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Japan household spending down 1.8% in June; Spending on durables in negative territory

According to the Ministry of Internal Affairs and Communications, Japan’s household spending fell by 1.8% in June. Although the drop was smaller than had been generally forecasted, it does represent the fourth consecutive month in which household spending has fallen year-on-year.

In May we saw a fall of 3.2% after a drop of 2.2% in April and 1.6% in March. The Ministry also tells us that average household income declined 2.1% against June of 2007, falling to 737,166 yen. June income seems high when compared to other months due to the summer bonus being received in June. This year saw the average bonus falling for the first time in six years, though the decline was only 0.08%. A separate report from the Ministry of Health, Labor and Welfare showed overall wages falling 0.6% in June.

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

Japan’s consumer price index up 1.9% in June, for 9th straight monthly increase

With a 1.9% jump in June, Japan’s core consumer prices have now risen every month so far this year, and for nine consecutive months overall, according to data released by the Ministry of Internal Affairs and Communications last week. Until September 2007, we had seen the exact opposite; Japan’s core consumer prices had fallen for nine consecutive months until that point.Last summer, Bank of Japan officials shrugged off the continually falling CPI by saying that lower energy prices had not yet been worked out of the CPI

Of course, Japan includes energy prices as part of its core CPI, and we have now seen for two straight years that it is necessary to keep track of not only “core” consumer prices, but also what the CPI looks like when energy is also stripped out. Here’s a breakdown of CPI categories for June:

• June general nationwide consumer price index: +2.0%
• June general nationwide consumer price index (excluding rent): +2.3%
• June nationwide core CPI (excluding fresh food): +1.9%
• June nationwide consumer price index (excluding fresh food and energy): +0.1%

Thus, with fresh food and energy prices stripped out (Japan also strips out the prices of alcoholic beverages, which have been on the rise), we see a 0.1% increase for the second time this year. This is only the second increase seen in this category over the past decade.

Here’s a breakdown of price increase by major category:

• Fuel, light and water charges +6.8%
• Transportation and communication +4.3%
• Food +3.6%
• Education +0.7%
• Miscellaneous +0.6%
• Clothes and footwear +0.5%
• Housing +0.2%
• Furniture and household utensils -0.4%
• Medical Care -0.5%
• Reading and recreation -0.6%

These figures are little changed from May. The same categories that rose in May rose again in June. Those that fell in May also fell in June. The largest differences can be found in the top three rising categories, which all saw increases at least 1% higher than a month ago.

Looking at individual categories, about 60% of products surveyed saw a rise in prices. Transportation expenses are pushing up the prices of fresh food as well; carrots, negi and spinach all cost over 10% more than a year ago.

The big question now is whether or not core CPI will see a jump above 2.0% in July, as 2.0% is what the Bank of Japan’s policy board considers to be the upper limit of price stability. Few expect to see a rate hike in August or September, but could the BOJ’s hand be forced by its own policy?

Japan convenience store sales up 4.2% in June, higher sales projected for July

While sales at both department stores and supermarkets continued to flounder in June, sales at convenience stores rose 4.2% year-on-year in June after having posted a 3.7% increase in May. According to data released by the Japan Franchise Association, sales at the nation’s convenience stores came to 648.7 billion yen in June, which was just lower than the 648.8 billion yen seen in May.

The future looks even brighter for convenience store sales. Reuters is reporting that the Taspo ID system, which must now be used nationwide to purchase tobacco products at vending machines, is providing a boost to tobacco sales at convenience stores. July’s sales increases are projected to surge into the double digit range.

Share prices at major supermarket chains Family Mart and Lawson are up 22% over the past quarter, as the market anticipates what could be the highest sales growth posted in the past decade at many convenience store operators.

One interesting part of the Reuters article: While department stores and supermarkets continue to blame bad weather for their decline in sales, “price hikes at supermarkets and favourable weather have helped sales [at convenience stores].”

Of course, growth from tobacco sales will be filtered out of the system in a year’s time, and Japan’s convenience store chains are still going to have to find ways to continue increasing revenue, which means we still expect to see Japanese convenience store firms make further attempts to establish overseas operations.

Japan’s June supermarket sales down 0.9%

Japan’s supermarket sales fell for the third consecutive month in June, sliding 0.9% to 1.08 trillion yen, according to the Japan Chain Stores Association. These figures follow a 1.1% fall in May. Actually, when new shops (those opened within the past year) are included in the data, supermarkets saw a 5.0% decline in sales.

As we continue to see almost every month, outside of food sales, supermarkets are not doing very well at all. Here is a breakdown of June’s adjusted figures:

• Food: +2.4%, 62.0% of total revenue
• Household Products: -4.5%, 19.6% of total revenue
• Clothing: -9.8%, 12.2% of total revenue
• Miscellaneous Items: +2.0%, 5.9% of total revenue
• Services: +0.2%, 0.4% of total revenue

Sales per square meter fell 2.8% to 47,745 yen. Read more

Koizumi’s dream of a balanced budget officially dead: Cabinet Office

Just over two years ago, Prime Minister Junichiro Koizumi announced his goal that Japan would have its national budget balanced by 2011. That isn’t going to happen.

Although most observers probably never expected it to happen, the Cabinet Office announced today that rather than having a balanced budget, it expects to see Japan saddled with a budgetary shortfall of 3.9 trillion yen in fiscal 2011. At the same time, this year’s GDP growth forecast was reduced from 2.0% to 1.3% (Last week, the Bank of Japan revised its projections down to 1.2% from 1.5%). Predicted growth in capital spending for this year was revised downward from 3.3% to 0.6%. The rise in consumer prices was revised upward from 0.3% to 1.7%. Consumer spending was revised downward from 1.3% to 1.0% - we need to bear in mind that household spending was down 3.2% in May, down 2.7% in April, down 1.6% in March, flat in February and up 3.6% in January. That looks like a nasty trend.

In January, the Cabinet Office estimated Japan’s national debt at 700 trillion yen. That’s now estimated to be at 778 trillion yen by fiscal 2009.

The real killer from the government’s perspective is that tax revenues are expected to be down, and that this could lead to hikes in consumption and other taxes. While this talk is going on, we also see that the Cabinet Office wants to encourage Japan’s households to dump their 775 trillion yen in deposit assets into the financial markets. Read more

Japan’s department store sales down 7.6% in June

Despite strong gains in department store sales in Shinjuku immediately following the opening of the new Fukutoshin subway line on June 14, department store sales fell 7.4% in Tokyo and 7.6% nationwide in June. According to the Japan Department Stores Association, 588 billion yen in sales were rung up across the country in June, at 280 department stores owned by 93 companies.

June was the fourth consecutive month with a decline in sales, and five out of the first six months of this year have seen a decline so far. Once again, the JDSA is citing bad weather as a reason for the decline in sales. Here’s a breakdown for June sales figures by category: Read more

Japan’s Consumer Confidence Index hits all-time low in June

In May, we saw Japan’s consumer confidence fall to its lowest level since December 2001. Late last week, the Cabinet Office released figures for June, and we now see that Japan’s consumer confidence has indeed fallen to its all-time low. According to the numbers, consumer confidence fell 1.3 points to hit 32.6, which is the lowest score seen since the survey was begun in June 1982 (though it was done quarterly instead of monthly until 2004).

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

Japan’s Wholesale prices up 5.6% in June, highest rise since 1981

On Thursday, the Bank of Japan released its corporate goods price index data for June, and the trend of rising producer prices is only intensifying. Wholesale prices rose 5.6% from the previous year in June, which follows a 4.8% climb from May.

June’s rise was the highest seen in 27 years. We have to go back to February 1981, when the index rose 5.7%, to see a higher figure. According to the data, producer prices for petroleum and coal products increased 36.5% year-on-year, while while prices for iron and steel products jumped 18.3%. The only other categories to see a rise above the 5% level were pulp and paper (6.8%),metal products (6.0%), electric, power, gas and water (5.6%) and processed foods (5.3%).

On the other hand, declines were seen in the prices of information and communications equipment (-6.0%), lumber and wood (-5.4%), nonferrous metals (-3.1%), electronic components and devices (-2.8%), and electrical machinery and equipment (-0.8%). Read more

Japan’s June bankruptcies soar 11.7% - liabilities up 56.2%

Although the number of bankruptcies in Japan had decreased by 1.5% May, that good news has been fully tempered by a string of negative data on June and first-half 2008 bankruptcy numbers. First, according to Tokyo Shoko Research, 1,324 firms went bust in Japan in June, which was an 11.7% rise against June 2007. The total liability left behind from these bankruptcies stood at 492 billion yen, which was a whopping 56.2% higher than a year ago.

Another firm, Teikoku Databank, put the number of bankruptcies in June at 1,065, for an 8.1% rise year-on-year. According to Teikoku, liabilities soared 40.3% to 472 billion yen. Both TSR and Teikoku include bankruptcies involving debts of 10 million yen or more, while Teikoku only counts those cases which are administered by a bankruptcy court. Teikoku had registered a fall of 1.9% in May.

For the first half of 2008, TSR announced that 7,544 firms had declared bankruptcy, which was a 6.9% increase on the previous year. Liabilities were up 19.8% to 3.20 trillion yen. On the other hand, Teikoku’s data saw a rise of 11.6% to 6,022 cases in the first half of 2008. The total liabilities of these cases was up 17.4% to 3.02 trillion yen.

Looking at TSR’s June data, we see the construction industry leading the way with 389 bankruptcies for about 105 billion yen. Following that was service industry (254), wholesalers (198), manufacturing (185), retail (151), real estate (52), IT (45), transportation (39), finance and insurance (8), and agriculture (3).

Although the real estate industry saw far fewer bankruptcies than the leading sectors, real estate led in terms of overall liabilities in June, with 142 billion yen left behind. In part, this is being blamed on tighter bank lending to real estate development firms (even as bank lending looks to be growing slightly), which has led to downward pressure on property values. More on this to follow.

Economy Watchers Survey down in June, to lowest level since 2001

After having seen a slight recovery in March, the monthly Economy Watchers Survey declined 1.4 points to to 35.5 in April, and then 3.4 points to 32.1 in May. According to the Cabinet Office, that figure fell 2.6 points further to 29.5 in June. This survey measures sentiment among workers who are particularly sensitive to economic trends, including taxi drivers, hotel staff and restaurant workers.

The Economy Watchers survey is measured as an index with a score above 50 indicating a positive view of the economy and a score below 50 representing a pessimistic overall view. It has now clocked in below the 50 mark for 15 consecutive months. June’s 29.5 is the lowest score seen since 27.2 was registered back in October of 2001, and it was the first time the index slipped below 30 since November of that year.

All subindexes of the survey showed a decline, with the services sector showing the strongest downward pressure, by 4.6 points to 30.3. Food and dining related workers reported the lowest score, at 26.8. Read more

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