Finance Minister Yoshihiko Noda acknowledges applause from his fellow lawmakers shortly after he was elected as the new leader of the Democratic Party of Japan during a vote by party lawmakers in
TOKYO (Kyodo) -- Japanese business circles largely welcomed the election Monday of Finance Minister Yoshihiko Noda as leader of the ruling Democratic Party of Japan, and thus the country's next prime minister, although many urged him to swiftly proceed with measures to realize Japan's economic recovery.
"Mr. Noda is a stable leader, well versed in taxation, finance and social security policies, and with Japanese politics facing difficult times, (his election) is heartening," said Hiromasa Yonekura, chairman of the Japan Business Federation or Keidanren. At a press conference in Tokyo, the head of Japan's biggest business lobby also called for Noda to create a strong Cabinet and proceed with rebuilding areas devastated by the March 11 earthquake and tsunami, while indicating Keidanren may tolerate tax increases to finance the rebuilding, an idea for which Noda has shown support.
"I think it's necessary for the nation as a whole, including companies, to shoulder the burden (of reconstruction)," Yonekura said.
Other business bodies also urged swift political action on reconstruction, and called for the ruling party to unite and work to bridge differences with opposition parties.
"With the state of Japan under crisis, there is no room for delays in policy measures," said Yasuchika Hasegawa, chairman of the Japan Association of Corporate Executives.
Under a divided Diet in which the opposition parties dominate the upper house, Hasegawa said the ruling party under Noda would need to work with opposition parties to tackle the national crisis.
Jiro Takahashi, chairman of the Nagoya Chamber of Commerce and Industry, said, "We hope he will exercise his leadership and bring the party together."
Many business leaders in western Japan were critical of the DPJ and its leadership election, with Kansai Economic Federation Chairman Shosuke Mori saying that contenders in the leadership race appeared to be "preoccupied with internal debate, and there was not enough policy debate done about reconstruction and recovery from the disaster."
Shinichi Otake, head of the Kansai Association of Corporate Executives, said the DPJ "should consider this the last chance it was given by the people and show clear visions of how things should be."
The 54-year-old Noda defeated Economy, Trade and Industry Minister Banri Kaieda, 62, in a runoff election after the initial vote with three other contenders ended without a single candidate winning a majority of votes.
The other contenders were former Foreign Minister Seiji Maehara, 49, Agriculture, Forestry and Fisheries Minister Michihiko Kano, 69, and former Land, Infrastructure, Transport and Tourism Minister Sumio Mabuchi, 51.
(Mainichi Japan August 29 edition)
Kyodo
The government outlined a set of strategies Monday for responding to the soaring yen, including financial assistance for struggling exporters.
The measures, presented at a meeting of economic ministers and Bank of Japan officials, encourage Japanese companies to sell yen for dollars and other major currencies to accumulate enough funds to make external investments.
The measures also offer incentives to prevent them from shifting production and other facilities abroad, which would hollow out the export-dependent economy.
The yen's extended climb is hurting exporters, who have seen their competitiveness eroded by cheaper exports from rivals in South Korea and other emerging economies. This has sparked talk of a hollowing out of Japanese industry as firms move to countries with cheaper labor costs to offset damage from the strong yen.
"We will continue to closely watch (currency) market developments and take decisive steps when they prove necessary," the government document said, adding it expects the BOJ to collaborate with it and make "appropriate and decisive policy responses."
The move comes as Prime Minister Naoto Kan prepares to step down and after the Democratic Party of Japan elected Finance Minister Yoshihiko Noda as his successor. The policy priorities are likely to be reflected in the budgets to be formulated by the next administration.
Financing aid for small and medium-size exporters, as well as corporate incentives to keep research, development and production facilities in Japan, are the major goals of the plan. Another is promoting tourism, which has plunged since March 11.
In a related move, the Finance Ministry unveiled last week an unprecedented plan to provide $100 billion in cheap loans from foreign-exchange reserves and encourage Japanese firms to accelerate mergers and acquisitions abroad, as well as investments in securing overseas energy resources by making the best use of the yen's strength.
(The Japan Times August 30 edition)
Sales tax would have to be tripled just to meet primary surplus goal
As sovereign debt issues in other countries continue to roil the global markets, it is easy to forget about Japan's own mess. But according to a new Cabinet Office forecast, total government debt is on track to top 200% of gross domestic product in fiscal 2020 - meaning the nation's fiscal condition will remain the worst in the world even into the next decade.
Japan has made an "international commitment" to start shrinking its debt in fiscal 2020. To that end, the government has set a goal of achieving a primary balance surplus - revenues in excess of spending, excluding debt-servicing costs - at the national and local levels that year. This would stop the debt mountain from growing.
However, the medium-term economic and fiscal projections released Aug. 12 indicate that posting a primary surplus by then would require a 12-percentage-point consumption tax increase, from the current 5% to 17%.
The Cabinet Office says debt at both levels of government will reach 181% of GDP in the current fiscal year. Assuming continued annual real economic growth of a little over 1%, the debt-to-GDP ratio will hit 210% in fiscal 2020, even with a 5-percentage-point sales tax hike in fiscal 2015.
The International Monetary Fund paints an even bleaker picture. Based on the fund's estimates as of April, Japan's debt-to-GDP ratio stands at 230% - compared with 152% for Greece, 120% for Italy, and 98% for the U.S.
And yet Japan is now being seen as a safe haven by investors who are anxious about European and American debts. The influx of money has driven the yen up to historic levels.
Experts give three reasons for this curious situation: Japan has plenty of room to raise the consumption tax; it runs a current-account surplus; and the bulk of its government bonds are held by domestic investors.
While Japan's sales tax is unlikely to rise to the 20% level - as in some European nations - it is true that its 5% rate is the lowest in the developed world. It is also true that Japan still has a surplus in its current account, albeit a shrinking one. And with more than 90% of government bonds domestically owned, it has little apparent reason to fear a massive pullout of funds.
No guarantees
None of these strengths is guaranteed to last, however. The government's all-in-one plan for social security and tax reform does call for incrementally lifting the consumption tax to 10% by the middle of the current decade. But political parties may prove skittish about raising taxes while the country remains mired in deflation.
In addition, the looming prospect of more than 10 trillion yen ($129.87 billion) in new government spending - mostly on post-disaster reconstruction - will make it all the more difficult to right Japan's finances.
As for the current-account surplus, Kazumasa Iwata, president of the Japan Center for Economic Research, warns that it could turn to a deficit in fiscal 2017. This forecast envisions exports struggling against a strong yen while fossil-fuel imports rise as a result of the nuclear disaster. With twin deficits on its hands - budget and current-account - Japan would come to resemble the U.S., in that it would grow more reliant on foreign investors buying its bonds.
Foreigners are already a growing presence in the government bond market, accounting for 18.7% of trading in June, excluding dealers. Some market watchers say they could become a source of volatility.
(The Nikkei August 22 edition)
To compete, nation needs to implement airport, seaport management reforms, tap private sector
As other Asian hubs become increasingly prominent, Japan faces a need to devote more resources to improving the management of its own ports and airports.
In February 2009, U.S.-based FedEx Corp. relocated its Asia-Pacific freight hub from an airport in the Philippines to Guangzhou Baiyun International Airport in China. The latter facility has plenty of transshipment space and no time restrictions, enabling the world's largest airfreight carrier to handle cargo from across the globe overnight and deliver to 20 major Asian cities in the morning.
In October of that same year, Seiji Maehara - Japan's minister of land, infrastructure, transport and tourism at the time - announced a plan to create a hub airport in Japan, apparently with Tokyo International Airport at Haneda in mind.
FedEx did sound receptive to the idea, with one managing director saying, "We'd like to fly into Haneda if conditions can be met." The reality, however, is that Haneda has many operational restrictions, with freight carriers only permitted to fly in and out late at night and early in the morning.
Meanwhile, the shipping industry is buzzing about the fact that Shanghai overtook Singapore to become the world's busiest container port in 2010. Hong Kong and five other Chinese ports were also in the top 10. The Port of Tokyo, Japan's highest-ranked port, placed 27th.
The Great Hanshin Earthquake that hit Kobe in 1995 spurred a shift in cargo handling from the devastated city to South Korea's Busan Port. In 1998, only 5% of cargo heading to or from Japan involved transshipment at non-Japanese Asian ports, but a decade later the ratio had climbed to 18%.
Revving up
The ever-swelling flow of people and goods is fueling competition among Asian ports and airports. The International Air Transport Association projects that, in the five years through 2014, global airfreight demand will increase by 46%. Global container traffic by volume has roughly doubled over the past decade, particularly at Asian ports outside Japan, where cargo volume has risen almost threefold.
To its credit, Japan has been putting up a fight. Regular international flights began from Haneda airport in October, while the government has selected the Keihin and Hanshin port zones to be turned into global containership hubs.
The aviation industry received a fresh boost June 22 when special taxation legislation passed the Diet. The bill will finally lead to a reduction in the aircraft fuel tax.
All Nippon Airways Co., for example, is currently saddled with about 40 billion yen ($519.4 million) a year in fuel taxes. The enactment of the law will help it save 11-12 billion yen annually - though it will still have to pay roughly 50 billion yen a year in landing fees.
Aircraft fuel tax revenues are used to build airports, while landing fees go toward airports' maintenance and operational expenses.
But as for the port plan, the government actually designated three port zones as strategic containership locations back in 2004, and it remains to be seen whether the narrowing down of the candidates will create momentum. The Japanese shipping industry sees little point in building cutting-edge port facilities if there is no cargo to carry.
It's about efficiency
Sayuri Hirai, senior consultant at Daiwa Institute of Research, believes Japan should focus on management and operations. "The age of building airports has ended," Hirai said.
Management inefficiency at airports under direct government control - such as Haneda, New Chitose Airport in Hokkaido and Fukuoka Airport - apparently stems from the separate management of runways and terminal buildings. By next summer, the Transport Ministry is to compile an airport management reform plan with the aim of outsourcing airport operations to the private sector, starting in fiscal 2014 or later.
Given that so many parties will be involved, some worry that reforms will be painstakingly slow. But if the nation fails to implement these reforms, global competition will leave Japan stranded on the tarmac, so to speak.
Singapore has long maintained a national policy of promoting its transportation hubs. Former Prime Minister Lee Kuan Yew once said that the economic strength of an island country is linked to its ports and airports. Since good infrastructure is vital for strong economic performance, the thinking goes, failure in this area can directly drag a nation into stagnation.
Japan is weighed down by its massive fiscal deficit. Maintenance expenses for roads, bridges and other infrastructure built during the high economic growth period of the 1960s are expected to double from their current level by around 2030. In short, this means the government will not have enough funds to finance new infrastructure projects.
It is thus all the more important for Japan to carefully select projects that are really worth the money. And the use of private-sector expertise and resources will be vital.
(The Nikkei Aug. 22 morning edition)
TOKYO (Nikkei)--Anticipating sharp growth in cargo shipments, major Japanese trading firms have been boosting their stakes in overseas port operators, with the focus on emerging countries.
Mitsui & Co.'s (8031) annual container handling volume is expected to soon jump 3.6-fold to 1.1 million 20-foot equivalent units, or TEUs, thanks to a string of investments in emerging-nation port operators.
By fiscal 2015, the company aims to raise the figure to 3 million TEUs to position it within the world's top 15.
Mitsui recently took a stake in a Thai port operator.
Mitsui's recent investments in overseas port operators include Evergreen Container Terminal (Thailand) Ltd., for which the trading house spent roughly 3 billion yen to acquire a 49% stake. ECTT is a major player that handles 500,000 TEUs a year at the No. 1 Thai trading port of Laem Chabang.
Mitsui plans to tap demand from Japanese consumer electronics and autoparts makers in Thailand by providing functions and services that offer improved convenience.
Evergreen Group, ECTT's parent, operates container terminals in 15 regions around the globe and handles marine and air cargo shipments. The Taiwanese firm and Mitsui plan to discuss the possibility of forming a broad tie-up in the cargo transportation business and jointly operating some container terminals.
In addition, Mitsui has launched a tender offer for Portek International Ltd. in Singapore, with an eye toward completing the transaction early next month and bringing the port operator under its umbrella.
Itochu Corp. (8001) is taking part in a 30 billion yen joint project with Nippon Yusen KK (9101), Mitsui O.S.K. Lines Ltd. (9104) and a Vietnamese state-owned shipping company to build and operate a large container terminal at the northern Vietnamese port of Lach Huyen. With an annual capacity of about 850,000 TEUs, the facility is expected to start handling shipments of such products as consumer electronics, precision equipment, clothing and miscellaneous goods in 2015.
Among other Japanese trading houses, Marubeni Corp. (8002) manages Eastern Sea Laem Chabang Terminal Co., or ESCO, a major Thai port operator, and holds stakes in grain shipment terminal operators in Brazil and the U.S.
Sojitz Corp. (2768) late last year upgraded a grain shipment port in Vietnam via a major local miller in which the trading firm holds a 20% interest.
(The Nikkei Aug. 24 morning edition)
JAL teams with Jetstar to enter low-cost carrier fray as winds of change sweep global industry
ATSUSHI NAKAYAMA
Senior staff writer
A new era of competition has dawned in the airline business, with low-cost and legacy carriers going head-to-head in an ever-widening budget market. Japan is hardly immune - the list of discount airlines in the country keeps getting longer. Last week, Japan Airlines Corp. announced that it will establish a low-cost carrier with Australia's Jetstar Airways Pty. and Mitsubishi Corp.
Since filing for bankruptcy in January 2010, Japan's national carrier has gone through a painful downsizing process. But that pain appears to be bearing fruit, and this latest move can be seen as an attempt to seize the initiative.
Flying under the name Jetstar Japan, the new airline will begin servicing domestic and international destinations next year. Tickets will go for around 40% less than JAL's regular fares.
At a news conference Aug. 16, JAL President Masaru Onishi said launching the budget business "will present a great opportunity to expand and diversify our operations."
Initially, Jetstar Japan will be capitalized at 4.8 billion yen ($62.3 million). Mitsubishi will contribute 33.4%, while JAL and Jetstar will shoulder 33.3% each. Jetstar is a wholly owned unit of Qantas Airways Ltd., Australia's national airline.
By next summer, new shareholders are expected to be brought on board through a capital increase. Mitsubishi's interest will shrink, but JAL and Jetstar will likely keep their 33.3% stakes. Once Jetstar Japan takes flight, the company's capital base will be boosted to 12 billion yen via a public offering and other methods.
Jetstar's 33.3% interest reflects the fact that foreign stakeholders cannot own more than one-third of a Japanese airline. But the Australian firm will play a leading role in the Japanese venture's day-to-day operations, providing not only its brand but also its reservation, sales and other systems.
As things stand now, Jetstar Japan will be one of three budget carriers calling Japan home. Peach Aviation Ltd., a joint venture between All Nippon Airways Co. and a Hong Kong investment firm, will start operating out of Kansai International Airport in the spring. AirAsia Japan Co. - another ANA joint venture, this time with Malaysia's AirAsia Bhd - is to begin offering domestic flights by the end of next year.
But remember, as many as six discount airlines - including the Australian Jetstar and firms based in China, South Korea and elsewhere - already fly to Japan. A few more plan to do so soon. The upshot is that competition in the country's budget market is certain to intensify.
There is a chance that JAL and ANA will try to use their low-cost carriers to simply "hold their own" against foreign rivals. But adopting such a defensive posture would essentially mean forfeiting growth opportunities.
Instead, JAL and ANA ought to use their budget businesses to tap fast-growing demand in Asia, all the while learning how to offer flight services at extremely low cost. They must then use this know-how to improve the balance sheets of their core operations.
Way of the world
Looking at it from a broader perspective, the emergence of low-cost carriers in Japan is an inevitable result of the deep shift taking place in the global airline industry.
Budget airlines are a worldwide phenomenon. Ryanair Ltd., based in Ireland, serves the largest number of passengers on international routes. EasyJet Airline Co. of the U.K. ranks third in the same category.
To fend off these challengers, more than a few legacy carriers - traditional airlines that offer "full service" at higher prices - have started discount units of their own.
Part of the reason it took so long for the trend to catch on in Japan is that, though it never declared it, the government used to prioritize protecting JAL and its shaky finances. It refrained from sharply increasing the number of takeoff and landing slots at airports in the Tokyo metropolitan area, leaving little room for budget players.
Despite its best efforts to look out for JAL, though, the government faced increasing pressure to relieve congestion at the capital's airports. Something had to give eventually, and JAL's bankruptcy has made the Ministry of Land, Infrastructure, Transport and Tourism more willing to expand airport capacities and grant new operating licenses.
The domestic environment for low-cost carriers is now much more welcoming. A new airport opened in Ibaraki Prefecture in spring 2010, offering a new destination only about 80km northeast of Tokyo. A fourth runway went into operation at Tokyo International Airport at Haneda in the fall of that same year. And Narita International Airport, the capital's main gateway, plans to add takeoff and landing slots in the near future.
As airports begin to compete with each other to woo new budget airlines, they are lowering the barriers to market entry.
In contrast to Tokyo's busy hubs, Kansai airport, near Osaka, has struggled with meager traffic. It is now offering newcomers one-year exemptions from landing fees.
Not to be outdone, Narita and other airports are starting to serve up similar incentives. As the rapid market evolution continues, it is conceivable that JAL and ANA may have to start thinking about drastic measures to survive. Eventually, they might have to give serious thought to merging their international operations into a single low-cost airline.
At the very least, the proliferation of low-cost carriers means the end of JAL and ANA's virtual duopoly in the domestic airline sector.
(Nikkei Weekly August 22, edition)
TOKYO (Nikkei)--Toyota Motor Corp. (7203) and other blue chips joined a list of 134 stocks that dropped to year-to-date lows Monday, the most since Aug. 9.
With investors alarmed by the prospect of a chronically strong yen and slowing economic activity overseas, the combined market capitalization of the 10 listed automakers slipped below 20 trillion yen for the first time in about two and a half years.
More than 12 trillion yen has been wiped from the value of the Tokyo Stock Exchange's first section in the past four sessions. On Monday, 15 of the 36 Nikkei sector indexes hit lows for the year, with notable declines in autos, electrical machinery and other foreign-demand-driven industries. The automotive sector's index is down more than 20% from July 22, when the Nikkei Stock Average reached its most recent high.
The auto industry faces a particularly strong threat to a rapid earnings recovery next fiscal year. The combined market cap of the 10 listed automakers dropped 3% to around 19.6 trillion yen, falling below 20 trillion yen for the first time since March 2009. Not only is the yen soaring at a historically high level, but the foreign demand that has sustained automakers' earnings since the financial crisis is also showing worrying signs of decline.
Besides Toyota, the five automakers plumbing year-to-date lows included Honda Motor Co. (7267) and Nissan Motor Co. (7201). Nissan fell 4% despite relatively solid performance since the March 11 earthquake disaster, from which it emerged largely unscathed.
(The Nikkei Aug. 23 morning edition)
SHOHEI KONO
Staff writer
Summer is the perfect time of the year to enjoy ice cream, but consumption is likely to be particularly strong this year, as the entire nation rallies to save energy. But the ice-cream market is one of a handful of growth segments in the food industry that does not actually need any help. Products aimed at men and middle-age and older consumers are leading the market's growth.
Thanks to the extensive branding and merchandising efforts of manufacturers, ice cream is transitioning from being a treat for children to sweets that are sophisticated enough for adults to enjoy.
Ice-cream sales rose 6% in fiscal 2010 from the previous year to 406.3 billion yen ($5.27 billion), according to the Japan Ice Cream Association. Ice-cream consumption was unaffected by price hikes due to rising raw materials prices in 2007 and 2008, and total sales have risen by about 50 billion yen since fiscal 2006. In general, prices have been trending upward for the past five years, although there have been some fluctuations from year to year in line with weather patterns.
The market has been largely supported by rising median prices. One source at a major ice-cream producer said that prices below 100 yen dominated until the first half of the 2000s, putting downward pressure on the market. But in recent years, products in the 120-150 yen price range have become strong sellers. According to the Ministry of Internal Affairs and Communications' Family Income and Expenditure Survey, annual expenditure per household was 6,333 yen in 2010, up 760 yen from 2006.
Male market
Every food producer wants to increase its per-unit prices, but that is currently almost impossible, given the consumption slump, long-term deflation and falling birthrates, as well as the rapid aging of society. The success of the ice-cream industry lies with a series of hit products aimed at men and older consumers, and a product strategy that includes creating new customers and stabilizing prices.
Morinaga Milk Industry Co.'s Parm line is a leading example of this trend. The company set out to design a product specifically for adults by making smoother ice cream for a higher-quality taste and texture. Actor Akira Terao was hired to convey a cooler, more grown-up image in its TV commercials.
About 80% of Parm buyers over the age of 30 are repeat buyers, 10 percentage points more than people in their teens and 20s. "This is the complete opposite of standard consumer trends for ice cream," a company source said.
Sales of Parm ice cream have expanded 5.5 times since the product made its debut. Morinaga has also released an ice-cream cone that has less sugar and a more bitter flavor to continue to appeal to adult consumers.
In spring 2010, Lotte Ice Cream Co. started offering its new Zacrich product, and it has been a success ever since. Zacrich is shaped like a flattened cone, and comes in a stylish black package. By pushing an image that is more likely to appeal to men, Lotte easily surpassed its initial sales target of 2.5 billion yen, attracting twice the number of male consumers in their 20s and 30s than other similar products.
Strategic success
This strategic approach is based around the role of convenience stores. Men and older buyers tend to use convenience stores more often than other consumers, and stores can always count on sales from impulse shoppers. According to Fuji Keizai Co., sales of chilled desserts aimed at male consumers in convenience stores rose 6% in 2010. Convenience stores account for about 30% of all ice-cream sales outlets. "Sales of goods targeted at men are doing well in convenience stores," said one Morinaga source.
Thanks to the rise of a new target market, the ice-cream market has seen its bottom line rise. In 2010 and 2011, manufacturers have been building new plants or reinforcing existing facilities. And this year, the national drive to save energy is set to help sales even more, according to industry sources.
Ice cream is not all that different from other food, so falling birthrates and the aging of society will likely affect consumption. Rising cacao and sugar prices, as well as earthquake-related shortages of milk ingredients, could work against the market, too. Some companies are trying to differentiate themselves by releasing products with no additives, low calories and other new twists that stress health and safety. But consumers are fickle; manufacturers have their work cut out for them.
(The Nikkei Aug. 23 morning edition)
The Office of Commercial Affairs, Royal Thai Embassy in Tokyo, Japan
Source : http://www.depthai.go.th