The Office of Commercial Affairs,
Royal Thai Embassy in Tokyo, Japan
Farm Reform, Nontariff Barriers Among Hurdles To TPP Bid
TOKYO (Nikkei)--Japan faces the task of overcoming three key obstacles before it can pursue entry into an Asia-Pacific free trade zone.
National Policy Minister Koichiro Gemba said Tuesday that the government seeks to win cabinet approval Nov. 9 for its basic guidelines on economic partnership agreements. The government and ruling bloc are now hammering out the details.
Farm products pose the biggest obstacle to Japanese participation in the Trans-Pacific Strategic Economic Partnership Agreement, or TPP. The framework requires abolishing tariffs on all goods within 10 years, in principle. Japan would need to commit to opening up its agricultural markets, amove it has resisted in order to protect domestic farmers.
In eliminating the tariffs, the government will have to take steps to increase the competitiveness of the Japanese agricultural sector. Prime Minister Naoto Kan will oversee a panel to discuss specific ways of making domestic farming more efficient, such as allowing the entry of private-sector firms.
The government also needs to support farming households whose income stands to decline.
Proposals include expanding an income subsidy program launched this fiscal year. Compensation to farmers for lost income could reach an estimated 6 trillion yen.
Nontariff trade barriers could also hinder Japan's entry into the TPP. The U.S. and Europe pressed Japan for regulatory reform amid the trade friction that escalated starting in the 1980s. With the U.S. playing a leading role in the latest round of TPP negotiations, Japan must be thoroughly prepared to address this matter or face the prospect of eroding ties with Washington.
For instance, the U.S. has taken issue with Japan's postal operations. The government and the ruling coalition plan to raise the cap on coverage offered under postal life insurance. But Japan could come under fire from the American side over the unfair competition posed by the government-backed Japan Post Holdings Co.
Japan could also find itself called upon to lift import restrictions imposed on U.S. beef over mad cow disease. Japan must also be willing to open its borders to workers from other countries. Under economic partnership agreements with Indonesia and the Philippines, it has provided support to nurses and nursing care specialists seeking positions here. But the government remains wary of allowing foreign workers into the country.
Source: The Nikkei Nov. 3,2010
Proposals To Offset Corporate Tax Cut Draw Fire From Industry
TOKYO (Nikkei)--A government commission is proposing to finance a corporate tax cut by scaling back the tax exemption on naphtha and other tax breaks, prompting strong protests from company officials, who warn of dire economic consequences.
Naphtha would no longer be tax-free under the commission's proposal. The 10-point plan from the Tax Commission would generate 2.59 trillion yen to 4.54 trillion yen in tax revenue for the central government. This far exceeds the estimated 1.4 trillion yen to 2.1 trillion yen cost of the 5 percentage point corporate tax cut requested by the Ministry of Economy, Trade and Industry.
The commission plans to unveil the plan Thursday in a meeting that will bring the corporate tax debate into full swing. Under the plan, ending naphtha fuel's tax-free status would generate up to 1.72 trillion yen in revenue. Taxing only naphtha used as a fuel in manufacturing would bring in 430-440 billion yen.
The plan says that 400-500 billion yen could come from capping the corporate tax deduction on losses carried forward at half of taxable income, and 270-510 billion yen from ending a tax credit for R&D spending. The funding proposals are already drawing fire from the business world.
"Expanding the tax base without due consideration will have a negative impact on the economy and won't help create jobs," Nippon Keidanren Vice Chairman Katsuaki Watanabe told the commission Tuesday. Even a slight tax on naphtha would kill 700,000 petrochemical industry jobs in Japan, warned Watanabe.
A corporate tax cut should not be funded by curtailing growth-driving targeted tax breaks, said Tatsuro Owada of the Japan Chamber of Commerce and Industry. He called for permanently lowering the corporate tax for small and midsize firms to 11% or less, as well as a permanent tax credit for R&D spending.
Source: The Nikkei Nov. 3,2010
Business Sentiment Worsens In Sign Of Lull: Teikoku Databank
TOKYO (NQN)--The diffusion index for the domestic economy fell for the third straight month in October in a sign of an economic lull, Teikoku Databank Ltd. said Thursday.
The DI sank 1.2 points on the month to 31.5, dented by the yen's rise and slowing overseas economies. As well, government subsidies for environmentally friendly vehicles has expired. All ten industry categories fell last month.
"The domestic economy is rapidly losing its recovery momentum," the private research firm said in a report. "It has fallen into a lull."
Teikoku Databank said it expects the index to fall 2.1 points from October in three months, and fall 0.7 of a point from October in six months.
The company polled 22,822 companies nationwide in late October, obtaining responses deemed valid from 48.9%. The DI ranges from 0 to 100, with 50 marking the boom-or-bust line.
Source: The Nikkei Nov. 4,2010
Key Econ Gauge Down 1.3 Points In Sept
TOKYO (NQN)--Japan's composite index of coincident economic indicators fell 1.3 points from the previous month to 102.0 (2005=100) in September, according to preliminary data released Monday by the Cabinet Office.
The index of leading indicators, a barometer of economic conditions several months down the road, sank 0.6 point to 98.9. The composite index, calculated based on the growth and shrinkage of the component indicators, shows the direction and size of economic trends.
Meanwhile, the diffusion index of coincident indicators came to 55.6%, while that of leading indicators stood at 30.0%. The diffusion index represents the ratio of component indicators showing an improvement from three months earlier.
Source: The Nikkei Nov. 8,2010
Upgrades Make Up 62% Of FY10 Earnings Forecast Revisions
TOKYO (Nikkei)--Most Japanese companies that revised their pretax profit projections for the current fiscal year expect better earnings that previously expected, thanks in part to strong first-half results.
The Nikkei examined the projections of publicly traded companies that close their books on March 31, excluding financial firms and start-ups. Businesses that revise their pretax profit outlooks often do so when they announce their results for the first half ended Sept. 30.
As of Tuesday, 542 companies, or about 30% of the total, had changed their forecasts. Of these, 337 firms, or 62%, upgraded their full-year pretax profit projections.
Many businesses that expect improved earnings enjoyed brisk overseas sales in the first half. For example, Komatsu Ltd.'s (6301) sales of construction machinery have been strong in China and elsewhere. Its pretax profit more than quintupled on the year to 100.1 billion yen for the first half, and the firm upgraded its full-year forecast by 21 billion yen.
Automakers and electronics companies were among those anticipating the sharpest improvements, including Honda Motor Co. (7267) and Hitachi Ltd. (6501).
Almost 30% of those that upgraded their pretax profit projections expect flat or lower sales, suggesting that cost cuts also play a major role in boosting profits. Sony Corp. (6758) raised its profit outlook, but lowered its sales projection for the full year by 200 billion yen to 7.4 trillion yen, mainly because it sees a stronger-than-expected yen.
Meanwhile, many of the businesses that downgraded their pretax profit projections are suffering from deflation in Japan and an economic slowdown. NTT Data Corp. (9613) is bracing for a lower profit because of sluggish domestic investments in information technology. And Nisshin OilliO Group Ltd. (2602) is among the food producers that have been unable to pass higher ingredient costs on to consumers.
The fading effects of government stimulus measures, including the end of subsidies for environmentally friendly automobiles, are another factor that led to weak outlooks for the second half. Of the firms that upgraded their full-year pretax profit forecasts, 138, or about 40%, effectively downgraded their second-half projections.
Source: The Nikkei Nov. 5,2010
Listed Firms' Pretax Profits Seen Rising 49% In FY10
TOKYO (Nikkei)--Listed Japanese companies will likely overcome the yen's strength to boost their aggregate pretax profit by 49% in the year through March 31, 2011, thanks to demand growth in emerging countries and streamlining efforts.
Beating the mid-August projection of 39% year-on-year growth, the new full-year estimate indicates that Japanese firms' profits will rebound to nearly 70% of the level they reached in fiscal 2007, the last full fiscal year before the September 2008 collapse of Lehman Brothers Holdings Inc.
In the electrical machinery and automobile industries, combined pretax profit is forecast to climb 2.63 trillion yen in the current fiscal year, accounting for 44% of the all-industry growth estimate.
Hitachi Ltd. (6501) sees its pretax profit jumping 510% to 390 billion yen, thanks to the strong performance of its high-function-materials business. Listed companies project their overall full-year sales to climb 7% to reach 90% of the figure from fiscal 2007, the highest on record.
Their aggregate April-September pretax profit soared 160% on the year, getting 58% of the way to the full-year projection. But with the prospect of the yen remaining strong and economic slowdowns in the U.S. and Europe hanging over their heads, they see pretax profit declining 6% for the October-March second half.
Elpida Memory Inc. (6665) is facing a plunge in demand for its mainstay DRAM chips. The company aims to "generate profits in the October-December period, but it will be very difficult" because of the falling average DRAM price and the yen's strength, President Yukio Sakamoto says.
Honda Motor Co. (7267) has downgraded its second-half sales projection by about 110 billion yen and is assuming an exchange rate of 80 yen to the dollar for that period.
JFE Holdings Inc. (5411), which exports steel materials in dollar-denominated prices, has cut its full-year sales forecast by 60 billion yen, citing the stronger yen's impact on its price competitiveness.
The earnings figures were compiled by The Nikkei using data from 885 listed nonfinancial firms that had reported interim results by Friday. These companies, which also excluded start-ups, accounted for 56% of the overall pool by number and 82% by market capitalization.
Source: The Nikkei Nov. 6,2010
Steel Exports Up 4.6% In Sept, 24.5% In April-Sept
TOKYO (NQN)--Steel exports increased 4.6% on the year to 3.74 million tons in September, topping the 3.57 million tons for the same period a year earlier to set a new record for the month, the Japan Iron and Steel Federation reported Tuesday. The figure also marked the 14th straight month of growth.
Stronger demand from Thailand, Indonesia and other Southeast Asian nations offset a fall in shipments to the major client nations of South Korea and China. For the six months through September, meanwhile, steel exports expanded 24.5% to a record 21.63 million tons, surpassing the previous high of 19.58 million tons, logged in the same period of 2008.
Despite the growth, a federation official warned, "The yen's strength will hurt steel exports." Japan, India To Nix 90% Of Tariffs In 10 Years
Source: The Nikkei Nov. 2,2010
Marubeni To Sell Veggie-Growing Condos
TOKYO (Nikkei)--Marubeni Corp. (8002) will ally with Kanagawa Prefecture-based venture firm Verde Co. to develop condominiums containing indoor communal vegetable gardens, The Nikkei has learned. The idea is to boost condo sales by introducing a feature that will bring residents closer together and thus make the residences more appealing to families.
The partners have developed what they claim is a simple method for growing vegetables indoors, involving the use of LED lighting to regulate the temperature as well as high-water-retention soil mixed with moss.
Marubeni will install, at a cost of about 2 million yen, the first garden in a 60-unit building to be constructed in Tokyo's Setagaya district from next spring. Vegetables grown in the roughly 4-sq.-meter garden will be distributed to residents. A residents' association will operate and manage the garden. Marubeni, which puts about a thousand condo units on the market each year, plans to install the gardens in new buildings targeting families.
Source: The Nikkei Nov. 4,2010
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