TOKYO (Nikkei)--Around 40% of Japan's major companies say they will need to expand production in emerging markets if the yen remains at its current heights, according to a Nikkei Inc. survey of top executives.
The yen on Friday briefly climbed to an all-time high of 75.95 against the dollar in New York. The survey was compiled Monday and targeted 100 presidents and other top executives, drawing responses from 96.
If the Japanese currency remains at current levels, 69.8% of respondents see profits souring considerably or worsening somewhat. Just 3.1% maintain it will help improve profits.
On efforts to prevent worsening profits amid the yen's strength, with multiple responses allowed, 50% said they will slash costs at home and 47.9% reported plans to ramp up overseas purchases of parts and materials. And 37.5% said they will strengthen local production in emerging markets. This shows that many corporate executives are finding it increasingly difficult to continue operating in Japan.
On what the government and the Bank of Japan should do to correct the yen's might, 46.9% said continued and expanded currency interventions. Many wanted to see improved conditions for competing globally, with 45.8% calling for lower corporate taxes and the same percentage calling for Japan to join accords like the Trans-Pacific Partnership and free trade agreements.
"Companies have been slogging away, but it could all come crashing down in the blink of an eye," Mitsui Chemicals Inc. President Toshikazu Tanaka says.
(The Nikkei Aug. 23 morning edition)
WASHINGTON (Nikkei)--The Trans-Pacific Partnership is one of the best ways to get the Japanese economy growing again, U.S.-Japan Business Council Chairman Jean-Luc Butel argues.
A stable political leadership in Tokyo would go a long way toward strengthening relations with Washington, says Butel, an executive vice president at U.S. medical technology firm Medtronic Inc. Edited excerpts from a recent interview with The Nikkei follow.
Q: How do you rate the pace of Japan's reconstruction from the March 11 earthquake?
A: I think it's easy to criticize. Probably a lot of people underestimate how difficult it is to manage such a situation. Nobody has ever faced such a triple disaster in a period of a few days. So I think the government needs to spend more money, (but) the government needs to tell us first exactly the total cost of the disaster.
Q: The Japanese economy is barely growing. What's your diagnosis?
A: Japan is an export-led economy. (But) we know the markets today, they are not favorable, right? And you have an aging population, and everybody knows that an aging population spends less. It's a very severe situation. (The TPP) is what Japan really needs to grab the opportunity (for longer-term growth).
Q: What do you say to the strong opposition in Japan, particularly from farmers, to joining the TPP?
A: In every country, there are some sensitive areas of the economy where people feel -- for historical reasons, for safety reasons -- (that) this has to be protected. Nobody is saying Japan in the next 12 months needs to change its agriculture. People think if you open (up the market), it's the end of Japanese agriculture. Actually, it will allow Japanese agriculture to export. We'll publish a white paper (in September) with very specific recommendations.
Q: What is the significance of the TPP for Japan?
A: Japan needs today to restart economic growth, and TPP is one of the best ways. Too much of the Japan-U.S. relationship is based around security; not enough is based around the economic ties. China, just by its size, will totally dictate the terms of economic relationships in Asia. Japan cannot let that happen. And TPP gives, to me, a very solid strategic framework around trade and investments. Japan has had a lot of time to think about (joining the TPP) since last year. There's nothing new to study. It's an issue of political will.
Q: What do you think about Japanese politics?
A: Japan has to fix that problem of every 12 months, every 18 months having this change of government. How do you negotiate major trade deals, like TPP, when every time, Washington has a new team in front of you? It's impossible. (Japan) has the most unstable political system in the world (among) democracies, I would say. It is hurting Japan, in my opinion.
Q: Business are suffering under the strong yen, but what can Japan do about it?
A: The Japanese government alone, in my opinion, cannot have a lasting influence on (the currency market). These have to be coordinated actions from different central banks. And right now you don't have that coordinated action. That's the problem.
Q: Are you in favor of Japan raising the consumption tax to help reduce government debt?
A: The Japanese economic system has so many hidden costs. Instead of doing that, I would address the areas of inefficiencies (such as health care). We're talking hundreds of billions of yen that could be saved by making those reforms.
--Interviewed by Nikkei staff writer Masakuni Oshirabe
(The Nikkei Aug. 20 morning edition)
TOKYO (Nikkei)--Asahi Group Holdings Ltd. (2502) plans to go shopping for beverage producers in Southeast Asia now that it has built up an operating base in Oceania.
"We will now build a network in Southeast Asia," President Naoki Izumiya told a Thursday press conference in which the company announced its acquisition of New Zealand firm Independent Liquor.
Asahi plans to seek out targets among makers of alcoholic beverages and soft drinks in Southeast Asia. But it will likely focus on the latter, given their sheer numbers.
Independent Liquor marks Asahi's fourth purchase in Oceania since it kicked off its shopping spree there in 2009 with Schweppes Australia Pty., Australia's No. 2 producer of soft drinks. The blitz has cost as much as 200 billion yen and given it 15 production facilities and 27 distribution centers in the region.
Strong in premixed cocktails, Independent Liquor is expected to ring up sales of 27 billion yen this fiscal year and enjoy an operating profit margin of 27%.
But Asahi's ambitions go far beyond the latest deal. Its long-term goal is to lift sales above 2 trillion yen in fiscal 2015 from the 1.49 trillion yen of last fiscal year. Mergers and acquisitions will be central to realizing this expansion, with Izumiya envisioning deals averaging 100 billion yen in sales terms a year.
As its first M&A deal in the booming Southeast Asian market, Asahi decided last month to buy Malaysia's second-ranked soft-drink maker, Permanis Sdn Bhd. But the success of additional deals is crucial to reaching its target.
The Asahi Super Dry brewer has earmarked up to 400 billion yen for M&As in 2011 and 2012. Its aggressive takeovers could backfire, however. If earnings at the acquired firms slump, impairment losses could significantly erode core profits.
Even so, Asahi is pushing ahead with its overseas strategy amid a pronounced decline at home. Except for 2009, the company has had a stranglehold on the top spot in the domestic beer market since 2001. Yet its shipments of beer offerings, including low-malt and no-malt products, last year were 20% off the peak reached in 2001.
(The Nikkei Aug. 19 morning edition)
TOKYO (Nikkei)--South Korean products have become a more familiar sight on store shelves in Japan since the March 11 earthquake.
Korean imports are being helped by Japanese firms tapping into new supply networks. Other factors include younger people embracing South Korean culture through music and TV, and the won's weakness against the yen since the global financial crisis.
LG Electronics Co. unveils a new TV set with original 3D technology in June in Tokyo. In June, Samsung Electronics Co. released in Japan its Galaxy SII smartphone (which uses Google Inc.'s Android operating system) through NTT DoCoMo Inc. (9437). The phone sold more than 100,000 units in the first three days, making it Docomo's fastest ever selling phone, and over 350,000 by the end of July.
While Samsung sells around 200 million cell phones worldwide each year, it faced obstacles building brand-recognition in Japan. But things began to change when DoCoMo made the original Galaxy its feature product to compete with the iPhone.
The Galaxy's most attractive feature, especially for young people, is its organic electroluminescent display. DoCoMo executives have described its beauty as awesome. The Galaxy II has a dual-core processor built on a pair of ultrahigh-performance chips that gives it significantly better operability. The phone is set to become Samsung's most successful product in Japan.
Changing mind-set
Flat-screen TVs were the product that first brought Korean firms to prominence in Japan.
LG Electronics' Executive Vice President Byun Kyung-hoon is credited with taking the firm to second spot in the global flat-screen TV market. Byun highlighted the powerful specifications of an LG LED TV that is the world's thinnest at a press conference in Tokyo on June 15. He later met executives from appliance retailers such as Yamada Denki Co. (9831) and asked for their cooperation on sales. Six volume retailers now carry LG products -- up from three last autumn when the TVs first hit the Japanese market.
Byun is confident that LG will control 5% of the Japanese TV-set market within five years, ending Japanese firms' dominance of 90% of the market.
Hidehiko Mukoyama, chief researcher at the Japan Research Institute, says the younger generation is the engine for the recent popularity of Korean products in Japan. He believes the popularity of K-pop music and South Korean dramas have given young Japanese people quite a different image of Korean products from the negative view they once held. "They realize that the functionality of the products make them worth their price," he says.
More tie-ups likely
Japanese firms have been looking to redistribute risk since the earthquake and take advantage of the weak won. They are therefore trying to do business with lesser-known South Korean firms that are new to the Japanese market.
Byucksan Corp., a leading building-products maker, was surprised to win orders from Japan for its fiberglass insulation. It now plans to add a new building for business in Japan to its Chinese manufacturing facility.
Leading lighting-equipment maker Namyung Group has been "receiving five times as many inquiries from Japan about bids for and purchases of LED lighting systems than before the earthquake," says a source at its Japanese subsidiary.
The state-run Korea Trade-Investment Promotion Agency set up a help desk in Japan after the quake to assist Japanese firms needing services from Korean firms. It received over 70 inquiries in the first three months.
The won peaked in early 2008 at rate of 900 to 100 yen. It has steadily fallen since, reaching a low of between 1,400 and 1,500 this month. This rate encourages South Korean firms to export.
With imports to Japan since the quake from South Korean topping 280 billion yen in June, it is likely that Japanese-South Korean business partnerships will increase.
(The Nikkei Aug. 21 morning edition)
TOKYO (Nikkei)--Electronics retailers are slashing prices of large flat-screen TVs to stimulate demand following the transition from analog to digital terrestrial broadcasts on July 24.
Stores in Tokyo are selling 40-inch LCD TVs for at less than 50,000 yen. They are also pricing 32-inch TVs at around 1,000 per inch.
The price cuts are likely to force electronics makers to review their strategies.
Sharp Corp.'s (6753) 40-inch LCD TV Aquos LC-40E9 is selling for 48,800 yen at one retailer in Tokyo -- around 16,000 yen lower than the price before the digital switch. Sony Corp.'s (6758) 40-inch LCD TV Bravia KDL-40EX500 has been lowered from under 70,000 yen to under 60,000 yen.
After rising because of replacement demand, prices of 32-inch TVs are also falling again. According to a BCN Inc. survey of electronics retailers, the average price of 32-inch TVs in the week of Aug. 8-14 was 46,000 yen, around 7,000 yen lower than the price in the week of July 18-24.
The price decline is prompting electronics makers to expand into emerging markets, as well as cutting production costs, for example.
Toshiba Corp. (6502) has set up new bases in India and Vietnam to develop and design LCD TVs for emerging countries. It will try to meet local needs by making TVs with built-in batteries for countries with frequent blackouts.
Hitachi Ltd. (6501) plans, in principle, to outsource TV production overseas. The TV operations of Sony and Panasonic Corp. (6752) remain unprofitable, with Sony planning to restructure in an effort to improve earnings.
(The Nikkei Aug. 17 evening edition)
TOKYO (Nikkei)--The March 11 earthquake and its shifting of consumer needs has prompted supermarkets to go back to their roots, breathing new life into the industry.
Ito-Yokado Co. stopped stocking large appliances in most of its stores about four years ago, shifting its focus to selling small numbers of selective items such as rice cookers and electric fans. But it recently brought back its appliance section at its Ishinomaki Akebono store in Miyagi Prefecture to meet rising demand for appliances in communities recovering from the disaster.
The home-appliance section at the Ito-Yokado Ishinomaki Akebono store in Miyagi Prefecture The store had to get in staff from other stores to help cope with the rush for these products. The hot summer has driven demand for air-conditioners, leading to Ito-Yokado doubling its sales of household products, including appliances. In contrast, food sales only increased 30-40%.
Ito-Yokado subsequently started selling appliances in two other stores in quake-hit areas beyond a Aug. 31 deadline for temporary operations. It is also considering ways to keep a store in Sendai open rather than closing it next year as planned.
Daiei Inc. (8263) is quietly resuming sales of bicycles and children's clothing, flouting a recommendation from the Industrial Revitalization Corp., a state turnaround body that has controlled the company since 2004. Increased awareness of the health benefits of cycling and the growing use of bicycles as a primary mode of transportation has boosted demand for bicycles. Daiei has many stores in prime locations near rail stations. It hopes that moving bicycle sections to prominent first-floor locations will attract customers.
Leading supermarket chains are enjoying double-digit sales growth at outlets in the Tohoku region because their nationwide distribution networks and purchasing prowess enables them to continuously supply goods to quake-hit communities.
"Consumers are coming back to supermarkets as one-stop sources for food, clothing and other essentials," says Aeon Co. (8267) President Motoya Okada.
Just the beginning
This disaster-related demand spike is transitory. Supermarkets urgently need to train personnel and devise structures to keep customers happy.
Aeon Retail Co., Aeon's supermarket operator, boosted its regional divisions from four to eight to improve its focus on local needs. It controls popular brands and imports at headquarters, and delegates purchasing authority to the regional divisions.
The head office was surprised at the success of weeding chairs in new farming sections that opened in April at stores in the Hokuriku-Shinetsu region. The Aeon store in quake-hit Ishinomaki stocks carnivorous plants to fight the current deluge of flies.
At Ito-Yokado's The Price discount stores, one person is now doing the work of three. It has reduced the volume of discount fliers by nearly 70%, compared with Ito-Yokado stores. The Price relays sale information to subscribers by e-mail before stores open every day. Over the past three years, The Price has reduced its ratio of management costs to sales by 5 percentage points from the industry average of near 20% -- turning its first profit in the December-February quarter.
Ito-Yokado's supermarket sales per square meter fell between fiscal 2004 and fiscal 2010 from around 720,000 yen to 645,000 yen. It hopes to repeat the success of The Price to boost group earnings.
The firm is "finally ready to give up on its past glories and rise to new challenges," Ito-Yokado President Atsushi Kamei says.
The revival of the industry is only just beginning.
--Translated from an article by Nikkei staff writers Kenichiro Toyoda and Itsuro Fujino
(The Nikkei Aug. 17 morning edition)
TOKYO (Nikkei)--Japanese apparel and merchandise manufacturers plan to curb production in China to cope with soaring labor costs there, opting instead for locations like Southeast Asia.
Menswear retailer Aoyama Trading Co. (8219) aims to lower its ratio of Chinese production from 75% to less than 50% in three years. It will start outsourcing production of suits to Indonesia this fiscal year, adding to such operations in Vietnam, Myanmar and Cambodia.
Ryohin Keikaku moved production of fabric bags from China to Laos this year.
Aoyama Trading will continue sourcing fabrics from Italy and China while handling sewing in Southeast Asia.
Ryohin Keikaku Co. (7453), parent of the Muji store chain, will shrink the proportion of goods procured from China to less than 50% in three years from 60% at present. It will slash the number of plants manufacturing its apparel there from 229 to 86 and increase procurement of wood used in furniture and other merchandise from Southeast Asia.
Fast Retailing Co. (9983) plans to increase production outside China for goods sold at its low-price g.u. apparel chain stores by outsourcing to firms with manufacturing bases in Bangladesh and Indonesia. The company says it aims to lift non-Chinese production, believed to now reach 20-30%, to 50%. It will continue to gradually ramp up output in China but boost procurement from other areas faster.
Others are building their own production bases elsewhere. TSI Holdings Co. (3608) unit Tokyo Style Co. is spending 1 billion yen to construct a sewing factory in central Vietnam, while women's wear chain operator Honeys. Co. (2792) will launch a similar facility in Myanmar around autumn.
Apparel companies and others began manufacturing their products in China back in the 1990s to take advantage of its low labor costs. But such expenses have roughly doubled in the past year or two alone. In contrast, labor costs in Bangladesh are said to reach about one-fifth those in China.
(The Nikkei Aug. 18 morning edition)
TOKYO (Nikkei)--Prices of imported mineral water have fallen sharply as bottles rushed from overseas after the March 11 earthquake pile up in inventories.
There was a shortage of bottled mineral water immediately after the disaster. But domestic supplies have recovered sooner than expected, resulting in a glut of imported products.
Bottled mineral water was in short supply immediately after the March disaster.
Online vendor kenko.com Inc. (3325), which specializes in daily-use items, is selling a package of 48 500ml bottles of Crystal Geyser water for 1,290 yen. It recently lowered the price by 5 yen a bottle to around 27 yen.
Discount liquor store operator Kawachiya Shuhan Co. has reduced the price of Aquafina, imported from the U.S. by Suntory Holdings Ltd., to 680 yen for a case of 24 bottles, nearly one-third of its initial price.
Domestic beverage manufacturers, which gave priority to shipments to areas hardest hit by the quake and tsunami, have completed upgrades to production capacity. As a result, mineral water stocks, primarily of imported items, "have been overabundant since June," says an official at an online distributor.
Suntory had planned to procure 3 million cases of water, but imported just 800,000 cases in May as part of a first round of shipments. Demand was less than forecast, while sales have reached just 200,000 cases. As for plans to import the remaining 2.2 million cases, "we are undecided at this point," says a Suntory official.
(The Nikkei Aug. 18 morning edition)
TOKYO (Nikkei)--The recovery in Japan's exports to Asia has lost momentum, as shipments of construction machinery struggle amid China's economic slowdown and sales of semiconductors languish due to slumping personal computer demand worldwide.
But exports to the U.S. have continued to recover, led by automobile shipments.
Japan's overall exports in July fell 3.3% on the year in value terms, according to preliminary trade data released Thursday by the Ministry of Finance. The seasonally adjusted index of export volume calculated by the Cabinet Office edged up 0.3% from June. The gauge rose 4% for the U.S., exceeding its level in February before the March earthquake. But the reading for Asia was limited at 0.6%, short of the February level.
Shipments of construction machinery to Asia plunged 26% in July as China tightened its monetary policy. With no signs of recovery in chip and other electronic parts exports, "trade volumes in Asia are slumping," says Toru Nishihama, chief economist at the Dai-ichi Life Research Institute. Exports of such consumer goods as televisions and cellular phones languished as well.
Meanwhile, shipments of autos to the U.S. are recovering. After the disaster, automakers sold vehicles out of their inventories overseas. But they have switched back to exporting vehicles as domestic production returns to normal. They are also seeking to replenish overseas inventories. Although the disaster impaired production, supply constraints have essentially been resolved. Still, the strong yen and a slowdown in overseas economies may weigh heavily on the recovery of exports.
(The Nikkei Aug. 19 morning edition)
The Office of Commercial Affairs, Royal Thai Embassy in Tokyo, Japan
Source : http://www.depthai.go.th