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

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

Subscribe

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.

Japan supermarket sales up 0.9% in July, first rise since February

Japan’s supermarket sales rose for the first time in four months in July, post a 0.9% gain to 1.12 trillion yen, according to the Japan Chain Stores Association. These figures follow a 0.9% fall in May, and represents only the second time supermarket sales have increased in the past 31 months. However, when new shops (those opened within the past year) are included in the data, supermarkets saw a 4.4% decline in sales.

Here is a breakdown of June’s adjusted figures (not including newly opened stores): Read more

Japan’s household spending down 1.6% in March - durables hit harder

With food and fuel prices surging, Japan’s consumers have expressed their lowest degree of sentiment in nearly five years. In the face of sluggish wage growth, we have been expecting to see households begin to tighten their belts and rein in spending. After seeing increases of 2.2% in December and 3.6% in January, February’s household spending came out flat. In March, household spending decreased 1.6%, for the first drop reported since November of last year.

According to the Statistics Bureau, spending at households with two or more people came to 312,565. Income at households with a salaried worker as head of household came to 453,482 yen, which was up 0.6% from a year ago, while spending at workers’ households was at 342,868 yen, down 0.2% from last year.

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

Business Conditions, Capital Spending, Industrial Output all Down, Yet Consumer Spending Holding Up

The Cabinet Office published its monthly Index of Business Conditions for January earlier today, and we have seen a decline in all three indexes for the first time since September of last year. This report generates three scores, which are referred to as diffusion indexes. The three categories reported are the leading index, the coincident index, and the lagging index. The leading index is meant to evaluate business sentiment for the future, the coincident index measures sentiment in the current period, and the lagging in the period previous to the report. For each index, a score below 50 indicates pessimism, while a score above 50 indicates an optimistic result.

January results showed the Leading Index falling from 50.0 in December to 30.0 in January, while the Coincident Index dropped from 63.6 to 22.2 and the Lagging Index fell from 66.7 to 62.5 (incidentally, we have not seen all three indexes below 50 since February 2007).

The fall in the Leading Index is what tends to worry economy watchers the most. Although it stood exactly on the fence at 50 in December (a figure which has since been revised down to 45.5), the score had seen an encouraging rise from the previous four months, when it checked in at 25.0, nil, 16.7 and 16.7.

Just last week we noted that industrial output had slid 2.0% in January, and that figure seemed to have been caused by nervousness over the course of the US economy. The Leading Index supports that supposition, though fears may be even reach beyond worries over the US economy.

To make matters worse, on Wednesday the Ministry of Finance announced that capital spending fell at its steepest pace in five years during the October-December quarter. According to the Ministry’s data, capital spending declined 7.3% during the fourth quarter, greatly exceeding the expectations of most Japan watchers. Read more

Convenience Stores vs Supermarkets and Department Stores

I’ve been writing about this for months, but this chart still has me fascinated:

Click to see a full size version.

I’m not sure if it’s more of a comment on the national diet, the strength of convenience stores, the lack of product differentiation at supermarkets, the overpricing at department stores, the sheer convenience of convenience stores, strange chartmaking, or some mutant combination of all that and more…

From the Bank of Japan’s October 2007 Monthly Report of Recent Economic and Financial Developments.

Japan Economic Reports Roundup: The Good, Bad and Ugly of This Past Week

The Good:

Industrial output has soared to an all-time high, according to the Ministry of Economy, Trade and Industry. August figures showed a rise of 3.4% against the previous month and an increase of 4.3% over the same month last year. This was the first increase posted since May, but the second record-setting high seen this year. According to the ministry, the increase was led by the transport equipment and electronic parts and devices industries. Production is forecast to show a 0.8% decline in September, as much of the August gain was due to the restarting of auto parts factories in Niigata that had been shut down after an earthquake.

Household spending rose 1.6% in August to stand at 296,035 yen per household with two or more occupants. This is the sixth consecutive monthly rise, according to data published by the Statistics Bureau. Spending on ‘culture and recreation’ showed a gain of 10%. According to the same report, average household income was down 1.7% in August and stood at 467,786 yen.

Retail sales were up 0.5% in August, showing their first rise in three months, according to the Ministry of Economy, Trade and Industry.

The Bad

Unemployment inched up by 0.2 points to 3.8% in August, according to the Statistics Bureau. 64.46 million people were employed in Japan in August, 190,000 more than a year ago. On the other side, 2.49 million people were out of work, which was a decline of 230,000 people, or 8.5%, from a year ago. This was the first increase in the unemployment rate seen in 11 months.

Consumer prices fell 0.1% in August, according to the Ministry of Internal Affairs and Communications. Core CPI has now fallen for seven consecutive months, even as the Bank of Japan continues to predict rises in their statements. Japan’s core CPI does not include fresh food costs. Energy costs, however, are included. Given August’s figures and the shrinking of GDP in the April-June quarter, one has to assume that the BOJ will not be making any move to raise interest rates in September.

The Ugly

Housing starts fell by a record 43% in August. Ground was broken on 63,076 new units last month, according to the Ministry of Land, Infrastructure and Transport. Stricter regulations that were put in place following revelations that data had been falsified to show that many homes were earthquake resistant was blamed. Those regulations came into effect on June 20. Housing starts had shown a 23.4% decline in July

Japan’s Retail Sales Down in July, Consumption Tax Hike Being Discussed Openly

Yesterday, the Ministry of Economy, Trade and Industry released statistics showing that Japan’s retail sales fell 2.2% in July 2007 compared to July of last year. We have now seen retail sales fall in Japan every month since last October, aside from the 0.1% increase we saw in May of this year. Sales at large retailers fell 3.8% year-on-year.

Once again, weather is being brought out as the culprit, as a rainy holiday weekend seemed to have dampened sales. Interesting that this seems to happen every month. In truth, it seems as though savings rates are staying high (especially amongst younger Japanese consumers), wages are not increasing (though with the mass retirement of baby boomers, this is to be somewhat expected), and effective tax hikes are behind the fall in spending.

Speaking of tax hikes. While personal income tax cuts have been quietly rolled back over the past two years and local taxes have gone through the roof for most taxpayers this year, new Health, Labour and Welfare minister Yoichi Masuzoe told reporters on Thursday that a hike from 5% to 7% in the nation’s consumption tax might be necessary:

We will endeavor to work on spending cuts but we have no choice but to ask people to pay more taxes in the future…I consider it better to raise the consumption tax and disburse much of the increased tax income on welfare programs. The people should find it more acceptable if the proposed tax increase is designed to fund nursing care services, for example.

Masuzoe is surely aware that tax funds enter the same pool and attempting to tell the public something along the lines of, “This money is being collected to be spend on this” is a big fat lie. By the way, the Defense Ministry asked for more money in its next budget, after seeing five years of budget cuts (Good timing there, as Chinese Defense Minister Cao Gangchuan just asserted on Thursday that China poses no threat to Japan).

Masuzoe made his remarks despite reports last week in the Nikkei and Forbes that the ruling Liberal Democratic Party would drop discussions of a possible hike in the consumption tax, since the opposition Democratic Party of Japan, which now controls the Upper House, stands firmly opposed to such a move.

Of course, if official party line is that discussion of tax hikes is to be dropped, Masuzoe is exactly the man to bring it up, as he has been one of the most outspoken critics of the Abe administration and its policies.

However, we now see new Finance Minister Fukushiro Nukaga also saying that it would be good to discuss raising the consumption tax.

Aside from the obvious political question of why Abe cannot get his party to put forth a unified front, we have the serious economic repercussions that not only an actual tax hike might bring, but also what might result simply from further (aimless) discussion of one.

Many analysts say that an imminent consumption tax hike might cause a short-term boom in spending on durable goods and housing starts, as people try to spend before prices rise (not to mention interest rates). This is probably true. At the same time, however, when we look back at what happened in April 1997, when the consumption tax was increased from 3% to the current 5%, it seems more likely that the public mood will sour at the move, and the retail sales will stand little to no chance of picking up any time in the next three years.

Nikkei: Japan’s Twentysomethings Not Spending Like They Used To

On Wednesday, the Nikkei published its results of a survey concerning the spending habits of consumers in their 20s and 30s in Japan. The survey was done online in June and early July and received responses from 1,207 men and women in their 20s and 530 men and women in their 30s.

The results do not bode well for the future of consumer spending. According to the Nikkei, 13% of respondents in their 20s from the Tokyo area said they own a car, and only 25.3% said that they wanted to purchase one. When the same poll was conducted in 2000, the paper found that 23.6% of Tokyo residents in their 20s owned a vehicle, with 48.2% aspiring to purchase one.

29.6% of respondents in their 20s said that drinking was a waste of time, and 34.4% said they drink alcohol once a month or less. I remember a hip young marketer in Tokyo recently making an astute point that alcoholic beverages needed to be marketed in newer, fresher contexts in order to appeal to the younger market, who simply finds their products unappealing due to negative reinforcement. Perhaps what the industry needs is more along the lines of a miracle. I’d say the younger market might be catching on to what I would say about hard-earned disposable income: Don’t give it to companies whose business plan involves harming your health or quickening your death.

And that disposable income is increasingly harder-earned for young workers in Japan, who are more likely to be contract workers rather than regular employees. So what are they doing with that disposable income? The Nikkei tells us that although average disposable income was at 64,400 yen per month, up about 4,000 yen a month from 2000, 36% of those surveyed in their 20s said that they prefer to save their money rather than spend. This figure was up 8.2% from the 2000 survey.

Of course, we need to consider what kind of crowd in their 20s would be responding to an online Nikkei survey. We imagine that they might be professional job-holders in white collar positions. This might mean that we have more regular employees as a percentage of the group than the population at large, though I’m hoping to hear counter-arguments on this one.

However, if the group is indeed indicative of the views of Japan’s young professionals, we might assume that the population at large is spending less, since they would have slightly lower levels of disposable income.

Japan’s Household Spending up 0.4% in May

The Statistics Bureau has kept us busy today. Its monthly family income and expenditure survey was released, and shows that household spending in Japan increased by 0.4% in May.

Last month, the average household income in Japan stood at 431,013 yen (+1.0% from a year ago). The average monthly household spending per household with two or more people was at 293,231 yen. According to the report, the rise in spending was mainly driven by increases in medical and education costs.

Disposable income, at 332,806 yen, was up 1.6% from a year ago.

Quotes following yesterday’s Cabinet meeting

From Minister of State for Economic and Fiscal Policy Hiroko Ota:

There is some weakness in industrial production, and this situation hasn’t changed. Consumer spending is recovering, but not yet so strong…Japan has not yet entirely escaped deflation…

Finance Minister Koji Omi:

The economies, domestic as well as overseas, are recovering steadily and I personally think, as I have said many times, Japan is not in deflation…I have been saying that the government wants the BOJ to support the economy with policy, although individual rate actions are up to the BOJ…As the minister in charge of getting the government’s fiscal condition back into health, I will act on the assumption that interest rates will rise in the mid- to long-term.

One has to wonder if Omi and Bank of Japan Governor Toshihiko Fukui even bother keeping Ota in the loop. Fukui would obviously survive a sudden end to the Abe Cabinet (his job isn’t tied to the Prime Minister, and he’s due to step down in a few months anyway), and Omi would be likely to do so. Ota? She has a nice warm seat waiting for her back at Keio University and unlike most Cabinet ministers, is not an elected member of Parliament. Also, she’s not a really old guy.

Next Page »

Copyright © 2006-2010 Japan Economy News

Privacy Policy | Disclaimer