TOKYO (Nikkei)--As Japanese manufacturers grapple with the impact of the strong yen and the loss of global market share to their competitors in South Korea, delayed free trade talks and the lingering threat of potential power shortages are only adding to their woes.
Demand for liquefied natural gas carriers and oil drilling ships is surging this year. South Korean shipbuilders such as Hyundai Heavy Industries Co. are winning many of the orders for these vessels by leveraging the weak won in an industry dominated by the dollar. "Current exchange rates make the prices we offer about 30% higher than those from South Korean firms," said an official at Japanese shipbuilder IHI Corp. (7013).
Sales are growing for South Korean automakers, as Japanese manufacturers recover from supply chain disruptions caused by the March 11 earthquake. U.S. sales for Hyundai Motor Co., including those of group firm Kia Motors Corp., reached 567,900 units in the first six months of 2011, up 33% on the year.
During this period, Hyundai and Kia's combined share of the U.S. market increased to 9%, edging closer to Toyota Motor Corp.'s (7203) 12.8% share and Honda Motor Co.'s (7267) 9.6%. This month, a free trade agreement between South Korea and the European Union went into effect, making South Korean goods more competitive in terms of price.
In South Korea, electricity prices for businesses are only about 40% of those in Japan. South Korea's effective corporate tax rate is also lower, at 24%, compared to roughly 40% in Japan. Japan's corporate leaders, facing factors such as the strong yen, potential power shortages, mandatory carbon emission cuts, delayed trade liberalization talks and hefty taxes, are now intensifying their calls for the government to address these concerns.
Source:The Nikkei July 17,2011
TOKYO (Nikkei)--Japan intends to create a bilateral framework with Vietnam to receive carbon credits in exchange for reductions in greenhouse gas emissions achieved through energy-saving appliances and plants it exports. The two countries are expected to reach a basic agreement as early as this fall on forming a joint committee that will certify credits to be transferred under this bilateral carbon credit deal. Such details as how carbon credits are allocated will be hammered out later. Japan and Vietnam hope to begin the trades after a post-Kyoto Protocol global greenhouse gas reduction framework takes effect in 2013 or later.
Japanese companies would file reports with the joint committee whenever they export fossil-fuel-fired power plants, technologies for using exhaust heat from cement production, such appliances as air conditioners and refrigerators, and other energy conservation technologies to Vietnam. Should these products lead to lower carbon dioxide emissions in Vietnam, Japan would receive carbon credits for a portion of the reduction.
Although bilateral carbon credit deals are not recognized under the Kyoto Protocol, Japan believes that they will be under the next global framework. It hopes to sign similar agreements with such Asian countries as India, Indonesia, Laos and Cambodia. Greenhouse gas emissions in Japan are sure to rise because of the accident at the Fukushima Daiichi nuclear power plant. Safety concerns have set back moves to restart reactors now offline for regular inspections. To cover the shortfall in the power supply, the nation needs to ramp up use of fossil-fuel plants.
Source:The Nikkei July 16,2011
Japanese farmland values have tracked in only one direction over the past decade, down, regardless of whether global food prices have risen or fallen. Even when global prices of rice and wheat have followed opposite trajectories, the values of the Japanese farmland on which they are grown have remained in perfect sync. In principal, farmland values reflect the profitability or productivity of the land. By this logic, the recent surge in food prices should be sending prices of Japanese farmland higher. So why is this not happening? The explanation lies in the fact that Japanese farmers have no real incentive to increase productivity. One reason for this is that Japanese farmland values are determined by residential land prices, not by productivity, so the impact of high food prices on land values is extremely limited.
Carrots galore
Unlike in Japan, the surge in food prices is clearly benefiting food producers in the U.S. While it is true that the commodity price boom is pushing up the cost of fuel and fertilizer, rising grain and cattle prices, as well as expansionary monetary policies, are boosting land values, which is having a positive effect on American farmers' incomes and their ability to pay off their debts.
A recent survey on agricultural credit conditions by the Federal Reserve Bank of Kansas City shows an uptrend in farmland values and farm incomes. The Kansas City Fed concluded that robust farm incomes have led to a swift uptick in farmland values. Even as residential land prices in the U.S. are tanking, farmland prices and rents, even for non-irrigated land, are skyrocketing. Which system is better for farmers, one with a high correlation between farmland values and food prices, or one with little to none? Viewed from the supply side, high prices benefit net producers of foods and signal a need for increased production and investment, while low or volatile prices pose significant problems for farmers who are locked into strategies that assume prices will increase.
In the U.S., food producers enjoy high profits when demand for food is strong. As high food prices help lift farm incomes and farmland values there, farmers have strong incentive to increase productivity through greater investment. In Japan, in contrast, farmers have not had to give serious consideration to how much they will invest in machinery and new technologies, because the wholesale prices at which the government purchases rice are guaranteed. This has helped narrow the income gap between urban and rural households. In this sense, both systems have their advantages and disadvantages.
Need for incentives
Japan needs to give farmers an incentive to raise productivity and accelerate innovation.
If the global food price boom is not incentive enough for Japanese farmers to increase productivity, how, then, will they be able to compete with food-exporting countries in the long run, not to mention on a near-term basis? With international food prices closer than ever to Japanese prices, removing trade barriers and connecting to the global market would be less harmful. Considering Japan's huge budget deficit, heavy subsidies for farmers are no longer sustainable.
In the near term, however, the government needs to provide support for farmers hurt by the Fukushima nuclear crisis. Unfounded rumors about food safety triggered by the accident caused consumers and retailers to think twice about buying agricultural goods produced near the crippled reactor. But on a longer timescale, Japan has to embrace alternative plans, given that the average age of the country's farmers is about 65. One option that cannot be ignored is opening the sector up to the world.
Time to talk trade
It is crucial that Japan openly discuss and make decisions on whether to join the Trans-Pacific Partnership trade alliance or to forge a China-Japan-Korea free trade agreement. Entry into these pacts would provide the agricultural sector strong incentive for increasing productivity and promoting innovation. Of course, free trade is not always beneficial for the agricultural sector. But the farm industry needs to acknowledge that such alliances offer some advantages and, with that thought in mind, adopt new strategic plans as soon as possible. Failure to act will virtually guarantee that the country's farmland values will continue to sink.
Source:The Nikkei July 13, 2011
TOKYO (Dow Jones)--Japan's government said the nation's economy is still smarting four months after the March earthquake and tsunami, as electricity supply problems in the wake of the Fukushima Daiichi nuclear plant accident threaten improvement in production and exports. "Difficulties continue to prevail" due to the March disaster, even while "some positive signs can be seen," the government said in its monthly economic report released Wednesday, keeping the wording of its assessment unchanged from last month.
As the summer heat bears down on Japan, the government again warned electricity supply shortages could weigh on the economy. Many of the country's nuclear reactors remain off line after the accident at the Fukushima Daiichi nuclear plant. Prime Minister Naoto Kan is in a tight spot as he tries to steer recovery-related spending through the country's split parliament. Production and exports are stabilizing, fueling expectations for the economy to bounce back after contracting an annualized 3.5% in January-March. But political discord has slowed efforts to achieve stronger recovery.
Hobbled by a vague promise to step aside, Kan faces opposition even within his own Democratic Party of Japan. Critics say Kan's decision earlier this month to require nuclear plants to pass "stress tests" before they can come back on line was impetuous and undermined efforts to restore more power production. Bank of Japan Gov. Masaaki Shirakawa voiced concern Tuesday that power shortages may force Japanese companies to shift production overseas. Shuttering all nuclear power plants in Japan would lower the country's long-term growth potential, he said. In addition to the electricity supply and complications from the nuclear accident, the government cited high energy prices and "further softening in economic recoveries overseas" as additional risks to Japan's economy.
Adding to Tokyo's headache, an increasingly strong yen is again menacing firms like Sony and Toyota, by making their products less competitive overseas and eating into revenue sent back to Japan. The dollar fell to a four-month low at Y78.48 early Wednesday in Asia. Japan's Finance Minister Yoshihiko Noda signalled growing concern over the yen's moves earlier in the day, calling them "a little one-sided."
The government upgraded its view of two components of the economy, but only to say they likely won't get any worse for now. As firms make further progress restoring factories and supply chains in the wake of the disaster, business investment is bottoming out, an improvement from June when it was looking increasingly weak, the government said.
Tokyo also upgraded its assessment of personal spending, which accounts for around 60% of the nation's gross domestic product. While the government says private spending has yet to turn the corner and is still bottoming out, it no longer describes consumption as showing "signs of weakness." The government lowered its assessment of imports, saying they are "flat," after last month seeing "signs of a pickup."
"We thought imports would increase as production expanded after the disaster, but so far we haven't seen that," a Cabinet Office official said.
Imports should rise ahead, though, due to demand for fossil fuels, the government said, as the nuclear plant problems prompt a shift toward oil and gas-fueled power production.
Source:The Nikkei July 13, 2011
TOKYO (Dow Jones)--Japan's finance minister escalated his warnings against the yen's strength Thursday, calling the currency's recent climb "far out of line with real fundamentals," but he kept quiet on the prospect of government intervention in the currency market. The dollar's recent drop below Y79.00 "is far out line with real fundamentals and is one-sided," Yoshihiko Noda told reporters at the Ministry of Finance. "It would be troubling if this trend takes hold so we will continue to watch the markets carefully."
Noda's remarks were more pointed than early Wednesday, when he described the move as "a little one-sided" after the yen hit a four month high of Y78.48 to the dollar on concerns over Europe's debt woes and the U.S.'s economic outlook. That Noda hardened his rhetoric even though the Japanese currency has since stayed below that level suggests that Japanese officials may be bothered not only by the speed of the yen's recent gains but also its levels. If the yen continues to stay persistently strong like this, it would make Japanese exports less competitive abroad, threatening to derail the nation's embryonic economic recovery from the devastating March 11 earthquake and tsunami. But the overall tone of Noda's comments still indicate that Japan isn't about to storm into the market yet.
Noda declined to answer questions on possible currency market intervention to curb the yen's strength, a step last taken on March 18 with the other Group of Seven leading industrialized nations. He also didn't threaten to take "decisive steps"--the strongest language in Japan's currency lexicon that officials use to let the market know that they might act soon.
In an interview with Dow Jones Newswires Monday, Noda said official action should be limited to when there is "excessive volatility" or "disorderly movement" in the yen's exchange rates. The currency market showed little reaction to Noda's latest remarks Thursday. Many investors seem to think that sharper yen rises would be needed to spur official Japanese action and that even if Tokyo acts, it would be difficult to reverse the yen's rise, which is being driven by factors beyond Japan's control. The dollar stood at Y78.75 at around 0045 GMT.
Source:The Nikkei July 14, 2011
TOKYO (Nikkei)--Sojitz Corp. (2768) is launching an international distribution service connecting Vietnam, Cambodia and Thailand to help Japanese companies move into the region, which is becoming Asia's new production base. The new service will utilize an 850km international thoroughfare linking Ho Chi Minh City, Phnom Penh and Bangkok. Distribution subsidiary Sojitz Logistics Corp. will run the service, which could begin later this month.
Using the new route will enable trucks to cross national borders without unloading cargo. When combined with maritime transport via major ports in Vietnam and Thailand, this will shorten shipping times for parts and materials from Tokyo to Phnom Penh by around one-third. Demand is anticipated from Japanese manufacturers in Cambodia. Autoparts makers and apparel producers are moving there because of low labor costs. But until now, large-scale shipments have required much time and labor due to inadequate port facilities and roadways.
Sojitz will be the first Japanese firm to make full use of the new overland route. In the near future, it aims to handle 100,000 tons of cargo annually via the service.
Source:The Nikkei July 13,2011
TOKYO (Nikkei)--Major manufacturers of industrial robots are trying to reduce their dependence on automakers in hopes of insulating their profits against a drop in car production. Yaskawa Electric Corp. (6506) plans to open a facility in the fall to show food and logistics companies how to take advantage of robots, while Nachi-Fujikoshi Corp. (6474) has created a mobile phone Web site with videos showing off its robots as it tries to increase sales to smaller companies.
Yaskawa Electric will open a sales and training facility for industrial robots in the city of Saitama in late September that will have about 25 robots on display, including one that can box chocolates at high speed and one for loading and unloading heavy cartons at warehouses. Customers will be taught how to use them on site. The company is also considering building a similar facility near Nagoya.
Nachi-Fujikoshi has put up a Web site that lets visitors see its robots in action on their mobile phones. Potential customers can see the machines
performing various types of jobs, such as assembling parts and tightening screws. The mobile site lets customers see product specifications without having to look at the robots themselves, even while away from their desktop PCs. About 280 domestic sales agents are using the site to sell robots to smaller companies.
Automate this
Kawasaki Heavy Industries Ltd. (7012) and Fanuc Corp. (6954) are also pushing to increase sales of robots that can perform light work quickly. Kawasaki Heavy has tie-ups with five or six factory design companies with expertise in food processing plants. Together they have sold 200 such machines, which can sort perilla (Japanese basil) leaves, for example. Fanuc is estimated to have shipped more than 1,100 similar robots since 2009.
Robot makers are trying to reduce their dependence on the auto industry, having suffered from the worldwide slump in car production that followed the 2008 financial crisis. Shipments of automotive robots peaked in 2005 at 89.4 billion yen, making up 43.8% of all domestic shipments, according to the Japan Robot Association. In 2010, that figure fell to 23.2 billion yen and 21.8% of the total.
Yaskawa Electric suffered a consolidated operating loss of 6.9 billion yen in the year ended March 2010, mainly due to a 50% year-on-year drop in sales of industrial robots. For Fanuc, sales at its robot division were down about 30% that year.
Food processing plants, which robot makers see as promising customers, still rely on people for many jobs. But more and more plants are using robots to improve hygiene. Small subcontractors to major manufacturers are also automating more of their production to compete with overseas rivals.
Source:The Nikkei July 12,2011
But jewelry demand isn't as dependable - a fact driving materials firms to serve up some sparkle
With jewelers being squeezed by tepid consumption, suppliers of gold, platinum and other precious metals are coming to the rescue by releasing new products they hope will restore some luster to the fading industry.
As many jewelers are too financially weak to mount their own revival campaigns, suppliers are taking it upon themselves to introduce intriguing items with attention-grabbing marketing campaigns. And who better to grab attention than popular South Korean actor Song Seung-heon?
Mitsubishi Materials Corp. obviously felt confident about Song's appeal, spending 50 million yen ($617,200) to make him the face of a new line of products under its MJC jewelry brand. At the Tokyo International Forum convention hall on June 9, the heartthrob put in a guest appearance as part of a product-launch event for MJC's Diamond For You series. Those who wanted to see Song were chosen by lots, with their chances pegged at one in 200.
Luck was particularly on the side of one middle-aged woman who made it into the audience. She was plucked from the crowd by Song and invited on stage, where he presented her with a 390,000 yen ring adorned with four diamonds.
Saying "I love you"
The promotional concept behind the Diamond For You series, which uses flower petals as a design motif, is that men express their love for women through jewelry. Until now, MJC has been selling its products online and through mail order catalogs, with prices mostly around 100,000 yen. Its primary target has been women who buy jewelry for themselves.
The impetus for Mitsubishi Materials' new approach is the firm 's belief that the jewelry industry as a whole urgently needs a boost. Sluggish domestic demand is dampening jewelers' earnings, causing
many players to become reluctant to shell out for TV ads. And that means demand for ingot metal produced by materials firms is heading for a contraction as well. As for Mitsubishi Materials' investment in Song, it has proved to be worth every yen. The star attracted a flood of media attention, with a total of 18 of the firm's new offerings - including the 390,000 yen ring - receiving prime coverage on TV and in magazines.
As part of the product launch, Mitsubishi Materials held a photo-op event at its directly owned MJC shop in Tokyo's Marunouchi district. Though it was open only to the press, over 200 of Song's fans gathered outside. "We can apply this brand strategy to the cement and other businesses," a senior official at Mitsubishi Materials said. The company estimates that Song's impact will be worth anywhere from 500 million yen to 1 billion yen, and it has decided to continue using him to promote its jewelry.
Platinum and pricey
Tanaka Holdings Co., an ingot metal producer, has also changed its tactics recently. In May, it brought out a new ring commemorating the reprint of Japan's first specialty book on diamonds. The book was originally published in 1923 by Yamazaki Shoten, the precursor to the company's jewelry unit, Tanaka Kikinzoku Jewelry KK.
The book, titled "Diamond," was authored by Tetsusaburo Iwata, who was also Yamazaki Shoten's chief clocksmith. And a point that Iwata made - that diamonds look far better in platinum bands than gold ones - provided inspiration for the new ring. Made of 950 platinum, meaning it is 95% pure, the ring features a 2-carat diamond at the center and several smaller stones. It carries a price tag of 10 million yen, more than three times that of the company's most expensive regular offering.
The idea is to invigorate the market by breaking with the current focus on low-price jewelry. To keep prices down, more jewelers have been handling items made with 10-carat gold, which has 42% purity, rather than 18-carat gold, which is 75% pure. Fearing that this trend will dampen its earnings, Tanaka Holdings decided to try the high-end route.
Suppliers of precious metals have long acted as behind-the-scenes players in the jewelry industry. Positioning jewelry-making as secondary businesses, however, they have traditionally avoided pouring significant resources into the segment. JX Nippon Mining & Metals Corp., for example, runs a jewelry shop, but most of its customers are from group firms. Sumitomo Metal Mining Co., meanwhile, cut off its jewelry unit from its core operations and sold it in 2004.
Now, though, stagnant consumption has made it harder for jewelers to release new products, prompting them to look to their suppliers for help. Tomoyuki Hori, chairman of the Japan Jewellery Association, said, "Jewelers expect metal suppliers to play a leading role in rejuvenating the industry."
Slumping market
According to Yano Research Institute, the domestic retail market for jewelry and precious metals was worth an estimated 910.4 billion yen in 2010, down 1.9% from a year earlier and less than a third of the 1991 peak of 3.015 trillion yen. It also marked the fourth-straight year of decline. The lingering recession has put downward pressure on incomes. In addition, younger consumers are generally less keen to buy jewelry, preferring simple and frugal lifestyles. A recovery was thought to be in sight in 2010, but now the March 11 earthquake has clouded the outlook.
Jewelers are rushing to expand their lineups of low-price offerings to attract younger customers, but surging precious metal prices and shrinking demand have dealt their earnings a double whammy. Metal suppliers, in contrast, are engaged in a more diverse range of businesses, with jewelry accounting for only a portion of their money-making operations. Their ample resources give them the edge they need to play a key role in putting the sparkle back in consumer activity.
Source:The Nikkei July 11,2011
TOKYO (Nikkei)--With living standards rising in emerging markets, consumer healthcare products are growing more popular than expensive prescription drugs. To make headway in these rapidly growing markets, global drugmakers are merging with or buying out cross-border rivals. Meanwhile, Japanese firms are working to increase awareness of their brands in local markets and reaching out to middle-income customers.
Pfizer Inc. of the U.S., the world's largest drugmaker, is again flexing its muscles in consumer healthcare. In February it bought Danish healthcare company Ferrosan's Imedeen beauty supplement operations as it gears up for a push into Russia, Turkey and other emerging markets. The deal is a reversal of its previous strategy, under which it unloaded its over-the-counter drug businesses and withdrew from consumer healthcare in 2006.
Where the money is
"To maximize earnings opportunities, Pfizer has changed its stance to adopt omnidirectional strategies that target consumers in emerging markets," said a senior official at Pfizer Japan Inc. Sanofi SA of France last year set up a joint venture in dietary supplements with Minsheng Pharmaceutical Co. of China. In February it acquired Chinese over-the-counter drugmaker BMP Sunstone Corp. Meanwhile, Reckitt Benckiser Group Plc of the U.K., which is known for its medicated soap Muse, announced plans in December to buy India's second-largest maker of over-the-counter medicines.
GlaxoSmithKline Plc, another British giant, generates 18% of its sales from consumer healthcare products, while those products make up less than 5% of Daiichi Sankyo Co.'s (4568) sales. The difference is due to the alternative approaches of Western and Japanese drugmakers in emerging markets. European and U.S. drugmakers often use M&As to gain entry in emerging markets because it saves time. By contrast, Japanese drugmakers try to raise their profile in Asian markets by building up their brands in the minds of local consumers.
Rohto Pharmaceutical Co. (4527) last November started selling lip creams in Bangladesh in hopes of rolling out eye drops and skin care products down the road. "It is a stereotypical view that companies should deal in only low-price products in emerging markets," said Masaya Saito, director of marketing at Rohto. By incorporating its pharmaceutical expertise into its skin care products, the company has developed a wide range of medicated cosmetics targeting middle-income consumers.
Eisai Co. (4523) in March began advertising its Chocola BB Vitamin B2 supplement drink for women on TV and billboards in Hong Kong using the same actress it uses in Japan to pitch the product. It is planning to bring Chocola BB to China, where women's supplement drinks have yet to catch on. Its rivals will be Japanese cosmetics companies like Fancl Corp. (4921) and DHC Corporation.
China is a top priority for Eisai. "We want to raise our name value among Chinese consumers through over-the-counter drugs, and hope to attract would-be workers for our company as well," said Executive Vice President Hideshi Honda. For drugmakers, profits from nonprescription operations are far smaller than the prescription drug business. But Toshiki Mano, a professor of medical management at Tama University, said consumers' views need to be incorporated into the business if it is to grow.
Nonprescription drugs require different safety precautions from those for prescription drugs because they target the general public. Japanese drugmakers should take advantage of their expertise in making high-quality products that meet some of the world's strictest safety standards to strengthen their brand identities with local consumers.
Source:The Nikkei July 13,2011
The Office of Commercial Affairs, Royal Thai Embassy in Tokyo, Japan
Source : http://www.depthai.go.th