TOKYO (Nikkei)--Efforts to repair Japan's damaged infrastructure and rebuild shattered business operations are starting to create demand, but to what degree that demand will grow and when the economic benefits of the reconstruction will start being felt remain unclear.
Work to remove debris has begun in the disaster-hit town of Rikuzentakata, Iwate Prefecture.
Hitachi Cable Ltd. (5812) kept its plant in Hitachi, Ibaraki Prefecture, running during the recent Golden Week holidays to ramp up production of power distribution lines. Demand for distribution lines has been goosed not only by the rebuilding efforts in disaster-hit areas but also by moves by companies across the nation to expand their power sources.
Hitachi Construction Machinery Co.'s (6305) plants to manufacture hydraulic shovels are operating at full tilt.
"We are certain to report revenue and profit growth for the current fiscal year," said Hiroshi Tokushige, a senior executive at the company.
GDP boost
According to a Cabinet Office estimate based on the assumption that damaged social infrastructure -- losses from which have been put at 16-25 trillion yen -- will be fixed in three years, reconstruction spending will lift Japan's real gross domestic product by 5-9 trillion yen annually.
The economic benefits of the rebuilding process are not just limited to the manufacturing sector.
Hotel Metropolitan Sendai, located in front of JR Sendai Station, has been almost completely booked since it fully resumed operations in early April. This is in contrast to the 60-70% occupancy during this period in typical years.
Initially, the business hotel's rooms were booked mainly by construction workers and insurance inspectors. But in recent weeks, "More of our guests are corporate executives in suits visiting their companies' branches to support the recovery efforts," said Junichi Konno, the hotel's general manager.
K's Holdings Corp. (8282), which operates the largest chain of home electronics stores in the hard-hit Tohoku region, has seen its store sales grow now that people are starting to replace broken appliances.
Government spending on rebuilding ravaged cities and towns is about to begin now that the Diet has passed a 4 trillion yen supplementary budget to finance the removal of debris and other necessary measures.
But the planned second extra budget to provide funding for larger-scale reconstruction projects will not be formulated until July, and the outlook for its passage is unclear.
Doubts at BOJ
On April 28, Bank of Japan Governor Masaaki Shirakawa stressed the need to pay attention to "downside risks" to the economy, referring to uncertainties in the outlook. The BOJ, which downgraded its forecast for real economic growth in fiscal 2011 from 1.6% to 0.6%, made only a rough estimate of special demand from the reconstruction.
The central bank predicts that reconstruction-related demand growth will start boosting the economy around autumn, but some BOJ economists warn that such benefits may materialize later than expected.
(The Nikkei May 10 morning edition)
TOKYO (Nikkei)--Automakers have long been the main drivers of Japan's economy, but their pre-eminence is under threat, and not just because of the March 11 disaster. A series of factors that have occurred worldwide over the past few years are taking their toll, creating what might be called a "combined crisis."
Looking back, the first turning point was the global economic downturn after the collapse of Lehman Brothers Holdings Inc. in 2008. U.S. automakers, including General Motors Co., were hit the hardest, but their Japanese counterparts took a hit as well, because the North American market was a major source of their earnings.
Honda's factory in Sayama, Saitama Prefecture, was up and running again on April 11.
Bad timing
Toyota Motor Corp. (7203), for example, opened its first pickup truck assembly plant in Texas in 2006 amid great fanfare. But soaring crude oil prices before the Lehman shock slowed down sales of pickups and other large vehicles, and the subsequent global financial crisis led to a contraction in the entire U.S. auto market.
Most recently, supply shortages of autoparts have forced Toyota's Texas plant to reduce output again. Takaki Nakanishi, managing director at Merrill Lynch Japan Securities Co., says the carmaker is still unsure when it will be able to recover its investment in the U.S. plant.
Toyota has pumped roughly 150 billion yen into the Texas facility. In hindsight, the automaker could have achieved a totally different return if it had invested in the production of low-end models in rapidly growing China and India rather than push large vehicles in the U.S. The automaker is still trying to adapt to the new paradigm for success in today's automobile market, which rewards companies that tap high-growth emerging markets more aggressively than they do advanced economies.
Recall disaster
The next event that altered the trajectory of the Japanese auto industry was the discovery of defective parts in Toyota vehicles sold in the U.S. In the end, U.S. authorities identified floor mats and other parts as being the possible causes of accidents, but they were unable to find problems with electronic-control systems, which were the focus of their probe.
Japanese automakers have maintained a quality advantage, but their foreign rivals have rapidly narrowed the gap over the past decade. High-quality Japanese cars have been so popular among American consumers that they are willing to pay more for them. But this tendency is weakening, and the recent Toyota recalls have not helped.
Quake woes
The third event to hurt the competitiveness of Japanese automakers is the Great East Japan Earthquake. For one thing, it will probably take a while before their production returns to normal.
Chubu Electric Power Co.'s (9502) decision to idle its Hamaoka nuclear power plant in Shizuoka Prefecture means that now the Tohoku and Kanto regions will probably not be the only areas hit by power supply shortages. Indeed, over 70% of Japanese cars are produced in central Japan and regions to the west. Possible power shortages in western Japan would deal a major blow to auto production.
Peter Drucker, the founding father of the study of management, hailed the auto industry as the "industry of industries," a play on the expression the "king of kings." No other industry can have the power to create a production system, industrial pyramid and employment on such a massive scale.
Still fighting
During Japan's "lost two decades" in the wake of the collapse of the economic bubble, the auto industry has gained a larger presence and performed well, while the electronics and other industries have shrunk. But the tide is changing.
That is not to say, however, that the auto industry has lost all its strengths. For example, carmakers are expected to take the lead in environmentally friendly know-how, such as hybrid technology. If the nation's economy is to recover from the recent disaster, the auto industry needs to regain its vigor.
-- Translated from an article by senior Nikkei staff writer Kunio Saijo
(The Nikkei May 10 morning edition)
TOKYO (Nikkei)--The Great East Japan Earthquake has revealed just how deeply Japan and its Asian neighbors depend on each other. Slow reconstruction operations in the disaster-hit country could hurt regional consumption, and a drop in Asian visitors could stall Japan's economic recovery drive.
Shark-fin soup is becoming increasingly difficult to obtain in Guangzhou, one of China's food capitals, as imports of key ingredients for the luxury dish, such as shark fins and abalone from Japan's stricken Sanriku coast, have been halted since the magnitude 9.0 temblor struck northern Japan.
Customers peruse samples at a Japanese food fair in Dalian.
"There have been no shipments of shark fins since the quake, and we have run out of stock," said an employee at a shop that sells gourmet ingredients.
There have been serious shortages in Asia of ingredients from Japan due to the damage caused by the quake and tsunami, as well as because of import restrictions on certain food items due to fear of radiation contamination from the crippled Fukushima Daiichi nuclear power plant.
Hurting in Hong Kong
The supply crunch is dealing a major blow to restaurants specializing in Japanese cuisine in Hong Kong, where about 600 such eateries are concentrated.
"I would not be surprised to see more than 100 Japanese restaurants shut down if the supply shortfall continues," a chairman of a restaurant association there told the local media soon after the March 11 quake. One long-standing Japanese restaurant there closed earlier this month.
"The number of customers has dropped 50%," said an executive of the Honmono group, which operates Honmono Sushi, a sushi restaurant in Bangkok.
In Singapore, it is said that sales at Japanese restaurants have declined by an average of 20-30%. Workers in the industry fear that bigger layoffs may be on the way.
Japan's exports in March totaled about 5.86 trillion yen, with Asia accounting for about 60% of that. That means weak sales of Japanese products in the region would affect production in Japan and also hit the Asian economy.
Tourism tumble
A plunge in the number of Asian visitors to Japan is taking an economic toll on the quake-hit country. Government data shows that 8.61 million foreign tourists visited Japan in 2010, with those from Asia accounting for 70% of the total.
Foreign tourists tend to spend big while in Japan. Chinese visitors splash out an average of about 145,000 yen per visit, according to the Japan Tourism Agency. However, that revenue stream has dwindled considerably since the March disaster, with the number of foreign tourists to Japan that month falling 50% on the year to 352,800 due to reservation cancelations. Visitors from China plummeted 50% to 62,500 in the same period.
On the mend
But efforts to rebuild the consumer network between Asia and Japan have begun. Chinese department store Dalian Mykal has been holding a Japanese food fair at its main outlet in Dalian since mid-April. Among the products being sold there are processed foods and sweets, including items from Hokkaido and quake-hit Iwate Prefecture. A store official says made-in-Japan products are necessary for helping the store differentiate its product lineup from its rivals'.
Travel companies, meanwhile, are trying to revive business. On April 16, group tours from Hong Kong were resumed, with the first group visiting Hokkaido. On April 29, 40 Chinese visited Fukuoka Prefecture, making them the first group of tourists from mainland China to visit Japan since the devastating quake.
Finding ways to boost consumer links between Japan and other Asia countries could not only help Japan rebuild from the disaster but also help promote growth in Asia.
(The Nikkei May 9 morning edition)
NAGOYA (Nikkei)--Toyota Motor Corp. (7203) plans to make plug-in capabilities standard for Prius hybrid models slated to debut in 2014, The Nikkei has learned.
Plug-in hybrids can be charged with regular household current. And with the batteries in these cars capable of storing solar-generated electricity, Toyota envisions them also being used as emergency household power sources.
Prius hybrid models debuting in 2014 will come with plug-in capabilities as a standard feature.
Around 2015, Toyota aims to lift global hybrid sales to around 1 million units a year, bringing the total number traveling the world's roadways to 5 million. Since some 70% are expected to be Prius models, the automaker hopes to use the plug-in versions to tap replacement demand.
The future plug-ins will feature high-performance lithium ion batteries. Current models can travel a maximum 38km per liter. The fourth-generation offerings will be able to cover more than 60km, including electricity-only mileage.
Lithium ion batteries are more expensive than conventional nickel-metal hydride batteries, but the automaker will seek economies of scale through mass production. By further cutting prices of high-performance motors and other core components, the vehicles will start at around 2.05 million yen, in line with current prices.
In addition to hybrids and plug-in hybrids, Toyota is developing electric cars and fuel cell vehicles. Taking the available charging infrastructure into account, the automaker sees plug-in hybrids as the leading candidate for next-generation eco-friendly cars. It will use the technology in sedans, minivans and other models after switching over the Prius lineup.
(The Nikkei May 9 morning edition)
BRUSSELS (Nikkei)--The European Union has approached the Japanese government about starting preliminary negotiations toward an economic partnership agreement, a departure from its passive stance on a trade deal with Japan, The Nikkei has learned.
European Trade Commissioner Karel De Gucht made the proposal to Foreign Minister Takeaki Matsumoto at a meeting Monday, according to sources familiar with Japan-EU relations.
Prime Minister Naoto Kan is scheduled to meet later this month with European Council President Herman Van Rompuy and Jose Barroso, the president of the European Commission. They are expected to agree at least to begin preliminary negotiations on an EPA, with a deal on starting formal negotiations likely to be reached at the Group of 20 summit in France in November.
The European Commission had maintained that Japan needed to show a willingness to drop nontariff barriers for EPA talks to begin. Its change of tack reflects an initiative by some EU members, including the U.K., to help Japan rebuild from its worst postwar disaster through trade.
Shortages of Japanese-made parts, which threaten to slow European manufacturing, have added to the momentum toward strengthening economic ties.
Worryingly for Japan, a free trade agreement between the EU and South Korea takes effect July 1. To keep its goods competitive in Europe, Japan will push the EU to drop tariffs on Japanese exports, which run to 10% for autos and 14% for flat-screen televisions.
For the EU, the challenge will be curing chronic trade deficits with Japan by seeking the removal of certain product standards and other nontariff barriers.
(The Nikkei May 7 morning edition)
TOKYO (Nikkei)--The crisis at the Fukushima Daiichi nuclear power station is prompting Japan to re-examine its electricity supply system, whereby utilities maintain generation capacity far in excess of demand.
Electricity shortages triggered when the power plant was knocked out by the March 11 earthquake and tsunami have sparked growing interest in so-called smart grid technologies.
Before the earthquake, the government had shown little appetite for the large investments needed to make smart grids work, arguing the technology was not cost-effective. Now, however, more industrial users of electricity, which are under pressure from the government and utilities to cut back on their consumption before summer, are starting to put the pieces of a smart grid in place.
Powering down
Enegate Co., a joint venture between Osaki Electric Co. (6644) and Kansai Electric Power Co. (9503) that makes power regulating equipment, has taken three times the usual number of inquiries since early April from companies in eastern Japan hoping to hold down their power consumption.
Enegate equipment sets off an alarm when power use exceeds a preset limit, alerting workers to switch off lights and air conditioners, for example. The controllers can also switch off devices automatically. Before the disaster, such "demand-response" systems were not seen as important because an excess of generating capacity, rather than shortages, was the main problem in Japan.
A 4,000kw solar power plant in Miyakojima supplies electricity in Okinawa Prefecture (left); Okinawa Electric Power uses batteries to store electricity from solar and wind power plants.
Just after the quake and tsunami hit, Tokyo Electric Power Co. (9501) began rolling blackouts. Substations stopped supplying electricity to certain areas to ensure overall supply and demand were balanced. In all, Tepco had 27 scheduled blackouts over nine days; hospitals, traffic lights and other key facilities was cut off, throwing affected communities into disarray.
"If smart meters had been widely used, such tumult would not have taken place," said Tsutomu Takei, president of Ennet Corp., which was set up by the NTT group and a major gas company to compete with electric utilities after the industry was deregulated.
Smart savers
Another key component is "smart meters" that let power companies to stop and start electricity supply by remote control. If such meters, which Tepco and others are currently testing, had been in wide use suspensions could have been targeted at specific large-scale users of electricity, rather than entire areas. That might have allowed Tepco to ride out the power shortage with minimal blackouts while maintaining power for hospitals, traffic lights and the like.
Although Ennet's power sources were not damaged in the disaster, the firm had to halt supplies to its customers because it uses Tepco-owned power lines. If smart meters had been prevalent, Ennet and other new power firms might have been able to keep the juice flowing.
Until the earthquake struck eastern Japan, most experts saw smart grids mainly as a way to handle the growing number of houses equipped with solar panels, whose power output fluctuates, making it difficult to control voltage on the power grid. One analyst at an overseas securities firm said, "Smart grids will not be developed in Japan on a wide scale in the next 10 years as the use of solar power is expected to be limited."
But the disaster has changed the outlook for smart grids. Tepco, which was criticized before the quake for maintaining excess generating capacity, has been forced to suspend operations at all its nuclear plants in Fukushima Prefecture, which previously accounted for about 20% of its generating capacity.
Despite the previous lack of interest, some utilities were working on smart grid technologies and the nuclear mishap has acted as a spur. Okinawa Electric Power Co. (9511) began more fully utilizing power from solar and wind plants to supply the city of Miyakojima last October, using batteries to store excess electricity to be used when the sun is not shining and the winds are calm.
Toshiba Corp. (6502), which created the power control system, plans to test a demand-response facility in Yokohama starting in fiscal 2012. The system, which is designed to reduce overall power consumption, will send a signal to devices installed in homes and offices to warn when the area's power consumption has expanded sharply and blackouts loom, to encourage users to switch off air conditioners and other power-hungry machines.
Shimizu Corp. (1803) has developed a system to automatically restrict electricity consumption in a building when utilities reduce the power supply.
Building a full-scale smart grid will require a huge investment, however. Nomura Securities Financial & Economic Research Center estimates setting up such a grid will cost 12 trillion yen through 2030. With Tepco facing the need to raise electricity charges in the aftermath of the disaster, there appears to be a limit to how much it can shift the cost of such investments to customers.
And because upgrades to the existing "dumb" grid will not directly lead to higher sales, they are not expected to attract much private-sector investment. Finding a way to finance its construction is key to the development of an advanced power infrastructure, experts say.
-- Translated an article by Nikkei staff writers Shinichiro Unozawa, Ko Iwasaki and Tomoya Onishi.
(The Nikkei Business Daily May 5 edition)
Fukushima trouble stoking wariness of fish from Japan
The Agriculture, Forestry and Fisheries Ministry is thinking about offering certification that Japan's seafood exports are free of radioactive contamination.
The certification it is considering would be meant to convince China and other trading partners to withdraw import restrictions put up since the Fukushima Daiichi nuclear power plant began discharging radioactive water into the Pacific Ocean.
With nearly 200 billion yen ($2.4 billion) in exports last year, seafood counts as a growth industry. But since the plant's reactors were crippled, Japan's marine bounty faces stricter safety requirements overseas.
As of April 25, the European Union as well as 34 other countries and regions had placed restrictions on imports of Japanese farm and fisheries products, according to the ministry. These bans cover a variety of goods from different prefectures. What stands out is the number of countries pushing for an official safety guarantee backing up the results of radiation tests.
The European Free Trade Association is prepared to resume imports of products shown to be safe by Japanese government-accredited private-sector institutions.
China's barriers are more formidable, covering all types of food from Fukushima and 11 other prefectures. Products from other prefectures need to carry government certification of compliance with radioactivity standards; their place of origin must also be certified.
But fresh fish, which must get to market quickly, needs to be tested for radioactivity where it is brought onshore. That means relying on prefectural authorities. Tokyo is negotiating with Beijing on an arrangement in which the Japanese government would certify the results of local testing.
The government is also asking other countries to ease import restrictions on Japanese seafood. In the meantime, it hopes a certification program will help the fishing industry clear the new safety hurdles, some of which stand in the way of seafood from Kyushu and other areas far removed from the threat of radioactive contamination.
Japanese seafood has enjoyed a reputation for premium quality overseas. Exports rose 13%, to 195 billion yen, last year and accounted for more than 10% of the value of Japanese fishing.
(The Nikkei May 2 morning edition)
The Office of Commercial Affairs, Royal Thai Embassy in Tokyo, Japan
Source : http://www.depthai.go.th