The Office of Commercial Affairs,
Royal Thai Embassy in Tokyo, Japan
Kan Vows To Bring Japan Into TPP Trade Pact
TOKYO (Nikkei)--Prime Minister Naoto Kan on Tuesday pledged to bring Japan into the Trans-Pacific Partnership (TPP), saying the trade liberalization initiative will help the country return to a path of robust growth.
The government's basic policy on comprehensive economic partnerships, which was approved at a cabinet meeting the same day, says Japan will begin TPP talks with all countries concerned, although it does not say when.
In the meantime, Kan's government will draft measures to boost the competitiveness of Japan's farming sector, which is likely to suffer most from the elimination of import tariffs that joining the TPP would require.
Chief Cabinet Secretary Yoshito Sengoku said after the meeting that the government will likely decide formally whether to seek to join TPP around next June, by which time it will have compiled a basic policy on agricultural reform.
Kan directed four cabinet ministers to form a new body charged with coming up with measures to bolster Japan's farm sector. The measures will be financed by the Agriculture Ministry's fiscal 2011 budget. The four members are Sengoku, National Policy Minister Koichiro Genba, Finance Minister Yoshihiko Noda, and Agriculture Minister Michihiko Kano. Genba will head the group.
Kan will announce the basic policy on comprehensive economic partnerships during the APEC summit to be held in Yokohama on Saturday and Sunday. "It must be Japan's basic policy going forward to open up its market, while ensuring the revival of its farming sector," Kan said during the cabinet meeting.
TPP is a multilateral free trade pact comprising nine countries, whose prospective members include the U.S. and Thailand.
Source: The Nikkei Nov.9,2010
Japan Takes Step Toward More Open Markets
TOKYO (Nikkei)--Backed by carmakers, steel firms and other Japanese manufacturers eager to boost exports, the cabinet approved a plan Tuesday to start talks on entering a trans-Pacific free trade zone.
Prime Minister Naoto Kan equated joining the Trans-Pacific Strategic Economic Partnership Agreement, or TPP, with Japan's opening to the world in the 19th century after more than two hundred years of self-imposed isolation.
Many in the auto industry say the change cannot come too soon. "You can't compete in the world unless you're on the same terms," says Suzuki Motor Corp. (7269) Chairman and President Osamu Suzuki.
Japanese carmakers have suffered bitterly at the hands of Korean rivals as a result of Tokyo's foot-dragging on free trade agreements. South Korea's auto exports to Chile surged after the South American country dropped its 6% tariff in 2004 in accordance with a bilateral FTA. In 2007, South Korea shipped 75,000 autos to Chile, surpassing Japan for the first time.
Japan's economic partnership agreement with Chile took effect in 2007. The following year, Japan turned the tables on South Korea in vehicle exports to Chile. The benefits from the Chilean pact pale against what the TPP could do for Japanese trade. If both Japan and the U.S. join the partnership, America's 2.5% tariff on Japanese passenger cars will fall to zero. For Honda Motor Co. (7267), which exports nearly 200,000 cars to the U.S. a year, "the advantages are big," says a company official.
South Korea has a pending FTA with the U.S. So unless Japan joins the TPP or concludes a free trade pact with the U.S., South Korean automakers will gain the upper hand with duty-free access to the American market.
Mitsubishi Heavy Industries Ltd. (7011) warns of a "wider competitiveness gap" between Japanese firms and foreign rivals if tariff disadvantages compound the troubles already caused by the strong yen. In gas turbines, one of its main profit earners, the industrial giant goes head-to-head with world leader General Electric Co. Japan's membership in the TPP would likely bring down the tariff barrier to turbine exports to the U.S., GE's home turf.
Steelmakers are also calling for a speedy entry into the TPP. Industry leaders like Nippon Steel Corp.
(5401) now export 40-50% of output, up from around 30% just a few years ago. Indeed, Asian demand is largely sustaining domestic steel production. South Korea's Posco looms as a formidable player in this market. The steel industry is in for "heavy losses" unless Japan joins the TPP, says
Japan Iron and Steel Federation Chairman Eiji Hayashida.
Greater Room For Maneuvering
Trade deals can help companies create more flexible global strategies. Take Sony Corp. (6758), which boasts the top share of flat-panel television sales in India for the April-June quarter. The TVs it sells there are made in Malaysia, a member of the Association of Southeast Asian Nations. Under an FTA taking effect this year, tariffs on ASEAN members' TV exports to India fell from 10% to 7.5% and are set to decline incrementally.
Thanks to this agreement, "We are not at a great disadvantage (in India) to Korean rivals," which build their TVs locally, a Sony executive says. The company has made Malaysia its export hub for Asia, even as it cuts back in-house production in the U.S. and Europe.
Joining the TPP would also let Japanese manufacturers take advantage of the weak dollar by turning their U.S. factories into key export bases. "We could build a more efficient production network, such as shipping big U.S.-made models to Australia," says a senior Nissan official.
Source: The Nikkei Nov.10,2010
Japan Seeks To Begin Trade Negotiations With EU In Spring
TOKYO (Nikkei)--Japan aims to launch negotiations next spring with the European Union toward the establishment of an economic partnership agreement, The Nikkei learned Wednesday.
Prime Minister Naoto Kan will propose the timetable to European Council President Herman Van Rompuy and European Commission President Jose Manuel Barroso during their talks Friday on the sidelines of the Group of 20 summit in Seoul.
The free trade agreement that South Korea signed with the EU last month will take effect next July, stoking concerns in Japan that domestic companies will become less competitive than their South Korean rivals. Echoing such fears, Kan contends that Tokyo should quickly pursue economic partnership negotiations with the EU.
Kan's talks with Van Rompuy and Barroso are expected to yield an agreement for future senior, working-level discussions about tariffs and other specific issues begiing aroud December. Tokyo wants the EU to slash the high tariffs it currently slaps on Japanese automobiles, LCD televisions and other products.
For its part, the EU has urged Japan to begin lowering nontariff barriers as a condition for pursuing economic partnership talks. For instance, European officials have called for streamlining the strength and safety certification procedures on such products as construction materials, cars and medical devices.
Japan's Ministry of Land and Ministry of Health and Labor have resisted such calls, citing safety concerns if certification procedures are scaled back. But government guidelines for pursuing comprehensive economic partnerships, approved by the cabinet Tuesday, include regulatory reforms, thereby paving the way for Japan to work with the EU on improving nontariff barriers.
Agricultural interests have opposed Japan's participation in negotiations to join the Trans-Pacific Strategic Economic Partnership Agreement, or TPP. But unlike the TPP, which requires abolishing tariffs on all goods in principle, an economic partnership agreement is more flexible, allowing exclusions. Therefore, agricultural issues could determine the fate of the trade talks between Japan and the EU.
Source: The Nikkei Nov.11,2010
Japan To Pursue Economic Pact Talks With Mongolia In Spring
TOKYO (Nikkei)--The Japanese government decided Thursday on plans to launch negotiations in earnest next spring toward an economic partnership agreement with Mongolia, The Nikkei has learned.
Japan is eager to enter into such an arrangement with Mongolia because of that nation's rich reserves of rare-earth metals and uranium. By forging a close economic relationship with Mongolia, Japan aims to reduce its reliance on China for rare earths.
Prime Minister Naoto Kan and Mongolian President Tsakhia Elbegdorj, who visits Japan next week, are expected to agree to work toward an economic partnership in their talks scheduled Nov. 19.
Japan would mark the first country with which Mongolia negotiates a bilateral economic partnership.
The two sides began jointly studying in June their prospects for an economic partnership. They willwrap this up next March and subsequently jump into full-fledged talks. They will target having an agreement signed 2012 to take effect the following year.
Mongolia saw its confirmed uranium reserves rank No. 15 as of 2007, according to International Atomic Energy Agency statistics. But its overall estimated reserves total 1.4 million tons or so, among the largest worldwide.
"Mongolia's mining beds are softer than other countries', making it easy to save on development costs," says a senior official at Japan's Foreign Ministry. Its rare metals and coal are also ripe for development, attracting the attention of Japanese, Chinese and Russian companies eager to obtain mining concessions.
Japan now relies on China for more than 90% of the rare earths used domestically. An economic pact with Mongolia would make Japan less vulnerable to export suspensions by China.
Source:The Nikkei Nov. 12,2010
APEC Envisions Regional Integration Of ASEAN, TPP
YOKOHAMA (Nikkei)--The 21 leaders attending the APEC summit vowed Sunday in their "Yokohama Vision" declaration to ultimately establish the Free Trade Area of the Asia-Pacific, or FTAAP, by continuing to integrate the Pacific Rim region with the Association of Southeast Asian Nations and the Trans-Pacific Partnership, or TPP.
The declaration, adopted on the last day of the two-day Asia-Pacific Economic Cooperation summit in Yokohama, sees the forum becoming a robust, economically integrated and secure community. It also calls for closer cooperation among member countries in pursuit of regional economic integration.
The Yokohama Vision describes Asia-Pacific economies as "recovering from the recent economic and financial crisis," while acknowledging that "uncertainty still remains" and noting the need for sound fiscal management to build a stronger financial system. The declaration also seeks to ban member countries from introducing new import barriers by the end of 2013 in order to deter protectionism.
The vision outlines APEC's future direction by presenting three forms of "community." The first, an "economically integrated community," is aimed at promoting regional integration and setting specific targets, such as a 10% cut in international-distribution network costs. The second form calls for a "robust community" to press ahead with the region's first-ever growth strategy. The third form, a "secure community," calls for cooperation among member nations to secure food supplies, minimize damage from natural disasters and prevent the spread of diseases.
The vision also states that regional integration, the centerpiece of the summit agenda, requires APEC countries to take concrete steps toward establishing the FTAAP, under which tariffs will be further reduced to accelerate free trade. The declaration adds that integration will be based on the TPP and the ASEAN+3 grouping, which includes ASEAN members plus Japan, China and South Korea, as well as ASEAN+6, which includes the ASEAN+3 in addition to India, Australia and New Zealand.
Japanese Prime Minister Naoto Kan, who chaired the APEC summit, discussed the declaration at a press conference Sunday afternoon. Noting that APEC has clarified its future path under the Yokohama Vision, Kan said he is confident the declaration will contribute to future prosperity and improve the welfare of people in the Asia-Pacific region and throughout the world.
Source:The Nikkei Nov. 14,2010
Top Electronics Firms' Net Profits Exceed Pre-Lehman Tallies
TOKYO (Nikkei)--The nation's eight leading electronics manufacturers' logged a combined group net profit of roughly 400 billion yen in the April-September half, surging 40% from the same period in 2008.
By contrast, the aggregate net profit at 983 Japanese firms came in 5% shy of pre-Lehman-shock levels, while that for the seven automakers' fell 2% short. Electronics manufacturers' earnings have rallied considerably from their 350 billion yen loss a year earlier. Since the financial turmoil of fall 2008, each has embarked on massive restructuring efforts. Toshiba Corp. (6502) slashed R&D and other fixed expenses by 430 billion yen in fiscal 2009, while Sony Corp. (6758) consolidated its production bases for televisions and other goods.
Toshiba on Tuesday reported that it swung back with a group net profit of 27.8 billion yen, buoyed by recovering demand for semiconductors and small LCD panels. Also boosting bottom lines was improved emerging-market demand. Hitachi Ltd. (6501) and Mitsubishi Electric Corp. (6503) enjoyed brisk sales of manufacturing equipment in China and elsewhere. And increased automobile production in emerging markets pushed up sales of related parts and materials.
Domestically, the government's eco-point program and searing summer temperatures drove up unit sales of TV and air conditioners at Panasonic Corp. (6752) and others. Hitachi, Toshiba, Fujitsu Ltd. (6702) and Sony all logged net profits above their pre-Lehman-shock postings.
Source:The Nikkei Nov. 10,2010
Apparel makers lonely no longer
Through integration, Sanei, Tokyo Style hope to switch from defense to offense in harsh industry Sanei-International, which offers the Natural Beauty Basic line, and Tokyo Style, which has brands like Aylesbury, both saw limits to what they could do to improve business individually.
While their "landlord" department stores have been swept up in a wave of consolidation since the 2003 merger of Sogo Co. and Seibu Department Stores Ltd., apparel companies have largely remained independent - until now. The double whammy of sluggish consumption and intensifying competition has prompted major apparel maker Sanei-International Co. and midsize player Tokyo Style Co. to decide to sew themselves together in June 2011. Others in the industry may soon follow suit.
Sanei and Tokyo Style reported a combined 152.5 billion yen ($1.88 billion) in sales in fiscal 2009 - nearly 100 billion yen less than industry No. 2 Onward Holdings Co. For Sanei, which is seeking funds for "continuing business development," the hefty internal reserves of Tokyo Style - once a target of the Murakami fund - are quite attractive.
Both companies have been on the defensive for several years. Sales on department stores' apparel floors have been falling year on year since 1997, and weak consumer demand has strengthened the gravitational pull.
Sanei shut 151 locations in the year ended August 2009 and another 75 in fiscal 2010, and it has reduced the proportion of department stores' contributions to consolidated sales to below 40%, compared to 46% in 2004. For the year ended August 2010, it reported 100.3 billion yen in consolidated sales, down 10.3% on the year.
Tokyo Style, which still depends on department stores for 80% of its nonconsolidated sales, is more susceptible to recession. For the year ended February 2010 it reported year-on-year consolidated sales down 16.7%, to 52.1 billion yen. It renewed its brands and enhanced its sales promotions, as did Sanei, but both saw limits to what they could do individually to ameliorate their prospects.
The turning point came last December, when Tokyo Style President Yoshiki Nakajima - the successor to Yoshio Takano, who died suddenly in August 2009 after leading the firm for three decades - visited Sanei Chairman Masahiko Miyake to "seek advice from a pillar of the industry."Nakajima expressed a growing sense of crisis that "Tokyo Style lacks flexibility and is falling behind the times."
The two hit it off as they exchanged opinions on the precarious state of the domestic apparel industry and the unsustainable status quo. Their many follow-up meetings led to the idea of management integration.
Shopping center slowdown
This past February, Miyake stepped down from the Sanei presidency to become chairman, due to a 2008 allegation of insider trading. But he quickly re-established his power, having amicably settled a lawsuit with Nomura Securities Co., the firm's lead underwriter at the time. The circumstances favored integration negotiations.
Apparel makers across the board have been struggling with shrinking sales via department stores and the rising power of SPAs (specialty store retailers of private-label apparel). Even though integrations are unlikely to improve the business environment, reorganization pressure is building because few apparel makers are capable of navigating through the storm alone.
Apparel companies had been pinning their hopes on shopping centers, but now they are following the path of department stores in dealing with the bleak business environment since the Lehman shock of 2008. As Nakajima noted at a press conference Oct. 14, "The trend of opening new shopping centers has hit a lull." According to the Japan Council of Shopping Centers, combined monthly sales at shopping centers that had been in business for more than a year fell continuously in the 24 months to August 2010.
Only 34 new malls opened from January to October - far fewer than the 80-90 per year in 2006 to 2008. Shopping center growth has been impacted by tighter regulations on large suburban retailers, on top of sluggish consumer spending.
With its Natural Beauty Basic line, Sanei was the first in the industry to develop a brand that does not depend on department stores for marketing. And since around 2003 and 2004, Tokyo Style has been taking over new, rising brands that ought to make shopping centers salivate. To put it another way, both companies have already done what they can to reduce dependence on department stores, but they have still had difficulty building new sales channels.
Squeezed by SPAs
Apparel makers face tough competition for space in choice shopping centers. The reason? SPAs like Uniqlo Co. and H&M Hennes & Mauritz AB of Sweden. These companies are now clearly the priority for developers seeking tenants for stores as large as 2,000 sq. meters or so. Sanei and other apparel makers, whose outlets are generally about one-tenth the size of those of leading SPAs, naturally fall to the bottom of developers' target lists.
"To steadily open outlets in promising shopping centers," one apparel consultant said, "apparel
The integrated Sanei-Tokyo Style and many other Japanese apparel makers are seeking a way forward through overseas markets like China. But there, too, they face the SPA challenge. With fast-growing Internet marketing, Uniqlo and H&M lead in building sales infrastructure. No apparel firm seems to have a clear plan for competing with these giants and creating new channels that can drive growth.
Simple addition of consolidated sales puts the integrated Sanei and Tokyo Style at third place in Japan's apparel industry, but that is still not much of a threat to the SPAs - many of which haul in around 1 trillion yen in annual sales.
Nevertheless, under an "offensive integration" strategy outlined by Miyake, the integrated entity will shoot for 300 billion yen in consolidated sales in fiscal 2016. Could new mergers and acquisitions help achieve that? What will the next move be? What the combined firm does - or does not do - will likely influence management decisions at other companies in the boxed-in apparel industry.
Source:The Nikkei Weekly Nov. 1,2010
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