April is the start of Japan's fiscal year and a time for holding "hanami" parties under cherry blossom trees. But many people are canceling celebrations this year out of respect for the victims of the Great East Japan Earthquake. Some economists, however, argue that such self-restraint will place further downward pressure on an already weak economy.
Ueno Park is one of the most popular hanami spots in Tokyo, but visitors this year will see posters asking them to refrain from eating and drinking under the trees. Inokashira Park in Musashino, western Tokyo, is also asking people not to hold hanami there. The Tokyo Metropolitan Government owns and operates both parks.
Officials say the measures are due to power shortages and reduced commuter train services. But at a press conference on March 29, Tokyo Gov. Shintaro Ishihara said, "It's an inappropriate time in Japan for pleasant chats over alcoholic drinks."
Social media sites have been flooded with people discussing the pros and cons of holding hanami, with opinion polarized. People who advocate self-restraint argue that survivors of the March 11 earthquake and tsunami face the risk of death due to poor sanitary conditions and insufficient food, heating and medical care. They say that under such circumstances, it would not be right to hold drinking sessions.
But those in favor of holding parties say that self-restraint will harm the economy. They ask what would be better for people in stricken areas -- drinking and eating as normal to keep the economy moving, or folding 1,000 paper cranes to pray for the health of survivors?
Tourism battered
Cancelations of hanami are not the only indicator of economic contraction. Tourism, in particular, has been hit badly.
Nikko is world-renown for its ancient temples and shrines. But being located in Tochigi Prefecture, about 120km north of Tokyo and 150km southwest of the crippled Fukushima Daiichi nuclear plant, many tourists, including foreigners, canceled trips there after the disaster. The number of visitors to Nikko's Toshogu Shrine in the two weeks after the quake was less than one-tenth that of the previous year's 40,000.
Tourism had been a growing sector in Japan. Last year, 8.71 million foreigners came to the country -- 28% more than in the previous year. Japan was fifth out of 180 countries in terms of the annual growth rate of foreign visitors, according to World Travel and Tourism Council statistics.
This trend led to operators of hotels, restaurants, souvenir shops and transport systems, especially in rural tourist areas, making large investments to modernize facilities and attract more foreign visitors. Their successful efforts also spurred domestic tourism, and this positive spinoff was seen as a driving force that was energizing declining rural economies.
Many foreigners are now reluctant to visit Japan because of fears over radioactive emissions from the Fukushima Daiichi nuclear power plant. The tourism sector also faces the problem of fewer Japanese people taking domestic sightseeing trips due to a sentiment of self-restraint. Central Japan Railway Co. (9022) reported the number of Tokaido Shinkansen passengers in March dropped by 19% from last year.
Party on
The ongoing crisis is worsening consumer sentiment, and consumers are spending less due to concerns over potential tax increases to cover massive government expenditure on the relief effort. A less active economy could lead to a fall in tax revenue and greater dependence on government bond issues. The risk of a slowdown could raise the possibility of the government defaulting on debt.
To prevent this vicious circle, people outside the afflicted area should carry on with life as normal. Drinking and eating too much is bad for your health, but it's good for Japan's economy.
By Masataka Maeda
Senior Economist
Source: The Nikkei April 4, 2011
TOKYO (Nikkei)--Eleven private-sector economists expect the Japanese economy to contract an annualized 2.6% on the quarter in the April-June period, according to an average of their latest forecasts reflecting the impact of the March 11 earthquake and tsunami.
One research institution projected 0.5% growth, but the other 10 anticipate negative growth, with the forecasts ranging from minus 7.1% to minus 0.3%. Most believe that personal consumption and exports will fall from the previous quarter.
Providing a glimpse of consumption trends, three major department store operators have said that sales in March likely skidded 10-20% from a year earlier. And according to SMBC Nikko Securities Inc., exports of automobile and information-technology-related products will fall especially sharply due to decreased production.
For the January-March quarter, the economy was forecast to grow almost 2% before the disaster struck. But the economists now anticipate negative growth of 0.6%.
If the projections for the current and previous quarter turn out to be correct, taken together with the contraction in the October-December quarter, the economy looks poised to post three straight quarters of negative growth through the April-June period.
Almost all of the economists said the economy will start to grow again in the July-September quarter on public works spending in response to reconstruction demand and a recovery in exports. They project that the economy will expand 1.2% in the July-September quarter and 5.6% the following quarter.
GDP is seen growing by 0.4% on a real basis for the entire fiscal year ending March 2012, down about 1 percentage point from earlier forecasts. Three of the economists project negative growth for fiscal 2011, citing the effect of the power shortage on production.
Source: The Nikkei April 5 morning edition
TOKYO (Nikkei)--The devastation caused by the March 11 earthquake will continue to drag the economy through September as reconstruction-related demand will not pick up until later this year, Mizuho Securities Co. economist Yasunari Ueno recently told The Nikkei Veritas.
Yasunari Ueno
He nabbed the No. 1 spot in a Nikkei Veritas ranking of popular economists compiled from a February survey of institutional investors. Ueno, who was No. 2 in last year's survey, took back the top of the list for the first time in four years.
While noting that such uncertain factors as the size of quake-relief spending and the impact of rolling blackouts make prediction difficult, Ueno now sees the real gross domestic product growing 0.7% in fiscal 2011, down from a previously forecast 1.1%.
The negative impact of the quake will remain profound through the July-September quarter, says Ueno, citing the quake's psychological and physical tolls, which will dampen consumer spending. Reduced electricity supply during the peak summer season will dent economic activity, Ueno observes.
But once reconstruction efforts financed by supplementary budgets begin in earnest, the outlook should improve from "rainy" to "cloudy" by the October-December term, asserts Ueno.
He expects Japanese exports to grow on robust overseas economies during the last three months of this year, with the worst phase over for U.S. households saddled with debt.
Ueno, however, warns against excessive optimism, holding that Japan's prospects could turn for the worse over the medium- to long-term. The government must tackle long-awaited reforms with a sense of urgency, he insists.
While some observers say the disaster may help spark reconstruction demand as happened after the 1995 Great Hanshin Earthquake, Ueno notes that Japan's economy lacks the vitality it had 16 years ago. The worker population was at its peak in 1995 and deflation had only just begun, according to Ueno, who adds that the government still had some fiscal leeway.
But now, the economy is mired in chronic deflation. Ueno dismisses the proposal floated by some to have the Bank of Japan underwrite around 10 trillion yen in bonds to fund the extra budget. He says tapping the central bank that way would raise the issue of fiscal discipline and compromise the BOJ's credibility. He warns that such purchases could trigger a capital flight out of Japan.
Instead, Ueno believes the government should abolish its child care allowances and introduce a temporary income tax hike to pay for extra public spending.
Source: The Nikkei Veritas April 7,2011
TOKYO (Nikkei)--Though nearly a month has passed since the devastating earthquake and tsunami hit Japan, supply disruptions have made it impossible for automobile, electric equipment and other domestic manufacturers to fully resume operations.
And now the supply chain woes are starting to affect manufacturing overseas as well.
A mobile phone is comprised of roughly 2,000 parts, while cars contain about 25,000 parts. If even one part is missing, the products cannot be made. Manufacturers can deal with emergencies by turning to alternative procurement sources, but they have failed to do so since the devastating March 11 disaster.
Follow the flow
The main reason for this is that makers of finished products lacked accurate knowledge of the conditions at suppliers.
In the case of auto production, more than 500 parts makers were operating in the quake-ravaged Tohoku and northern Kanto regions before the disaster. Automakers were receiving supplies directly from about half of them. But for such key components such as semiconductors, carmakers were reliant on secondary and tertiary suppliers and therefore unable to fully recognize the importance of such suppliers to auto production.
That is why automakers were unable to know which parts would fall into short supply immediately after the disaster.
Major Japanese automakers have continued to slash costs through the "just in time" production system, which minimizes inventories. The disaster revealed that this backbone of the Japanese production system is also an Achilles heel.
Makers of finished products should deepen their relationships with suppliers to establish mechanisms that enable them to follow the entire flow of parts. They also need to stop relying on suppliers concentrated in only one region and take a fresh look at what constitutes an appropriate inventory level from the viewpoint of minimizing damage to their operations in emergency situations.
By one account, 600 billion yen in sales is lost for every week that auto production remains suspended. It should also be noted that overseas makers of automobiles and electric equipment are shifting away from Japan for their supply needs.
Threat of losing out
Japanese parts makers form the foundation of Japan Inc.'s competitiveness. But they may succumb to Asian and other rivals if overseas manufacturers of finished products rush to build new supply chains that exclude Japanese suppliers.
Such a development would not only act as a drag on post-quake reconstruction but also weaken Japan's medium- and long-term growth and eat into the domestic job market.
Japan's parts supply networks need to be restored to health as quickly as possible. Makers of semiconductors and other core parts that are unable to quickly rebuild their supply systems should reveal their supply plans, such as when and how much they can ship, to their customers and investors worldwide.
There is a growing international view that Japan's production system has become dysfunctional. This anxiety will only build unless the country shows a concrete outlook for its recovery.
Japan's efficient parts supply system has been held up as a model for manufacturers around the world. The damage inflicted on that system puts a strain on the global economy.
Japan must use the ongoing crisis as a chance to further improve its production system and demonstrate its abilities to the world.
Source: The Nikkei April 6 morning edition
TOKYO (Nikkei)--Under pressure to save electricity in the wake of the Great East Japan Earthquake, which has crippled the power supply, retailers are desperately seeking ways to slash energy consumption without ruining the consumer experience.
Many businesses are paying keen attention to energy-efficient light-emitting-diode (LED) lighting, the quality of which has significantly improved over the years and which is moving into the mainstream.
At Sogo & Seibu Co.'s Seibu Ikebukuro department store in Tokyo, which has dimmed its lighting to save electricity, the display cases of the RF1 a la carte food shop run by Rock Field Co. (2910) stand out for their exceptional brightness. Their eye-catching luminosity comes from banks of LEDs attached inside the cases at 2cm intervals.
Looking tasty
Because light from the LEDs does not radiate sideways but instead focuses on objects in front of them, the salad in RF1's displays "have more sparkle and look more succulent" than they would under fluorescent lights, said an official of Rock Field.
The company began introducing LED-lit display cases in autumn 2009 and now uses them at 93 outlets, or a quarter of the stores its directly operates. The firm plans to introduce the display cases at all stores over the next several years.
Rock Field developed the case in its pursuit of eco-friendly operations, attracted by the relatively low power consumption and long life of LED lighting. Working together with a case maker and an LED producer, the company spent a year developing a case it liked.
The firm has even set up a section that studies ways to make food look tastier under LED lighting.
"We found that LEDs are not just a greener type of lighting, but that they also showcase products more effectively than fluorescent lights," the Rock Field official said.
Light and shadows
When LEDs began coming into greater use, many retailers were at a loss over how to use them for in-store lighting, as they gave off a different type of light than what they were used to. But after experimenting with LEDs in display cases, they realized the lights gave products more impact by adding subtle shading and shadows, an industry observer said.
One effective use of LED lights is to spotlight individual products. Their ability to create shadows makes them "suitable as lighting for jewelry or fine art," said Mitsuhiko Endo of major lighting equipment firm Yamagiwa Corp.
Many jewelry shops have already discovered this and have adopted small LED spotlights. Emitting little or no heat, these spotlights are also being increasingly used to illuminate such products as lipstick and chocolate. LED spotlights designed exclusively for perishables have even been developed.
When used for in-store lighting, LEDs are most effective for indirect illumination. Placing tiny LED lights behind shelves, where conventional lighting devices usually cannot be squeezed in, adds depth to a room. And because of their long life, LEDs do not require frequent changing, making them suitable for installation in hard-to-reach spaces.
Small wonders
Endo Lighting Corp. (6932), which caters to commercial facilities, has developed indirect-lighting LEDs that are two-thirds smaller than existing ones. Some large buildings that house mainly clothing stores have already adopted the equipment, and have found that it has helped them improve the ambience of their stores as well as save energy.
According to Yano Research Institute Ltd., the domestic LED lighting market nearly doubled on the year to 73 billion yen in 2010. With LED-related manufacturers racing to enhance the technology, the performance of the lights has continued to improve. With retailers under growing pressure to save energy, the scope of applications for LEDs -- widely seen as the future of mainstream lighting -- is steadily expanding, observers say.
Takashi Nishikawa, head of Progress Design Co., which designs lighting for supermarkets, said that until about a year and a half ago, "LEDs weren't considered powerful enough to light up the perishables sections of supermarkets." But now, he says, "there is no problem at all with using LEDs for an entire store." Nishikawa said that although the initial cost of installing LED lights is 50% higher than that for traditional lights, "users can recoup the investment in several years thanks to power savings."
Wall of light
But LED lighting is not the only energy-efficient way to create a pleasant atmosphere in a store.
The Shinjuku outlet of U.S. casual clothing chain Forever 21 has switched off the chandelier and fluorescent lighting on the ceiling and turned off spotlights illuminating shelves from behind. The only lights it uses on the sales floor are along the walls. Although it is using only a third as many lights as before, "We haven't received any customer complaints, and sales have not been affected by our energy-saving effort," said the store's manager.
A 25-year-old female customer said she was not even aware that the lighting had dimmed, adding, "I like this level of brightness." Another shopper, a 19-year-old student, said she does not mind the reduced lighting and appreciates the store's conservation effort.
Out of sight
An official at the Japan Lighting Coordinate Association said brightly lit walls can make an entire room look well-lit even if the ceiling and floor lighting is dim. He said stores can look sufficiently bright even with 70% of the lights turned off. "People's range of vision is 55 degrees up and down and about 110 degrees to the left and right, so ceilings and floors are largely out of sight," the official said.
A official in charge of commercial lighting equipment at Panasonic Electric Works Co. said that reconsidering the concept of brightness will enable further power savings. He said by strategically arranging the lights and lighting levels, it is possible to generate the same level of brightness in a given space despite using fewer lights.
Source: The Nikkei Marketing Journal April 8 edition
TOKYO (Nikkei)--The Great East Japan Earthquake has affected different types of restaurant operators in different ways, with family restaurants and "izakaya" Japanese-style pubs taking a beating, and fast-food chains showing more resilience.
The quake-stricken northeast has relatively fewer restaurants than in other parts of Japan, making the impact on eateries there generally less severe than in other regions.
Beef bowl chain operator Matsuya Foods Co. (9887) temporary closed about 30 of its 833 outlets nationwide after the March 11 quake. Nonetheless, its sales grew 8% on the year in March. The firm attributes the rise to an influx in visits by families who would have dined at family restaurants under normal circumstances.
At Zensho Co. (7550), operator of the Sukiya beef bowl chain, March sales climbed 7% even though it closed some outlets in quake-stricken areas.
Demand at fast-food restaurants remains strong because such eateries tend to attract more repeat customers, according to some experts. Others attribute the robust business to growing anxiety about food shortages.
"Families are trying to avoid eating food stockpiled at home and are instead eating at fast-food restaurants," said one analyst.
Also working in favor of casual, lower-end restaurants is that such establishments have generally seen less damage and lost revenue from the quake.
Zensho has reopened most of its outlets. After the quake, it temporarily closed around 900 stores, or 20% its roughly 4,000 eateries nationwide. As of March 31, only 83, or 2%, of its restaurants remained shuttered.
It expects that revenue losses from the closures will total 1-3 billion yen, less than 1% of the group sales of 368.5 billion yen Zensho projects for fiscal 2010. As most of its factories are unscathed, special losses will not likely exceed several hundred million yen.
McDonald's Holdings Co. (Japan) (2702) had temporarily closed 67 outlets, or 2% of its 3,283 stores, as of Wednesday. It is gradually resuming around-the-clock service at some stores that were halted after the quake.
Ramen noodle chain operator Kourakuen Corp. (7554) is returning to full strength as well, with only 9 of its outlets still closed as of Wednesday.
The Fukushima-based noodle chain resumed full-scale production of gyoza dumplings and other products at its factory within 10 days of the temblor. Sales at its directly managed stores fell about 20% on the year in March due to its heavy presence in the Tohoku region. But the firm says April sales -- excluding those at Tohoku outlets -- are showing signs of recovery, tracking at about the same level as a year ago.
Feeling the heat
While the outlook is generally positive for the fast-food industry, other types of restaurants are taking a direct hit from consumer thriftiness.
At Coco's Japan Co. (9943), a chain of family restaurants under the Zensho umbrella, sales fell 7% in March, the first decline in six months. Sales at Doutor Coffee Co. and Nippon Restaurant System Inc., both under Doutor-Nichires Holdings Co. (3087), likely dropped about 10% each last month.
"Growing hesitation among families to dine out in Tokyo and surrounding prefectures after the quake could be one reason" for the weaker performance, said an official at Doutor-Nichires Holdings.
Stock prices mirror these trends. McDonald's shares are recovering to their pre-quake level, and Zensho and Matsuya Foods are also picking up. In contrast, the stock of major izakaya chain operator Watami Co. (7522) has been depressed since the quake.
Looming power problem
How well restaurant operators fare going forward will hinge to a large extent on their ability to cope with the projected electricity shortages in summer. Rolling blackouts, if extended through summer, could force firms to reduce the use of air conditioning and cut operating hours at stores and plants.
Until now, restaurant operators have been able to lift earnings by improving their efficiency; To overcome the current crisis, however, they need to craft entirely new strategies adapted to the new environment.
Source:The Nikkei April 8 morning edition
TOKYO (Nikkei)--The Japanese government will pay trade insurance benefits to domestic firms unable to export their products due to radiation concerns, part of an effort to help businesses hurt by the perception that Japanese products are tainted.
As a result of the problems at the Fukushima Daiichi nuclear power plant, the European Union and many other countries have placed restriction on food imports from Japan. But there have been cases where nations refused imports of goods from areas far away from the nuclear plant. For example, towels made in Ehime Prefecture were stopped by customs officials in Italy, and China refused to unload of containers from Japan.
The government decided to have Nippon Export and Investment Insurance cover almost the full amount of losses when businesses cannot export their products due to such tarnish. Until now, it was unclear whether benefits would be paid for such stigma-related damage.
Currently, trade insurance covers about 10% of the value of goods exported from Japan. The government will urge small and midsize businesses to apply for such insurance because their operations could be impacted significantly by radiation concerns.
In addition, the government may pay for radiation tests conducted by the smaller firms, given that many overseas customers have requested inspection certificates even for industrial products. Typically, it costs almost 100,000 yen a day to hire an inspector. The government intends to provide referrals to inspection entities and rent out measuring equipment as part of measures to expand its assistance in this area.
The government will also step up radiation tests at ports so that Japanese ships are not refused entry at foreign ports. It plans to begin checking containers bound for overseas at the ports of Tokyo, Kawasaki and Yokohama this month. The inspections will be expanded to include ships and seawater.
Source: The Nikkei April 10 edition
The Office of Commercial Affairs, Royal Thai Embassy in Tokyo, Japan
Source : http://www.depthai.go.th