BANGKOK (Nikkei)--Japanese companies operating in Thailand are ruminating on the effect the new government's proposed minimum wage hike will have on their businesses there.
The administration of Prime Minister Yingluck Shinawatra, the country's first female premier, has
a 60% majority in the lower house of the national assembly. Many firms expect this new government to bring political stability to the country after years of turmoil. But they are divided over the implications of Yingluck's proposed minimum wage hike.
Workers prepare food at K&U Enterprise, Kyokuyo's seafood processing joint venture in Thailand. The minimum wage hike proposed by the new Thai government will deliver a heavy blow to such labor intensive businesses.
K&U Enterprise Co., a local joint venture of Kyokuyo Co. (1301), a major seafood processing company, is braced for a steep rise in labor costs. K&U's factory in Samut Sakhon Province, which borders the western edge of the capital, produces around 3,500 tons of seafood for sushi annually.
It exports all its output.
Minimum wages in Thailand range from 159 to 221 baht. As the centerpiece of her election platform, Yingluck pledged to raise them to a uniform 300 baht. The minimum wage in Samut Sakhon is expected to be raised from 215 baht (580 yen) in January. This translates into an increase in labor costs of nearly 20% for the Kyokuyo unit.
"We don't know whether we'll be able to offset the cost increase through obvious measures such as a drive to boost productivity or job cuts," says a senior Japanese executive at K&U.
Also beneficial
Siam FamilyMart Co., the local unit of FamilyMart Co. (8028) operates 650 convenience stores in
20 Thai provinces, employing around 4,500 local workers. On the expected minimum wage hike, Siam FamilyMart CEO Kazushige Ueno says, "We have forecast a 40% rise in labor costs."
Such wage increases would, in theory, benefit the convenience store industry, which depends on domestic consumption. Ueno says, however, it will take time for the positive effects to trickle down to consumption.
The new government has also proposed a corporate tax cut as a means to placate businesses. But given that many Japanese companies operating in Thailand already enjoy tax breaks under a government policy to attract foreign investments, it is unlikely to be of great benefit to them.
The proposed wage increase, however, can be seen as a reasonable response to the country's strong economic growth over the past decade. Its gross domestic product has ballooned by 53%, and prices have surged 30% in the 10 years
since 2001. Yet the minimum wage in Bangkok has risen by only 25%.
Higher part prices
Japanese automakers operating in the country have mixed feelings on the prime minister's proposal.
Toyota Motor Thailand Co. President Kyoichi Tanada warns that the company may have to import parts from India and Indonesia if component prices rise significantly in Thailand.
The Thai unit of Toyota Motor Corp. (7203) employs 8,000-odd local workers, or two thirds of its Thai workforce, at the minimum wage of 215 baht. The wage hike will not overly impact its bottom line because wages account for less than 10% of its overall production cost. A bigger problem for Toyota would be higher component prices stemming from wage increases at its labor-intensive suppliers.
Mitsubishi Motors (Thailand) Co. President Nobuyuki Murahashi sees lifting the purchasing power of Thai consumers as important for the nation's fast-growing auto industry. Though he describes the proposed wage increase as "excessive."
While it is not yet clear how the wage increase will affect the Thai economy, it will certainly have implications for rapidly growing Japanese investment in the country.
--Translated from an article by Nikkei staff writer Toru Takahashi
(The Nikkei Business Daily Aug. 16 edition)
TOKYO (Nikkei)--The country's gross domestic product shrank for the third straight quarter in the April-June period, but the government and the Bank of Japan expect the economy to start picking up from the July-September quarter.
People walk on a street at Ginza shopping district in in Tokyo. Japan's GDP shrank for the third straight quarter in the April-June period on the March 11 earthquake impact.
Distribution bottlenecks triggered by the March 11 earthquake caused exports to plunge in the quarter ended June. However, domestic demand remained brisk, with capital investment increasing from the previous quarter. Inflation-adjusted GDP is set return to positive territory in the July-September period due to recovering production and exports, but that growth will likely be tempered by the stronger yen and weakening overseas economies.
The negative impact of the March disaster began easing in the April-June quarter, with supply-chain recoveries enabling production and exports to start getting back on track in May. Adding to the growth momentum is the implementation of the first and second supplementary budgets for this fiscal year, which is expected to significantly boost relief and reconstruction demand.
The government and the BOJ expect the economy to start recovering from the July-September quarter, a view that is supported by private-sector economists, who predict GDP for the period to expand by an average of 4.6% on an annualized basis.
But that rosy scenario could be upended by limp U.S. and other overseas economies, which are showing signs of slowing, as well as by a possible deceleration in export activity from autumn.
Exports are being battered by the strength of the yen, which is trading at around 77 yen to the dollar, compared with an average of 81.70 yen in the April-June quarter.
"The strong yen could reduce export volume, but its negative effects might be even more pronounced in its impact on personal consumption and capital investment as a result of deteriorating corporate earnings," said a Cabinet Office official.
The Cabinet Office estimates a 1% fall in overseas demand will depress GDP by 0.1 percentage point, and a 10% rise in the yen against the dollar will push down GDP by 0.2 percentage point. A prolonged slide in stock prices could also dampen consumer sentiment.
(The Nikkei Aug. 15 evening edition)
TOKYO (Nikkei)--Not a single contract changed hands on the Tokyo Grain Exchange on Monday as supply concerns for the 2011 harvest, sparked by the Fukushima nuclear disaster, drove bid prices far above the allowable daily gain. Rice futures began trading that day at the TGE and the Kansai Commodities Exchange for the first time in decades.
At the TGE, a circuit breaker mechanism was set to be triggered if the price were to move more than 600 yen from the starting base line of 13,500 yen per 60kg of rice. Quotes for January 2012 contracts came in at 18,500 yen soon after the market opened.
The base-line reference price was "set by using producer organizations' estimates for wholesale prices for rice to be harvested this autumn," a TGE official said.
Following Monday's results, the exchange aims to expand the threshold for triggering the circuit breaker and change other trading rules. As a start, it has decided to hike the base-line price to 16,400 yen and the maximum price range to 1,000 yen as a special measure for Tuesday.
"Once farmers and wholesalers make a full-scale entry, the price will come down," an analyst said, adding, "Individual investors were dominant on the first day."
But the National Federation of Agricultural Cooperative Associations and its affiliates, which account for 60% of the rice distributed in Japan, oppose rice futures trading on grounds that it is vulnerable to speculation. The exchange plans to continue urging the federation and other agricultural organizations to take part in the futures market while touting the roles that futures trading can play.
Meanwhile, November 2011 and January 2012 rice futures contracts changed hands at the Kansai Commodities Exchange on Monday, with January contracts closing more than 4,000 yen higher
than those for November.
"January 2012 contracts will consist only of the 2011 harvest, for which concerns for supply shortages are strong," says an official at a commodity trading firm as to the reason behind the large price gap.
"Orders for 2010 rice doubled in the Kanto area since radiation testing rice has been decided," a major rice wholesaler in Kansai said.
Sales of 2010 rice have also been rising at supermarkets, due partly to people stocking up in case of supply shortages. Life Corp.'s (8194) food supermarkets saw rice sales come in 30% higher on the year between Wednesday and Sunday.
"We're not experiencing any shortages at the moment since we have sufficient inventory," a company official said.
(The Nikkei Aug. 9 morning edition)
OSAKA (Nikkei)--Sumitomo Rubber Industries Ltd. (5110) will invest an additional 10 billion yen by 2013 to turn its tire factory in Thailand into one of the largest in the world.
Sumitomo Rubber will invest an additional 10 billion yen in this Thai plant.
The world's sixth-ranked tire manufacturer is currently increasing the plant's output capacity, with plans to spend a total of 28 billion yen during the 2010-12 period. In light of sharp growth in demand in Southeast Asia and a strong yen, the company decided to pour an additional 10 billion yen into the plant for further expansion.
After the upgrade, the factory will have a daily output capacity of 100,000 tires in 2014, up about 150% from the level at the end of last year. In comparison, global leader Bridgestone Corp.'s (5108) largest factory, located in Shiga Prefecture, can produce 46,000 units a day. Other large-scale factories generally have a daily output capacity of around 50,000, making the Thai plant one of the largest.
With new-car sales in the six key Southeast Asian markets rising about 30% on the year, Sumitomo Rubber anticipates stronger demand not just from automakers but also from consumers replacing their tires.
The Thai plant will be equipped to produce a broad range of passenger-car tires, from all-purpose to sports models. The facility, which has mainly exported products to the U.S. and Europe, will also supply tires to Japanese automakers and local tire stores in Thailand, Indonesia and other Southeast Asian markets.
Nissan Motor Co. (7201) and other automakers have factories in Thailand, and natural rubber is easy to purchase locally, making the plant suitable as a core production base.
Sumitomo Rubber is currently building a new plant in China and has decided to construct its first South American factory in Brazil. With these new facilities and the expansion of the Thai plant, the firm's annual output capacity is expected to grow about 20% from the current level to 120 million units at the end of 2014.
(The Nikkei Aug. 9 morning edition)
BANGKOK (Nikkei)--Japanese companies are rushing to expand their businesses in Thailand, as evidenced by the 130% year-on-year jump in their direct investment in the Southeast Asian country in the six months through June.
Moves to shift more production outside Japan have gained steam as a result of parts-supply disruptions in the wake of the Great East Japan Earthquake and are now gaining further momentum due to the yen's surge. Thailand is particularly attractive to Japanese manufacturers because the country seems better equipped as a manufacturing hub than its regional neighbors.
In the January-June period, total foreign direct investment in Thailand rose 30% to 155 billion baht (420 billion yen), and there were 471 direct investments, up 25%, according to Thailand's Board of Investment. Japan accounted for 87.5 billion baht of the total and 241 of the investments, up 65%. In other words, Japan accounted for half of foreign investment in Thailand by value and volume.
Production base Japanese firms are pouring resources into the country to boost production and to start making value-added products there. JFE Steel Corp. and Nippon Steel Corp. (5401) separately plan to make surface-treated steel for use in vehicles there from 2013. Jatco Ltd., an autoparts maker, will begin producing CVT (continuously variable transmissions) there in 2013.
Nonmanufacturers are also making forays into the country to capitalize on rising domestic demand. Fast Retailing Co. (9983) will open three Uniqlo outlets in Thailand by the end of this year as part of its aim of having 100 shops there by 2020.
The Japanese Chamber of Commerce in Bangkok recently conducted a survey on 228 Japanese manufacturers and found that they planned to spend an average of 94% more on capital investment in the country in fiscal 2011 than in the previous year. In the April-June quarter, it had consultations with 56 Japanese firms thinking of starting operations in Thailand, up 270% on the year.
Over 40% of these companies were services firms, such as staffing agencies and call center operators, that are counting on business expansion there by Japanese firms, according to Nobuyuki Ishii, secretary-general of the Bangkok Chamber of Commerce.
Local governments are helping small and midsize firms establish roots in Thailand. Fukuoka Prefecture became the first Japanese local government to open an office in Bangkok. And on Aug. 1, Okayama Prefecture set up a new section to support the local companies that are doing business in Thailand, commissioning the operation to a consultancy.
Meanwhile, Kasikornbank Public Co., a major Thai bank, has formed capital alliances with about a dozen Japanese regional banks and helps their client firms enter Thailand, such as by extending loans and offering other financial services.
A Thai autoparts processing factory: Japanese direct investment in the Southeast Asian country is rising fast.
Japan magnet
In 2010, Thailand was the third-largest recipient in Southeast Asia of foreign direct investment, behind Vietnam and Indonesia. But Japanese investment in Thailand came to 3.3 billion dollars (260 billion yen), 60% more than what runner-up Vietnam received from Japan.
About 7,000 Japanese firms have already entered Thailand, far more than the some 1,400 in Malaysia and 1,300 in Indonesia. Despite political confusion and other negative factors that have been present there in the past several years, Thailand appears to have no trouble attracting Japanese businesses.
With the slated creation in 2015 of the ASEAN (Association of Southeast Asian Nations) Economic Community, many Japanese companies appear to regard Thailand as a strategically important base from which to obtain high market shares in the region. Another appeal is that Thailand is a country where companies can make products for export as well as for local consumption. If political stability is restored under the new administration, even more Japanese firms will likely enter the country.
Suri Pitsuwan, secretary-general of ASEAN, said the strong yen, rising personnel costs and labor shortages in China have sparked renewed interest among Japanese firms about investing in Southeast Asia. Foreign direct investment in the region doubled on the year to 75.8 billion dollars in 2010.
Indonesia and the Philippines are trying especially hard to attract Japanese firms, but they are not having as much success as Thailand. One major reason is delayed infrastructure development.
Standing out
In fact, Thailand is the only country in Southeast Asia where Japanese investment is not growing slowly. For example, Indonesia, where foreign direct investment increased 16% in the six months through June, received only about 700 million investment dollars from Japan, just one-fourth the amount received by Thailand.
Meanwhile, the Philippines saw investment from Japan fall 54% on the year to 4.72 billion pesos (8.5 billion yen) in the January-March period. In the same period, Malaysia received 258 million ringgit (about 6.5 billion yen) in investment from Japan, down 40% on the year.
--Translated from an article by Nikkei staff writers Toru Takahashi and Koji Nozawa
(The Nikkei Aug. 11 morning edition)
TOKYO (Nikkei)--After dwindling in the wake of the March 11 disaster, demand for eating out is rebounding on hot summer temperatures and loosened entertainment purse strings.
Leading family restaurant operator Skylark Co. suffered an 8.6% year-on-year drop in same-store sales for March due to the earthquake. After seesawing in April and May, same-store sales rebounded a sharp 5.8% in June and then jumped 9.1% last month.
Seven & i Food Systems Co., which operates Denny's family restaurants, logged growth in same-store sales for June and July, as did the Royal Host chain and Saizeriya Co. (7581).
"Demand is also strong this month," a Skylark official says.
Families, loath to waste energy by turning on household air conditioning, are increasingly eating out. With beverage sales brisk, per-customer sales are also in an uptrend.
And at Japanese-style pubs, gatherings are on the rise as customers stop holding back, according to Daisyo Corp. (9979). The operator of Shoya pubs saw same-store sales plunge 21.1% for March but logged two straight months of increases in June and July.
Same-store sales fell 13.8% for March at Amataro pub operator Colowide Co. (7616) but only 1-2% for June and July.
March sales sank nearly 40% at high-end restaurant operator Ukai Co. (7621). But thanks in part to events to support earthquake reconstruction efforts, its sales have been in an uptrend since May.
Restaurant sales fell a record 10.3% for March but slipped just 0.2% in June to be nearly level with the year-earlier figure, according to the Japan Foodservice Association.
(The Nikkei Aug. 13 morning edition)
TOKYO (Nikkei)--NEC Corp. (6701) plans to shift overseas production of servers into full gear as the strong yen continues to erode its competitiveness.
NEC now makes nearly all of its servers through a subsidiary in Yamanashi Prefecture, outsourcing production of a small number to China. It plans to manufacture the entry-level models known as personal computer servers abroad. NEC churns out more than 140,000 PC servers a year, more than half its overall server sales.
In Thailand, NEC will modify some production lines at a subsidiary handling telecommunications equipment so that PC servers can be assembled there. Full-scale production is expected to begin by year-end. This facility will be able to make more than 1,000 servers a month for Asian markets.
NEC will also outsource production to an electronics manufacturing service in Hungary and may take similar steps in the Americas. It aims to produce 20% of its servers outside Japan by fiscal 2013.
The growing popularity of cloud computing is seen pushing up demand for data center and other servers. By fiscal 2013, NEC hopes to double its share of the global server market from the current 2% or so. And it aims to have foreign markets account for 20% of its worldwide server sales by that year, double the current figure.
(The Nikkei Aug. 13 morning edition)
MANADO (Kyodo)--Economic ministers from Asian countries said they will take into account a joint proposal by China and Japan on ways to forge a regional free trade area in the future but stopped short of adopting outright a suggestion for the establishment of three working groups to study specific sectors for the creation of the FTA, according to a statement released Saturday.
''The ministers welcomed and exchanged views on the joint proposal by China and Japan,'' said a statement on the ASEAN-plus-three ministerial meeting that was held Friday on the sidelines of the annual meeting of ASEAN economic ministers in the capital city of Indonesia's North Sulawesi province.
But the ministers also ''reiterated the importance of ASEAN centrality in the expanded regional economic integration process,'' it added.
ASEAN officials said the group decided not to immediately accept the suggestion in the joint proposal for the three working groups to study the consolidation of ASEAN's existing FTAs with individual countries outside the region in the areas of trade in goods, trade in services and investment.
The main reason cited is that the group would like to play a central role in designing the regional FTA, instead of allowing countries outside the group to take over the helm, and have already started to prepare their own report on the structure for the FTA.
The statement said the ministers ''noted that ASEAN is still working on the structure and template for the (regional FTA) and is taking into account the joint proposal by China and Japan in developing recommendations by November 2011,'' when the ASEAN leaders summit and other related meetings with countries outside the region will be held.
They ''looked forward to considering the ASEAN-proposed structure and template for the (regional FTA) alongside the joint proposal by China and Japan'' and have instructed their senior officials to meet in November specially to consider these proposals, the statement said.
Some ASEAN countries are also hesitant to move too quickly on an East Asia-wide FTA amid current global economic uncertainties and also amid fears of being swamped with goods from China, ASEAN officials said.
Another reason is that setting up the three working groups immediately would add to the burden of ASEAN countries, especially developing member countries like Myanmar, Laos and Cambodia which are already struggling to cope with four working groups set up by ASEAN in 2009 to study ways to consolidate ASEAN's current FTAs with countries outside the region as the basis for the future FTA, the officials said.
(The Nikkei, August 14 edition)
The government has decided to create a new nuclear safety agency as an extraministerial bureau under the Environment Ministry to free it from the influence of the Economy, Trade and Industry Ministry.
Plans call for the new agency to be established next April by integrating the industry ministry's Nuclear and Industrial Safety Agency and the Cabinet Office's Nuclear Safety Commission. The government believes the new agency will have a staff of about 500.
The decision was prompted by the government's concern that it is difficult to secure nuclear safety under the current system, in which the agency--which supervises the safety of nuclear power generation--is placed under the ministry that promotes nuclear power.
To make the new agency independent from the ministry, the government judged it desirable to establish it under the Environment Ministry, which does not have close ties to nuclear power or power companies.
Initially, the government considered setting up the new agency under the Cabinet Office, but the idea was dropped. Goshi Hosono, minister in charge of the nuclear crisis, who drafted the set of ideas, explained Friday that the government wanted to eliminate the influence of the industry ministry and the other organizations.
"Officials at the Cabinet Office come from various ministries and organizations. There's a possibility some officials will work to benefit the organization they came from," Hosono said.
About 400 to 500 staff members of the agency and the Nuclear Safety Commission are expected to be transferred to the new agency. However, there are almost no experts on nuclear power among about the 1,250 staff of the Environment Ministry.
Many ministry officials are concerned, with one saying, "I wonder whether we can cope with the situation, as we have had no connection with nuclear power administration."
Economy ministry to cooperate
The Economy, Trade and Industry Ministry officially announced a senior personnel change Friday, in which Vice Minister Kazuo Matsunaga, 59, retired and was replaced by Kenyu Adachi, 59, the trade policy bureau chief.
At his inaugural press conference, Adachi expressed his readiness to cooperate on establishing the new agency, saying: "We also believed the nuclear safety myth. It's obvious we need to review our assumptions about serious accidents and clarify [the ministry's] role in responding to them."
(The Yomiuri Shimbun Aug. 14, 2011)
In June, a number of designers, including Dsquared2, Hermes, Prada and Comme des Garcons Homme Plus, unleashed their 2012 spring/summer men's collections of pink-flavored fashions on the catwalks of Milan and Paris.
Comme des Garcons Homme Plus presented a sheer pea coat in pink, while Dsquared2 unveiled pink pants coordinated with a navy blue double-breasted jacket. Several designers accented their outfits with a pink scarf.
Asked why they went for pink, some designers said they wanted to break society's gloomy atmosphere with the color, while others said they wanted to show that not only women can wear pink. Whatever the reason, all of them seem to be hoping to bring something new to menswear, which is slower to incorporate new trends than women's fashion.
While fashionistas will have to wait until early next year for these new pink arrivals to hit stores, a "pink revolution" can already be seen taking shape on the street.
A company employee walking in Kita-Aoyama, Tokyo, was seen sporting a pink jacket with white trousers. The 45-year-old man said he likes the color because it exudes cleanliness. "I'd like to coordinate different outfits using pink this summer," he said. Men were also seen with pink bags or shoes. The owner of an upscale shop for men in Minami-Aoyama, Tokyo, said bright pink is a popular color for small items like scarves, too.
With the pink trend already making advances in the streets of Tokyo, it's no wonder that top international designers often come to the city to get creative inspiration.
(Tomonori Takenouchi / Yomiuri Shimbun Staff Writer Aug. 12, 2011)
The subdued, natural deep blue that indigo dyeing creates is visually cooling and suitable for these warmer days. Indigo dyeing can be used not only for clothes, but for home furnishings and tableware.
According to Kumiko Mori, an indigo dye artist, tadeai grass, also known as Chinese indigo, was traditionally used for dyeing cotton and linen in Japan.
"[Tadeai] dyeing takes time because of its light pigment, but it creates transparent, distinctive colors," she said.
Mori said that tadeai dyeing methods originated in the Nara period (710-784), while the color it creates has come to be known as "Japan blue" overseas.
Tadeai grass, which has a one-year life cycle, is said to have been widely cultivated in the Edo period (1603-1867) and Meiji era (1868-1912) along the Yoshinogawa river that runs through Tokushima and Kochi prefectures. Although chemical dyes have become increasingly common in indigo dyeing processes, some workshops still use traditional tadeai methods in Tokushima city, which is also regarded as the home of Awa ai, another form of indigo dyeing. Tokushima city is also Mori's hometown.
While studying at college in Tokyo, Mori became interested in the traditional dyeing methods of Tokushima city through her grandmother. Mori also studied jewelry design, but after visiting a dyeing factory in Tokushima city, wanted to become an indigo dyer herself.
Mori returned to her hometown in 1987 and opened her Japan Blue Space workshop by remodeling her grandmother's house. At the workshop, Mori has been pursuing traditional indigo dyeing methods by studying old documents on the craft.
Thanks to her efforts, Mori has become a prize-winning indigo dye designer, while her works are regularly exhibited at galleries, including Ginka in Ogikubo, Suginami Ward, Tokyo.
Indigo dyeing has a distinctly Japanese image, but its simple patterns and tones suit Western home items such as tablecloths to create a modern look. Mori also creates indigo-dyed bedspreads, cushion covers and other items.
"They spice up an interior and the fabric creates a relaxing mood, too," Mori said.
Mori recommends an indigo-dyed stole as a fashion accessory. "Men seem to find stoles attractive and easy to use, too," she said, adding that it can be enjoyable to wear them with other indigo-dyed materials and shades.
For dye, Mori uses sukumo--dye made by fermenting tadeai, wood ashes and fusuma bran, which provides food for bacteria during the fermentation process.
Indigo dyeing is laborious and requires repetitive dipping and squeezing of cloth. To achieve a blackish navy blue textile, for example, the process must be repeated about 20 times. Completing a full roll of cloth can take up to one month.
Traditional indigo dye patterns are also made by hand. Nui-shibori, an indigo tie dyeing and stitching technique, creates round patterns, while ori-shibori, or indigo dyeing coupled with folding, renders geometric patterns. Mori said she sticks to these traditional dyeing methods and strongly hopes to hand them on to future generations.
"Since [material] fibers are gradually dyed in natural indigo dyeing, colors are well preserved even after washing. I want many people to discover the charm of dyeing by actually using the products," Mori said.
(Takashi Sakinaga / Yomiuri Shimbun Staff Writer Aug. 12, 2011)
The Office of Commercial Affairs, Royal Thai Embassy in Tokyo, Japan
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