A free-trade agreement between Japan and India entered into force Monday, ending tariffs on goods that account for 94 percent of their trade flow over 10 years. The FTA, which the two officially cemented last October, is Tokyo's 12th bilateral FTA and offers Japanese firms a chance to gain a better footing in the rapidly emerging economy, which has a population of 1.2 billion.
Tariffs on goods exported to India, including auto parts, steel products, peaches and persimmons, will be scrapped over the next five to 10 years. Tariffs on goods imported from India will be eliminated, including those on nearly all manufactured products, curry powder and tea leaves, but tariffs on wheat, beef and pork will stay in place.
South Korea and others have already made inroads into the vast South Asian market. This made raising Japan's corporate profile in India a priority. India's economic growth is expected to climb through increased trade and investment. India has sustained an annual economic growth rate of between 6 percent and 9 percent since 2005.
But India accounted for less than 1 percent of Japan's total trade figure in fiscal 2008.Experts say the reasons behind such small trade with India include Japanese companies' reluctance to advance into India's market, where high-priced Japanese products are unpopular. Japanese firms have also been busy making investments in China and Southeast Asian countries, they said.
Joichi Kimura, chief at Japan Bank for International Cooperation's office in New Delhi, said India's less developed infrastructure and distribution system compared with Southeast Asian countries has been one of the main reasons behind Japan's slow advance into the market. But he pointed out that India and Japan are working together to improve the industrial infrastructure to help increase businesses between the two countries.
"If India eases regulations, Japanese investments in retail and other fields may increase. And if the two countries deepen their economic relationship, Japanese businesses may even be able to expand into Africa, utilizing India as a transfer point," he said. The negotiations for concluding an FTA between the two countries began in 2007. The agreement was officially endorsed by Prime Minister Naoto Kan and his Indian counterpart, Manmohan Singh, last October and signed in February.
Source: Kyodo/The Japan Times Augst2,2011
The nation's gross domestic product will likely show negative growth in the April- June quarter due mainly to a decrease in exports following the Great East Japan Earthquake, according to forecasts by seven private research institutes. The average estimate of real GDP growth rate by the institutes shows a contraction of 0.7 percent from the previous quarter, or an annualized 2.7 percent decline, which would mark the third straight quarter of decline.
The Cabinet Office is expected to release April-June GDP data on Aug. 15. The March 11 disaster caused a decrease in the production capabilities of automakers and other manufacturers, leading to sagging exports, observers said. The Japan Research Institute Ltd. estimates the nation's exports plunged by 9.2 percent from the previous quarter, and the rate of decline in annualized real GDP will be higher, at minus 4.7 percent in the quarter compared with the 3.5 percent contraction in the previous term.
However, NLI Research Institute estimates the real GDP will decline only slightly, predicting an annualized 1.4 percent drop. The institute said companies have started to rebuild inventories depleted following the disaster, cushioning the decline in the annualized GDP growth rate, which otherwise would have fallen 0.4 percentage point further.
The group predicts that personal consumption, which makes up about 60 percent of GDP, will drop by 0.4 percent in the quarter. Regarding the ratio of public investment to GDP, six institutes forecast positive growth due to construction of temporary housing units in disaster-hit areas. (Aug. 2, 2011)
Source: The Yomiuri Shimbun, Augst2,2011
YOKOHAMA (Dow Jones)--As the possibility is increasing for the yen to strengthen further after the downgrade of the U.S. credit rating, a Nissan Motor Co. (7201) executive said Sunday that it aims to reduce exports from Japan to soften the negative impact from the stubbornly strong yen. Nissan, Japan's second biggest car maker by volume, looks to boost production for the domestic market, to maintain its pledged 1-million vehicle volume a year, said Hiroto Saikawa, a Nissan executive vice president.
The strategy is part of the company's efforts to meet its targeted operating profit margin of 8% and global market share of 8% set under its business plan for the next six years.
"We'll maintain a production volume of 1 million vehicles in Japan by using (domestic production) as our manufacturing center to enhance our competitiveness," Saikawa said at a meeting with reporters at its headquarters in Yokohama, south of Tokyo.
The targeted ratio of exports to Nissan's total domestic production will be still short of the industry's leading level in Japan, possibly still leaving the company vulnerable to the yen's rise.
For Nissan and other Japanese car markers, the yen's strength remains a big headache, as it stays near a record high of Y76.25 against the dollar and threatens to become much stronger after Standard & Poor's downgraded the U.S.'s credit rating on Friday.
A strong yen reduces the price competitiveness of vehicles built in Japan abroad and also deflates income from overseas markets when repatriated.
With the current levels of their local currency, Japanese car makers find it hard to export vehicles profitably from their home country.
Nissan estimates that each time when the dollar weakens by 1 yen, the move reduces the company's annual operating profit by Y20 billion. The company projects an operating profit of Y460 billion for the current fiscal year through March.
Still, Japanese auto makers seek to keep production in Japan as they believe advanced manufacturing technologies and skills owned by their home factories and suppliers will continue to help them build competitive vehicles.
Nissan is targeting the ratio of production for exports to its overall output in Japan of at least 50% or even 40% in the long term, Saikawa said.
The car maker aims to lower its dependency on exports in Japan as it already decided to move production of the Rogue small sport-utility vehicle to North America from Japan while it also plans to increase production capacity in emerging markets such as China.
This 40%-50% ratio goal marks a steady drop from the 57% in the last fiscal year ended in March but won't be significantly low when compared to the most recent ratios at local rivals.
In the first six months of 2011, Honda Motor Co. (7267) exported only 37% of its vehicles built in Japan and the ratio at Suzuki Motor Corp. (7269) stood at 28% while Nissan had 62% and Toyota Motor Corp. (7203) logged 56%.
Nissan aims to increase production for the domestic market to 600,000 vehicles which will lift the portion for the Japanese market to 60% at the maximum to its overall output volume in Japan. The company built 460,000 vehicles for its home market in the last fiscal year, 43% of its total production in Japan.
New models, including a new compact, electric vehicles and other green cars should help boost sales and therefore increase output for the Japanese market, Saikawa said.
As a first step, the car maker is already working to boost its domestic share to 15% by the end of March 2014 from the 13% in the last fiscal year.
Source:The Nikkei, Augst7, 2011
TOKYO (Nikkei)--Hitachi Ltd. (6501) and Mitsubishi Heavy Industries Ltd. (7011) are expected to begin discussing a merger soon. The move by the two industrial heavyweights, which have long resisted drastic changes to their core operations, may encourage others to revamp their businesses as well.
Hitachi and Mitsubishi Heavy are believed to be working toward creating a new company in the spring of 2013 that will focus on infrastructure, environmental and energy businesses, including power plants and rail transport.
The two are hoping to combine their strengths as competition in the infrastructure and energy businesses heats up, with an eye on fast-growing economies in particular.
Since the collapse of the bubble economy 20 years ago, mergers and tie-ups have taken hold in a number of Japanese industries. Many firms are more focused on key operations, spurred by the financial constraints of the economic downturn. Both Hitachi and Mitsubishi Heavy have restructured some operations and group firms over the years, but they have not wielded the ax at their core businesses until now.
Victims of success
Since the end of World War II, Hitachi and Mitsubishi Heavy steadily expanded their operations by establishing strong relationships with clients such as domestic railways and utilities. But over the past two decades, as the economy slowed, they have proved reluctant to rethink the business model that served them so well in the postwar period.
Now changes are being thrust upon them. Japan's nuclear future has been clouded by the meltdown at the Fukushima Daiichi power plant. The power companies that are big clients of Hitachi and Mitsubishi Heavy are faced with the prospect of radical change. Meanwhile, competition with overseas players is getting fiercer.
International markets are critical to the growth of the two partners. The fact that even giants like Hitachi and Mitsubishi feel compelled to wed underscores the urgent need for an overhaul among Japanese firms generally.
Japanese companies are much less profitable, on average, than those in other major economies. Their return on equity, for example, was 6% in fiscal 2010 compared with the double-digit returns common among U.S., European and Chinese firms.
Faced with an uncertain economy, it is imperative that Japanese firms shore up their profitability quickly. This will help revitalize the economy by creating more jobs.
Japanese carmakers, home appliance firms and builders continue to battle for share in a lackluster domestic market but the war of attrition at home has sapped their strength abroad. To pull themselves out of the doldrums, more firms should be prepared to team up with domestic rivals, following the lead of Hitachi and Mitsubishi Heavy.
Source: The Nikkei Aug. 5 morning edition
TOKYO (Nikkei)--Sales of the first rice harvested this year have begun at supermarkets in the Tokyo and Osaka regions.
Koshihikari brand rice from in Miyazaki Prefecture hit store shelves before rice from other growing areas. Prices are slightly higher than last year, but sales have been solid.
Demand for early rice from Miyazaki, Kagoshima and Kochi prefectures is running high due to tight supplies. Consumers hoarded rice and other foodstuffs after the March 11 disaster, which has raised concerns about possible shortages among wholesalers.
While the wholesale price of Miyazaki rice has risen 20% compared with last year, the increase has not been fully passed on to consumers. Supermarkets have raised prices by about 10% over last year. At Tokyo and Osaka stores, for instance, a 5kg bag retails for around 1,780 to 1,980 yen, 100-200 yen higher than last year.
Sales of rice harvested last year are also brisk as consumers fret over possible radioactive contamination of this year's crop.
"Because of a spate of reports that new rice harvests will be tested for contamination, demand for rice grown in 2010 is also rising," said an official at rice wholesaler Murase Co.
Source: The Nikkei Aug. 5 evening edition
TOKYO (Kyodo)--Japan registered a 317.43 billion yen trade deficit in the first 20 days of last month, affected by slower production following the March earthquake and tsunami, the Finance Ministry said Friday.
The figure compared with the 226.51 billion yen surplus recorded during the same period a year earlier.
Exports dropped 3.4 percent year-on-year to 3,423.20 billion yen on declines in such products as vehicles as well as semiconductors and other electronics parts. Imports grew 12.7 percent to 3,740.63 billion yen due to rising commodity prices.
Japan has increasingly imported liquefied natural gas as a fuel to increase thermal power generation in the wake of the crisis at the Fukushima Daiichi nuclear power plant, which has led to many other nuclear reactors remaining idled even after regular safety checkups.
Source: The Nikkei Aug. 5 edition
TOKYO (Nikkei)--Japan and India have begun mutually lowering tariffs under their economic partnership agreement that took effect Monday.
While it is undeniably a welcome development that Japan is opening its market wider by concluding its first EPA with a major emerging economy, the accord by no means translates into a complete liberalization of trade between the countries.
To keep its economy growing amid a dwindling population, Japan needs to deepen ties with booming countries. India is an extremely important economic partner for Japan, in part because it offers a way to avoid relying excessively on China, which has yet to put sufficient trade and investment rules in place.
Not far enough
But the current EPA lacks the necessary teeth to deepen ties between Japan and India to an extent that props up the Japanese economy. It is regrettable that the accord does not include a clause stipulating a review of its content by a set date. Japan should therefore negotiate with India to amend the deal in order to realize meaningful trade liberalization arrangements.
The pact's biggest drawback is that it puts Japan at a disadvantage in various fields compared with its rival, South Korea, which has also concluded an EPA with the South Asian country.
Given that the South Korea-India EPA took effect in January 2010, Japan should have made up for the delay by setting better terms in its accord. But India is set to reduce tariffs at a faster pace in trade with South Korea than with Japan.
In particular, tariffs on South Korean engines and other automotive parts will be lowered noticeably faster than those on Japanese products, meaning it will cost less to export autoparts to India from South Korea than from Japan.
Eye on the EU
Japan should also pay keen attention to the ongoing negotiations for an EPA between the European Union and India. While India refused to cut tariffs on finished motor vehicles from Japan and South Korea for the sake of protecting its domestic auto industry, it is discussing the issue with the EU on a broad front.
The EU and India are expected to wrap up talks on their EPA by the end of this year. It is natural for governments to seek ever-more substantive EPAs. If India agrees to cut tariffs on finished European vehicles, Japanese automakers will find themselves decisively disadvantaged for exports to India. Trade negotiations are a matter of give and take. To seek more tariff cuts by India, Japan should first open its market wider to Indian products and services.
The South Asian country is demanding systematic reforms that would enable Indian nurses, lawyers and other professionals to work in Japan and avoid the double payment of social security premiums. Leadership a must
The current EPA does not cover the movement of services and people between the countries, and there has been procrastination on the negotiations. Political leadership is indispensable for moving forward on talks over opening the labor market.
As it stands, the EPA is unfinished. As a top priority in its economic diplomacy, Japan should forge ahead with domestic deregulation and call on India to reinforce the countries' economic alliance.
Source: The Nikkei Aug. 3 morning edition
TOKYO (Nikkei)--The government decided Friday not to start negotiating any new deals for exporting nuclear plant technologies.
Ongoing negotiations on nuclear exports and cooperation agreements will continue. But the government has decided against taking on new projects until it decides on a basic stance on nuclear technology exports in light of the Fukushima Daiichi accident, which fueled anti-nuclear sentiment among the public.
The cabinet will endorse the latest stance at a Saturday meeting.
Source: The Nikkei Aug. 5 morning edition
New Route To Boost Trade Between Japan, North China
DALIAN, China (Nikkei)--Trade between northeastern China and Japan will likely increase sharply once a new shipping route via Russia opens shortly.
The Chinese state-run Xinhua News Agency reported Wednesday that test runs resumed on the railway connection between Hunchun in the Chinese province of Jilin and Kamyshovaya in Russia after a lengthy suspension since 2004.
With regular services slated to begin as early as September, it will become possible to ship railway cargo from the Chinese city to the Russian port town of Zarubino.From Zarubino, cargo can be shipped to Niigata, a northern Japanese prefecture with ports on the Japan Sea side, via a new shipping lane to be opened shortly.
The Hunchun-Niigata shipping route is expected to halve the transportation time from around 10 days now. This will likely make the route popular among Japanese manufacturers of clothing, automobiles and other products operating in Jilin Province.
The new shipping route will also likely benefit the landlocked northeastern Chinese provinces of Jilin and Heilongjiang by boosting investment and finacing.
Source: The Nikkei Aug. 5 morning edition
TOKYO (Nikkei)--Cheap electricity and labor drew JX Nippon Oil & Energy Corp. to South Korea as a place to add production capacity. The country's penchant for free trade agreements is also likely to make it an export base of choice for more Japanese manufacturers.
"We gave thought to South Korea's electricity prices, labor costs, taxes and other advantages," says Toray Industries Inc. (3402) President Akihiro Nikkaku on the company's decision to spend about 5 billion yen on a carbon fiber factory in the city of Gumi.
Electricity prices in South Korea are 40-50% as much as those in Japan, while labor costs are 60-70% as much, according to the Japan External Trade Organization.
Other incentives for investment in Japan's neighbor include highly skilled factory operators and the won's weakness relative to the yen.
South Korea has already seen an influx of Japanese materials makers looking to supply Samsung Electronics Co. and other local firms. Their next target is likely to be foreign markets. Asahi Kasei Corp. (3407) is planning to grow an acrylonitrile plant in the city of Ulsan into the world's biggest source of this raw material for plastics.
South Korea's steadily expanding web of FTAs, including one with the European Union that went into effect last month, also create cost advantages for exporting from there. An added benefit is the country's proximity to China and other growing Asian markets.
At home, Japanese manufacturers are encumbered by a strong yen, onerous taxes, and a lagging trade policy. Add to that the growing unease over the power supply. Without solutions to these problems, the overseas shift in production could turn into a rout.
Source: The Nikkei Aug. 5 morning edition
Symbol pirates used to raise to strike fear now used to exude cuteness
NATSUKO NAKAMURA
Staff writer
Skull designs have become popular in kids' apparel, thanks to the huge success of the "One Piece" comic, which makes use of the Jolly Roger.
The skull and crossbones has identified pirates and warned of doom. It has been used by sports teams, secret societies, even military forces wanting to project a certain piratelike ferocity or rebelliousness. But the latest skull-and-crossbones trend is in fashion. What the pirates of yore called the Jolly Roger is now being rendered as an animal or in bright colors.
Ominous yet cute is in.
Kayo Tazawa (not her real name), a 36-year-old Yokohama resident, owns a cell phone that's fully encrusted with rhinestones. At the center of the phone, amid all the rhinestones, is a sparkling skull and crossbones. "I love shiny stuff, but hearts and ribbons are too saccharine," she said. "The skull and crossbones gives it a little more sophistication." The motif is often seen on accessories. Last year, jewelry brand e.m. featured it on its line of freshwater pearl necklaces (33,600 yen, about $430) and rings (16,800 yen), which
Take a close look at the freshwater pearl on the necklace and you will see a skull and crossbones embedded inside.
One of the four freshwater pearls on top of the ring also sports a skull and crossbones. The pearl accessories are feminine looking, but "adding a devious element that's only obvious to the holder is what makes the cute design a little menacing," a marketing source said. The jeweler last month released skull-and-crossbones accessories made from coral. Miho Sada uses clay and silicone to create fake macaroons and cupcakes. In June, the clay pโtissier unveiled her latest work: fake sweets with a skull and crossbones. "I've had the opportunity to see many skull-and-crossbones designs," she said. "When I checked it out, I learned that it can be a symbol of good luck. That's how my interest in it grew."
Unexpected icon
Kuromi made her first appearance in 2005 on a TV show for Sanrio Co.'s popular character My Melody. Kuromi, who sports a black hood and pink skull and crossbones, is My Melody's nemesis. At the time, Sanrio didn't carry any Kuromi products, but that changed after the character became popular.
Kuromi remains sought-after even today, though the show no longer airs. "Everybody has a little evil side," a Sanrio source said, "and people identify with the character." U.S. brand Psycho Bunny became a hit when the men's necktie brand used its bunny skull-and-crossbones motif on a new line of women's apparel in 2009.
Fairfax Collective, in Tokyo's Shibuya Ward, which markets the brand in Japan, offers mostly traditional styles, like dress shirts that are popular with a wide age spectrum, from consumers in their late 20s to 50s.
"The skull and crossbones has unexpectedly become the icon," a buyer for Isetan Mitsukoshi Holdings Ltd. said, "giving conservative fashion a contemporary twist." Added a source at A-Mish Co.: "The skull and crossbones has been accepted into the realm of fashion because people have a more sophisticated sense of fashion now and have reached a point where they feel comfortable in almost any look."
More to co me
These e.m. freshwater pearl accessories, left, are embedded with tiny skulls for elegance and kitsch. The things on the right are not real sweets; they are accessories created by clay pโtissier Miho Sada.
Based in Tokyo, A-Mish handles the Algonquins brand. Algonquins features a lot of Jolly Roger motifs in a style known as "dark cute" overseas. It used to be a niche brand with a limited but hard-core fan base but lately has been branching out.
A growing number of mothers are said to be buying matching outfits for themselves and their children.
Ritz, in the city of Shizuoka, sells children's clothing with the skull and crossbones. A majority of its orders come via cell phones.
"Many consumers select the products by name," a Ritz source said. "Adding the phrase 'skull and crossbones' instantly connects to higher sales. Ritz also has a bricks-and-mortar store in the city, which in recent years has seen grandmothers buying clothes for their grandchildren.
"The skull and crossbones is beginning to enter into the mainstream," the source at Ritz added. Chisa Suzuki, a consultant at Mitsubishi UFJ Research and Consulting Co., said children think the skull and crossbones is cool, thanks to the popular "One Piece" manga series. Skull-and-crossbones themes, she said, are likely to continue diversifying and expanding.
Source: The Nikkei Weekly Aug. 01 edition
The Office of Commercial Affairs, Royal Thai Embassy in Tokyo, Japan
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