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January Industrial Output Slides 2.0%

Earlier today, the Ministry of Economy, Trade and Industry announced that Japan’s industrial production had fallen 2.0% in January, which was a larger decline than had been expected. In its report, METI asserted that production has essentially remained flat (it increased by 1.4% in December).

The worry now is that expected slowdowns in the US economy are causing Japanese manufacturers to take cautions against creating oversupply. Combined with weak domestic spending, and METI’s projection that output will fall a further 2.9% in February, this news sheds a pessimistic light on the direction of first quarter GDP figures. Bank of Japan Governor Toshihiko Fukui told reporters that the economic is slowing down after his meeting with the Council on Economic and Fiscal Policy today.

METI, however, expects to see a recovery in March, to the tune of a 2.8% rise. If the February and march projections are on target, the first quarter of 2008 will see the largest quarterly decline since 2001.

What interested us the most is that despite the media’s concentration on a potential slowdown in the US, METI actually reported strong falls in the shipments of electronic parts to Asia and Europe, while automotive exports to the Middle East slowed noticeably.

Nonetheless, focus remains on the US economy and what may happen there, even for METI.

While shipments fell 0.9% in January, inventories slid 1.3%.

METI official: Shareholders “fickle and irresponsibile”

Earlier today, the ruling Liberal Democratic Party postponed plans to introduce a bill that would prevent foreign investors from owning more than one third of shares with voting rights in the nation’s airports. The Narita International Airport Corporation is one of many airports planning to go public in the coming years, and many amongst the LDP sought to protect what they felt was “fundamental national infrastructure.” (By the way, if you’re dying to get in on that Narita IPO, I have some really, really sweet wooden nickels you just have to check out).

Although the bill is not totally dead yet, the Nikkei quotes Financial Services Minister Yoshimi Watanabe, who is opposed to the idea, as saying that the proposed law it would be a “closed and isolated” measure against foreign investment.

I have to admit, that seems to be some progressive thinking. It would be hard to fault Japan for being protectionist over the sale of airports and seaports to overseas investors, and the nation would hardly be alone in taking such measures.

Later on Tuesday, however, a far more fascinating story was published in the Nikkei. According to the paper, Ministry of Economy, Trade and Industry Vice Minister Takao Kitabata, while speaking at a lecture on January 24, actually said the following out loud:

To be blunt, shareholders in general do not have the ability to run a company, and they are fickle and irresponsible.They only take on a limited responsibility, but they greedily demand high dividend payments. Steel Partners goes so far as to issue threats to corporate managers and other shareholders.

Kitabata thinks that firms should be able to pick and choose their shareholders, though he admits there may be some downside to this strategy. Kitabata talked about making it easier for firms to issue shares that carry no voting rights, or multiple voting rights. He suggested lower capital gains taxes for those who have held shares for over five years, and said that outside directors are “useless.”

As the Nikkei’s writer put it:

The best way to attract desirable shareholders is to run your company well. If Japanese firms come to think of nothing but introducing takeover defense steps, they will make laughingstocks of themselves to the rest of the world.

Sounds like good advice. Especially given this little tidbit from Wednesday morning’s upcoming Nikkei:

Sawai Pharmaceutical Co. on Tuesday said it has confirmed that the stake held by Fidelity Investments Japan Ltd. had reached 10.34%, or 1.62 million shares, as of Jan. 23. The drugmaker said it was unable to determine the rankings of its large shareholders.

If that doesn’t demonstrate the degree to which shareholders are “fickle and irresponsible,” I don’t know what does (Sarcasm alert).

Industrial output down 1.6% in November; METI downgrades its assessment of Japan’s regional economies

Earlier today, the Ministry of Economy, Trade and Industry announced that Japan’s industrial output fell 1.6% in November. Last month, industrial production had increased 1.6% and hit an all-time high. What we found interesting in the ministry’s data was the projection that large manufacturers expect a 4% gain in production for December. This increase will apparently come on the back of increased orders for construction machinery.

Increased orders for construction equipment may seem surprising with the ongoing plunge in housing starts, but we’re expecting a boom in building to start sometime in the middle of next year. At any rate, with the decline in housing starts and high oil prices on its mind, METI also downgraded its assessment of Japan’s regional economies today, saying:

Conditions in regional economies are mixed although they are showing a moderate improvement trend as a whole.

This, of course, is meaningless fence-sitting. But what does mean something is the fact that METI minister Akira Amari made it clear that METI will be watching over larger firms to make sure that they do not attempt to bully smaller firms into not passing along the increased costs for raw materials. That sounds like a job that would require a serious number of regulators…

Industrial Output up 1.6 percent, reaches all-time high

Export demand is still strong, apparently. According to figures released by the Ministry of Trade, Economy and Industry today, industrial production rose 1.6% in October against the same month last year, and hit an all-time high.

With Toyota leading the charge by raising production by 12.9 percent, the ministry said that exports of autos and semiconductors are on the rise, and expressed hope that industrial production would remain high in the coming months. Exports have remained strong despite the fear of slowdown in the US economy, as Japan continues to move more products into developing countries, and especially into Asia.

Domestic consumption, however, remains a back-burner worry; wages are down on the year and unemployment slightly up over the past few months. With unemployment and household spending figures due out tomorrow, a better picture of projected year-end domestic expenditures will start to come into focus.

METI to BOJ: Back off on rate hikes

Bank of Japan governor Toshihiko Fukui covered some familiar ground today, telling reporters, “The Bank of Japan will implement monetary policy appropriately by closely examining economic and price data [and] continue to contribute to the achievement of sustainable economic growth and price stability.”

Actually, he simply said that the BOJ policy board members will fulfill their job descriptions. At any rate, many analysts still see an August rate rise in the works, and many observers (including this one) agree. Nonetheless, earlier today, Senior Vice Minister of Economy, Trade and Industry Kozo Yamamoto told reporters:

The BoJ appears to be generating an atmosphere that the next rate hike will come in August, but it should help put an end to deflation first before even considering a further rate hike…There is a risk that deflation may be not be completely defeated before Mr. Fukui’s term ends (in March 2008) if the BoJ continues to raise rates while the CPI is in negative territory.

Yamamoto, who is a member of the ruling Liberal Democratic Party, was of the opinion that the Consumer Price Index should be showing a rise of at least 0.5 percent. In May 2007, Japan’s CPI was down 0.1 percent, showing a fall for the fourth consecutive month.

Fukui has stressed the need to at least make people think that rates might rise, so that the expectation that easy money will be around forever won’t become too strong. It may seem that Yamamoto is calling his bluff, but he’s taking the easy position: If the BOJ raises rates and things go wrong (which they’re bound to at some point), Yamamoto is right. If the BOJ holds off, Yamamoto might think he has an ear stretched towards him.

Industrial Production Falls in April

The Ministry of Trade, Economy and Industry has reported that industrial production was down 0.1% in April, compared to April 2006. The Ministry blamed the drop on lower manufacturing of cars and trucks as well as flat-panel displays and other electronics components. Most analysts had predicted a slight rise in production.

It was the second consecutive drop, after a fall of 0.3% in March. The Ministry, however, has high expectations for the future: It said that manufacturers surveyed expect output to rise 1.8% in May and 1.4% in June.

Ministry of Trade, Economy and Industry: Evaluation Standards for Electric Toilet Seats

Just in case you’ve been waiting on the edge of your…umm…seat, the Ministry of Economy, Trade and Industry has released a report entitled, “Public Notice of Hearing of Opinions from International Interested Parties in the Process of Developing Draft of Evaluation Standards for Electric Toilet Seats (Law Concerning the Rational Use of Energy).”

The meeting will be next Tuesday, by the way. Hope you can hold it until then…

Japan’s stocks up (a little), unemployment up, and household spending down

Some things went up in Japan today: Unfortunately, data showed the unemployment rate rising to 4.1% in December, and slightly fortunately, the Nikkei stock index rose 19.43 points, or 0.11%, to finish at 17,490.19 points on the Tokyo Stock Exchange.

Data released on Tuesday showed the twelfth consecutive month of year-on-year decline in household spending, with a fall of 1.9% compared with December 2005.

Industrial production, on the other hand, was up by 0.7%, as reported by the Ministry of Economy, Trade and Industry in a preliminary report. Previous forecasts from Dow Jones Newswires and Nikkei had projected only a 0.2 percent increase, which led many to feel upbeat about the state of corporate Japan, although the Ministry has projected that this figure will fall by 2.8% once the January data rolls in.

As Bloomberg points out, wages grew 0.1 percent in the third quarter of last year, while average corporate profits increased 15.5 percent.

Masaaki Kanno, chief economist at JPMorgan Securities Japan Co. and a former central bank official, had projected that the Bank of Japan would increase the benchmark interest rate at the close of its next meeting, on February 21st. But today he had this to say about the possibility of a February rate increase:

Today’s data were a bit of a disappointment from the Bank of Japan’s point of view. If tomorrow’s wage report shows more weakness, we’ll change our call.

It still seems early to be making calls (unless you’re just looking for interviews with a wire service, in which case, call away). I think I’ll make mine on Vanentine’s Day…

No, make that groundhog day. I’m making my call on the February BOJ meeting on groundhog day, February 2nd.

By the way, what did members of the Japanese government have to say about today’s economic news?

Finance Minister Hiroko Ota:

I don’t see the employment environment deteriorating…Spending on clothes has declined due to the impact of the warm winter but I don’t have the impression that spending in general is getting worse.

Deputy Chief Cabinet Secretary Hakukbun Shimomura:

Although we can see some weakness in consumption, our view remains unchanged that the long economic recovery continues unchanged.

Some weakness? Twelve straight months of decline?

Japan’s Ministry of Economy, Trade and Industry: Not the Ministry of Websites

A not-so serious post:

I went to Japan’s Ministry of Economy Trade and Industry (METI) website to check out their Index of Tertiary Industries Report. Now, I don’t expect government websites to win design or usability awards, but this is something else. I landed on the page using Firefox. Since large portions are unreadable (black text on a black background?) without pressing Control+A to select all text on the screen, I nearly gave up looking at it. Then I realized it was most likely designed for Internet Explorer and used that to check the link. Of course it’s in frames, but that’s easy enough to break.

The above link is not in frames. Check it out with IE and Firefox. Either way it’s bad, but who reads the Index of Tertiary Industries Report anyway?

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