japan is free to act on its own whims, even if they will have the result of doing no good for the average taxpayer.

New condo offerings in Tokyo and Osaka down in February

According to data released Monday by the Real Estate Economic Institute, the number of new condominiums put on the market in the Tokyo area in February fell 27.5% against a year ago, to 2,509. February was the 18th consecutive month in which the number of new units put on the market has fallen.

While the number of new units put up for sale declined, the average price of a new condo in the Tokyo area rose 1.2% to 48.23 million yen. At the same time, 1,548 of the new units put up for sale in February were sold that month, for a closing rate of 61.7%.

Meanwhile, in the Osaka area, 1,548 new condos were put on the market in February, for a decline of 30.5% against a year ago. The average price of a new condo in the Osaka area stood at 34.21 million yen in February, down 3.4% from a year ago, and showing a decline for the second consecutive month. 853 new units in the Osaka area sold in February, for a closing rate of 55.1%.

(I’m not linking directly to the Osaka pdf file, as it has crashed two different browsers (Flock and Chrome) three times. However, it is currently the second link under the section マンション・建売市場動向 on the Real Estate Economic Institute’s top page.)

Nikkei: Japan’s 2010 graduates looking at fewer job options

Although it’s still early to accurately predict 2010 hiring figures, a Nikkei survey published today shows that job hunting university students might have something to worry about. According to the newspaper, major firms in Japan intend to hire 12.6% fewer university graduates in 2010.

The largest declines in expected new hirings are amongst exporting manufacturers, with automobile producers and autoparts makers looking to cut back hiring by 30.1% and electronics firms by 22%. Overall, manufacturers reported expected hiring cuts at 17.4%, while the figure for non-manufacturers stood at 10%.

If these hiring cuts actually do happen, 2010 would be the first time in seven years that a reduction in new hires at Japanese firms would be seen.

Tokyo vacancy rates up for seventh straight month in February

Earlier today, the Nikkei reported that vacancy rates at office buildings in central Tokyo inched up 0.1% to 3.5% in February, according to data from CB Richard Ellis. This is the seventh consecutive month in which vacancy rates have increased. At the same time, average rent per tsubo (about 3.3 square meters) decreased 1.0% to 15,160 yen.

Will Ministop be the next convenience store operator to be sold?

Monday’s Nikkei reports that “stock market experts and industry insiders” believe that convenience store operator Ministop is “widely seen as taking center stage in the M&A drama that comes next in that sector.”

An interesting assertion, given the vagueness of those cited. Still, such a deal might make sense. Ministop is a unit of retail giant Aeon, and the Nikkei quotes an Aeon executive as saying, “There is a limit to the franchise business model.”

Of course there is. There is a limit to anything. The comment could be read as, “There is a limit to our ability to expand overseas.” The next quote from the unnamed Aeon executive is telling: “We have no intention of making the convenience store business part of our mainline operations.” Ministop accounted for about 8% Aeon’s operating profit in the six months to August 2008.

Having no intention of making convenience store operations part of core business may be a mistake, though it may be part of Aeon’s way of saying that they should sell Ministop while they can still get something for it. Or perhaps they need to unload assets.

The Nikkei goes on to tell us this:

Now that Aeon has no alternative but to draw down cash on hand and other liquid assets, and rely on loans from financial institutions, the company will naturally get around to selling off in pieces group operations, such as Ministop, observers note.

There it is. Who’s lining up to buy Ministop? Lawson has already shown its appetite for acquisitions, as it is set to buy out rival am/pm. Bringing Ministop into the fold would give Lawson nearly as many locations as Seven-Eleven currently has. On the other hand:

FamilyMart’s management has also shown strong interest, as President Junji Ueda said, “We are ready to buy Ministop anytime if the deal is found to be mutually beneficial.”

Just a week ago I posited that “smaller [convenience store operators] might find themselves able to sell out at better values as competition to acquire them increases.”

Ministop appears to be undervalued (or oversold, take your pick), which is helping make it look like a good candidate for a sale. The question is whether the holding company is making a mistake by leaving this lucrative market.

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