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Nikkei: Store brands and online sales contributing to CPI spiral

Japan’s core consumer prices fell a record 2.2% in July, showing a fall for the fifth consecutive month. Earlier today, the Nikkei published a piece illustrating the negative effect that store brands and online sales are having on consumer prices. According to the paper:

Aeon Co. began selling a store brand 350ml soft drink for 29 yen this summer. Major discount chain operator Trial Company Inc. responded immediately, slashing the price of a comparable product to 25 yen at some of its stores. The company even lowered the price to 19 yen at stores in Aeon’s home base of Chiba Prefecture.

19 yen for 350ml soft drinks? I’ve never actually seen such a thing, but that is a remarkable difference from the usual 120 yen or so. Further pushing down consumer prices:

990 yen jeans by Fast Retailing Co.’s g.u. stores sparked a price-cutting frenzy that saw Daiei Inc. and other discount retailers sell jeans for 880-980 yen.

Just a couple of weeks ago someone tried to convince me of the virtues of $500 jeans. I wasn’t listening, but I have a hard time imagining $10 jeans to anything approaching comfortable.

Of course, Japan’s “core” consumer prices strip out fresh food but not energy, and when energy prices are stripped out July saw a 0.9% fall in “core core” CPI.

With its benchmark interest rate at 0.1%, the Bank of Japan has few weapons at its disposal to fight deflation. And when consumers expect lower prices in the future, you can bet that purchases are going to be delayed.

We will start to see the effect of dropping oil prices soon. Crude oil hit an all-time high of $147.27 a barrel in July 2008, and has lost about half of its value since then. However, oil prices have been on the rise recently, and firms may find it difficult to continue to pay higher prices for resources without cutting wages further.

Nikkei on the upcoming Economy Watchers Survey and government stimulus

A bit of an odd article came out of the Nikkei this morning, with the title Rise In Econ Watchers Confidence Could Boost Stocks. The Economy Watchers Survey is released each month by the Cabinet Office, and gauges sentiment amongst service industry workers close to the “front line” in various sectors. The survey itself has taken a beating this year, and last month slid for the fourth month in a row to its lowest levels since late 2001.

Because the EWS is an index and is not measured year-on-year, there are bound to be occasional surprising results, such as when the survey reported a slight uptick in March of this year. Still, the main score has been below the boom-or-bust level of 50 for 15 consecutive months, and with a score of 29.5 registered in June, it’s difficult to imagine anything too much higher than 30 showing up in the July reading.

Speaking of the July reading, it’s not due to be published for another five days, so why the speculation? Here’s what the Nikkei had to say:

The Economy Watchers Survey for August may serve to lift stocks if the latest data, to be published Monday, shows an improvement in the diffusion index for economic conditions.

Perhaps, though many other factors would be at work, and this doesn’t show slam-dunk causality. But what if the survey shows a decline yet again?

But if the gauge marks the fifth consecutive month of decline, calls for government action to stimulate the economy will likely mount.

Ahh. That might be the real message. The last week of August was washed out with rain, which most likely dissuaded consumers from doing a lot of shopping - and 25% of Japan’s department store sales happen in the Tokyo area. Although household spending fell by just 0.5% in July, this July was fighting against one of the stronger months from 2007. Given that the Economy Watchers survey is done from the 25th to the end of each month, right in the middle of all that rain, I don’t see sunshine coming from next week’s figures.

And yes, I’m buying the weather excuse this time.

Bloomberg’s William Pesek on Japan’s (lack of) English ability, and why it hurts competition

Bloomberg’s William Pesek has penned an excellent opinion piece on why Japan needs to focus on better English education for its workforce at this point in history. As he points out, without English ability across the spectrum, Japan will simply never be able to achieve its stated goal of being Asia’s leading financial hub. So long as dinosaurs as former Education Minister Ibuki Bunmei (himself fluent in English) continue to portray English proficiency as something to be feared, Japan simply will not be able to gain a competitive foothold.

Read it.

Metropolitan Musings: Panasonic Goes Gaga Over Google

Tokyo: Google and Apple are the tech brands du jour right now, something not lost on Panasonic as it seeks to consolidate its brand globally. On January 6, Panasonic and Google announced that they are pursuing a television capable of showing Google’s YouTube videos and Picasa photos. This made the news, but is it really newsworthy? At first glance, such a move seems like a stroke of genius, converging computer content with the living room television: the long-sought holy grail in modern media of marrying content and delivery. In reality, it’s an idea that will probably never get far, but served the extremely useful purpose of injecting Panasonic into the news cycle—joined at the hip with Google—at the beginning of the annual International Consumer Electronics Show (CES) in Las Vegas from January 7-10, the largest trade show in the industry. Not coincidently, Panasonic President Toshihiro Sakamoto was one of the six keynote speakers this year.

Simultaneously, they were also trying to beat Apple to the punch in the event that Apple CEO Steve Jobs were to announce something revolutionary at the MacWorld Expo on January 15. It turns out that Panasonic did not need to announce anything extraordinary as Apple’s key announcement, the MacBook Air—much more evolutionary than revolutionary—has received only a lukewarm reception from macheads. Read more

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