TOKYO (Nikkei)--Six months to the day after the March 11 earthquake, 19,867 people remain dead or missing and more than 80,000 evacuees are still unable to return to their homes.
Nippon Paper Group Inc.'s Ishinomaki plant in Miyagi Prefecture was heavily damaged by the March 11 tsunami.
The Japanese economy is gradually crawling back to prequake levels, with production in the automotive sector and other manufacturing industries now nearly back to normal. However, global competition continues to intensify for Japanese businesses due to the impact of supply chain disruptions and the unprecedented strength of the yen. As a result, some companies have started moving production of core parts to other countries.
These challenges will test the degree to which the new administration of Prime Minister Yoshihiko Noda can truly display leadership.
Disaster damages
Nippon Paper Group Inc.'s (3893) Ishinomaki plant in Miyagi Prefecture was heavily damaged by the March 11 tsunami. The plant will finally resume operations on Sept. 16, but with just one production line back in place.
However, the company does not plan to simply return to its old ways. Rather, it reviewed its operations, which have long been characterized by overproduction, and slashed its production capacity by 15%. It will also lay off 1,300 employees across Japan, including its staff at the Ishinomaki plant.
"We will transform the Ishinomaki plant into a more profitable operation over the long term, and that's how we would like to pay back our employees," said President Yoshio Haga.
Industrial production rebounded in July to within 95% of its prequake levels in February, after tumbling 15.5% in March from the month before -- the biggest such decline in history. Over the past six months, however, businesses from emerging markets have been making rapid progress with product development and cost-cutting measures, and this has been eating into Japanese companies' share of key global markets.
Noda made his first trip to tsunami-stricken areas as PM.
As a result, Toyota Motor Corp. (7203) is now emphasizing local production and local consumption as key concepts. It is urging autoparts makers to base themselves near factories that produce finished cars.
Toyota is planning to set up a new plant in Indonesia, for example. Its group company, Toyota Tsusho Corp. (8015), will soon form a new company in the country to help Japanese businesses set up local operations. The company aims to reduce costs by promoting local parts production, which will in turn create a system to stabilize parts supplies and ensure cost-competitiveness.
"It is risky to continue producing products only in Japan," said an official from Hoya Corp. (7741). The glass substrate producer boasts an 80% share of the market for the mask blanks used in semiconductors. In response to requests by its overseas business partners, the firm has set up a production subsidiary in Singapore to ensure stable supplies of goods, even in times of disaster in Japan.
Increasingly, Japanese manufacturers are being forced to review their business strategies, which have generally been focused on the production of high-quality products at home for sale in overseas markets.
Farms and fisheries
"There is definitely a shortage of jobs in the areas that people want to work in," said one official at the Miyagi Labour Bureau. In Ishinomaki, which is situated in the eastern part of Miyagi, the prefecture's core fishery and processing industries have yet to resume operations. There have been some job openings in the construction and civil engineering fields due to reconstruction-related demand, but such jobs require training. As a result, the authorities have struggled to shift unemployed people into new industries.
The Japanese government plans to realign and consolidate farmland and fishing ports in order to make them more competitive. But it has been slow to hammer out specific measures and it has made little progress in reaching a consensus with local businesses.
Noda and his administration have identified recovery and reconstruction as its biggest priorities. The prime minister plans to submit the third supplementary budget, valued at 10 trillion yen, to the Diet. But he has also said he plans to mend ties with the business community, which soured under former Prime Minister Naoto Kan.
"First, I would like to see Prime Minister Noda deliver on his promises," said Yasuchika Hasegawa, chairman of the Japan Association of Corporate Executives.
Japan's economic situation has become increasingly critical in the six months since the Great East Japan Earthquake, which is why the nation can no longer afford to delay the introduction of important policies. With the rise of the new Noda administration, the time has come for Japan to make significant progress in the push to rebuild the nation.
(The Nikkei Sept. 11 morning edition)
TOKYO (Nikkei)--Japan will make a "comprehensive decision" on joining negotiations on the Trans-Pacific Partnership "at the earliest possible time," Economic and Fiscal Policy Minister Motohisa Furukawa said Thursday.
In a media interview, Furukawa said the government is moving quickly to achieve a "consensus of opinion" on the free-trade initiative.
The nine countries involved in the negotiations, which include the U.S., aim to reach a broad agreement in November at the Asia-Pacific Economic Cooperation summit.
Turning to policymaking in the new government, Furukawa said a new national strategy council that will answer directly to Prime Minister Yoshihiko Noda may include holders of senior party posts, such as secretary-general.
That would bring the government and the ruling coalition together on policy decisions.
When it comes to financing the post-disaster reconstruction, Furukawa stressed that the government will not rely solely on raising taxes.
"Given the state of the economy, every effort should be made to come up with funding by other means, such as cutting spending," he said.
There needs to be a plan for repaying reconstruction bonds, but the details can be filled in later, he argued.
On reforms aimed at funding social security programs, he said the government will look comprehensively at raising the consumption tax, basing its decision on factors such as economic indicators.
The government aims to announce a set of measures for coping with the strong yen "as soon as possible," Furukawa said.
As part of that effort, "we will use every means, including regulatory reform, to strengthen Japan's international competitiveness in manufacturing," he added. That suggests the government will deploy special economic zones and other proposals in its growth strategy.
(The Nikkei Sept. 9 morning edition)
TOKYO (Nikkei)--Japan risks seeing more jobs head overseas and a faster erosion of its industrial base by dragging its feet in joining the Trans-Pacific Partnership, according to a private-sector think tank.
In a set of recommendations handed Monday to Prime Minister Yoshihiko Noda, the Institute for General Policy Studies calls for an early entry into the free-trade agreement.
Drawing comparisons with South Korea, which has raised its status as an export base by concluding free-trade deals with many other countries, the paper argues that a decision by Japan not to join the TPP could trigger an "avalanche" of companies relocating factories overseas.
Rebuilding from the March 11 disaster provides all the more reason to join soon, the paper goes on. At the same time, Japan needs to push through agricultural reforms to increase the benefits of TPP membership, the think tank contends. With farmers growing old and land increasingly left fallow, Japanese agriculture is "on the verge of a crisis," and the TPP offers a chance to transform it into an "internationally competitive" industry, according to the recommendations.
The paper proposes, among other steps, promoting large-scale farming, doing away with price-supporting planting restrictions, bolstering food exports, overhauling a program of income support, and freeing up agriculture to new entrants.
Despite steps toward liberalization in recent years, the barriers to entry remain high, and further deregulation is needed to bring young people and corporations into farming, according to the recommendations.
(The Nikkei Sept. 13 morning edition)
TOKYO (NQN)--Prime Minister Yoshihiko Noda decided on Monday afternoon to select former Chief Cabinet Secretary Yukio Edano to replace former Economy, Trade and Industry Minister Yoshio Hachiro.
Newly named Economy, Trade and Industry Ministe Yukio Edano has been handling the nuclear issue since the beginning of the crisis.
Current Chief Cabinet Secretary Osamu Fujimura officially announced the decision at a news conference on Monday. Edano is expected to attend an attestation ceremony at the Imperial Palace in the evening.
Hachiro stepped down on Saturday over inappropriate remarks he made after inspecting areas near Tokyo Electric Power Co.'s (9501) crippled Fukushima Daiichi nuclear power plant.
Edano, who served as Chief Cabinet Secretary under former Prime Minister Naoto Kan, has been handling the nuclear issue since the beginning of the crisis. His selection as industry minister suggests that bringing the nuclear crisis under control is a key government priority.
(The Nikkei Sept. 12 edition)
TOKYO (Nikkei)--Mitsubishi Corp. (8058) will join forces with oil major Royal Dutch Shell Plc and other oil firms to develop a large-scale natural gas project in Brunei, The Nikkei learned Friday. The trading house has acquired a 6.25% interest in the offshore natural gas block from a Brunei government-affiliated oil company. The block lies 80km off the coast of Brunei and spans 5,000 sq. kilometers.
Malaysia's state-run oil firm, Petroliam Nasional Bhd, owns a 45% stake. U.S. company Murphy Oil Corp. and Shell have interests of 30% and 12.5%, respectively, while U.S. refiner ConcocoPhillips Co.'s share comes to 6.25%.
The partners will spend 70 billion yen to drill around seven test wells over the next two to three years to determine the size of the reserves. Previous appraisals put the reserves at a few trillion to around a dozen trillion cu. feet, making it viable for commercialization.
Development is to start as soon as 2013, with production to kick off the following year. At its peak, the project is expected to churn out 500,000 barrels of oil a day and 4 million tons of liquefied natural gas a year, representing roughly 6% of Japan's total LNG needs.
(The Nikkei Sept. 10 morning edition)
Firms such as Toray, Teijin shifting focus to automotive sector
Demand for carbon fiber, an advanced material in which Japanese manufacturers have a competitive edge, is taking off.
U.S.-based Boeing Co.'s latest midsize commercial jet, the 787 Dreamliner, is strong and lightweight because it is made of a high amount of carbon fiber. The material is also used in environmental applications such as wind power generation.
Since the 1970s, carbon fiber producers such as Toray Industries Inc., Teijin Ltd. and Mitsubishi Rayon Co. have each invested around 100 billion yen ($1.3 billion) in carbon fiber. They are now shifting their attention to the automotive market in a bid to develop low-cost processing technologies.
Black, threadlike carbon fibers are only one quarter as heavy as steel, but 10 times as strong. Carbon fibers have been used in passenger jet interiors since the 1970s, but account for just 1% of their total weight.
On July 3, a 787 landed at Tokyo's Haneda International Airport on an operational experiment. The midsize plane featured Toray's carbon fibers in its fuselage and main wings, accounting for about half of the aircraft's weight. It burns 20% less fuel than comparable craft, so it can fly directly from Japan to Europe or the U.S. mainland.
Fresh facilities
At Mitsubishi Rayon's plant in Otake, Hiroshima Prefecture, a new carbon fiber production line with an annual capacity of 2,700 metric tons went into operation in late June. Most of the output goes to wind turbine makers, and demand is rapidly increasing, the company said.
Global carbon fiber demand fell more than 10% following the onset of the 2008 financial crisis, but recovered in 2010, rising to about 30,000 tons. Demand is widely expected to continue to grow at an annual rate of 15-20% for the foreseeable future.
Toray is building a plant in South Korea, scheduled to start up in January 2013, that will produce carbon fiber for export. It has also purchased an additional site for other facilities, in anticipation of rising demand.
But for all the promise it holds, carbon fiber has contributed little to manufacturers' earnings. Group sales of carbon fiber composite materials accounted for just 4% of Toray's total revenues in the year to March 2011, for example. And at 67 billion yen, carbon fiber acccounted for just a one-tenth of Toray's sales of synthetic fibers. The business posted an operating profit of 3.2 billion yen in fiscal 2010, compared with a loss of 5.3 billion yen the year before, but the carbon fiber business is not yet a stable source of earnings.
The company is responding by focusing on the auto industry. Carbon fibers have long been used in race cars and high-end sports cars, but the cost of the material is significantly higher than steel costs. If Toray is looking for a way into the car market, costs will first have to come down.
Teijin, meanwhile, has been test-driving an experimental "black car" at its research facility in Gotemba, Shizuoka Prefecture. The vehicle's frame is made of carbon fibers and weighs only one-fifth as much as a steel-based car, making it light enough for two adults to lift.
Carbon fiber for automotive applications is mixed with plastic resin to form a composite that can be molded into vehicle parts in as little as one minute. The material is likely to become popular with carmakers as they try to squeeze more mileage out of vehicles by reducing their weight.
Manufacturers expect the use of carbon fibers to spread from high-end cars to midrange models toward 2020.
(The Nikkei Weekly September 5 edition)
TOKYO (Nikkei)--Japanese makers of food and sundries use subtle marketing strategies to spark demand in the domestic market, but these techniques may not work in the fast-growing markets of Asia.
Japan may be one of the most homogeneous countries in the world in ethnic and cultural terms, but its consumers are notoriously finicky. Why this is so remains something of a mystery, but it may be that consumers seek to assert their identity in their diverse product choices.
Take instant noodles, for example. Nissin Foods Holdings Co. (2897), the market leader in Japan, has mastered the art of catering to the subtleties of Japanese tastes, turning out roughly 300 products a year. But for Nissin Foods, the future lies not in the domestic market, which is stuck at around 5.3 billion servings of instant noodles sold each year, but in Asia, which slurps up more than 80% of the world's 95.4 billion servings sold. If they remain focused on meeting the whims of Japanese consumers, instant noodle makers may have trouble meeting growing demand elsewhere.
Masahiko Uotani, chairman of Coca-Cola (Japan) Co., provides another anecdote on Japan's hothouse consumer market. "One piece of data," he says, "shows that the Japanese drink nine kinds of soft drinks a week."
More for me, less for you
The March 11 earthquake might prove a good training ground for makers of food and sundries to focus on volume. The disaster disrupted production and made it hard to get hold of packaging, forcing many firms to cut their product lines and concentrate on big sellers.
Electricity shortages stemming from the nuclear crisis at Tokyo Electric Power Co.'s (9501) Fukushima Daiichi plant were another blow. Speculation was rife that Japanese consumers' love of variety, reflected in the high-mix, low-volume production model adopted by many companies would fade. But people's habits do not change so easily, nor can companies turn on a dime.
Calbee Inc. (2229), Japan's largest snack maker, suffered a huge decline in operating profit for the April-June quarter. It lost market share to rivals, because it was unable to pitch new products due to postquake disruptions. Calbee's strong brand and market dominance were not enough to protect it.
What's your beef?
Yoshinoya Holdings Co. (9861) offers another tale of the cost of complacency. The company's beef bowls were once synonymous with Japan's fast food industry, but it has recently been outmaneuvered by nimbler competitors.
"Nothing can be blamed other than the 2004 import ban on U.S. beef stemming from the woeful outbreak of BSE (bovine spongiform encephalopathy). We suspect that the long sales suspension created a sort of vacuum in people's taste for beef bowls," said one senior executive with the company.
Yoshinoya insisted on using U.S. beef for its offerings, which made it reluctant to resume beef bowl sales. Meanwhile, rivals Zensho Co. (7550), which operates Sukiya beef bowl chains, and Matsuya Foods Co. (9887), responded by switching to Australian beef and quickly resumed sales.
Zensho has gone from strength to strength. While Yoshinoya was playing a waiting game, its rival was working to make its restaurants more family-friendly by putting in more table seating and cutting back on counters. That drew more families and introduced many children to its food.
Sukiya's market share has gradually broadened. In 2008, it overtook Yoshinoya by number of domestic outlets. And many young people, who were brought up during the country's long-running deflation, no longer associate beef bowls with Yoshinoya.
Yoshinoya is still popular, especially among middle-aged men. But the beef bowl battle highlights the severity of competition in Japan. Even a front-running company can quickly find itself marginalized if it fails to respond quickly to market shifts.
Nissin Foods and Japanese breweries, meanwhile, are trying to develop globally oriented personnel, keenly aware that they must develop new skills if they are to survive in the wider world. Their efforts include global employee exchanges, which they hope will spark innovative thinking.
Such initiatives will take time to show results. But dithering is sure to be fatal.
--Translated from an article by senior Nikkei staff writer Naofumi Nakamura
(The Nikkei Marketing Journal Sept. 11 edition)
TOKYO (Nikkei)--Japanese consumers are focusing on stable, quality lifestyles after the devastating March 11 earthquake, said Kao Corp. (4452) President Motoki Ozaki in a recent interview with The Nikkei.
Kao, one of Japan's leading makers of consumer products ranging from detergents to cosmetics, will continue to expand in Asia, Ozaki said.
Excerpts from the interview follow.
Q: Six months have passed since the March 11 earthquake. How have consumer preferences shifted since then?
A: While the restraint that consumers showed following the disaster is waning, they are increasingly buying only what they really need. They are not just thrifty, but consume rationally.
Q: What do you mean by "consume rationally"?
Motoki Ozaki
A: Consumers are not just looking for cheap items, but are paying more attention to cost-performance. They had previously placed the highest priority on price in their product selection, but the recent disaster deepened a sense of crisis among consumers. They are putting more emphasis on stability and the quality of their lives.
Q: Sales of toiletries are recovering faster than expected and are about the same as the previous year. Which businesses have been slow to recover?
A: Shipments in the chemical business were strong in April and May, but they are now in a correction phase. Many of our chemical products are used as ingredients by food processors. They built up inventories, resulting in the current inventory adjustments.
The other is cosmetics. Sales of cosmetics had showed signs of stabilizing before the quake but they are slumping again. However, the negative impact of the disaster was short-lived, just encouraging people to be more thrifty. Some have tried to make full use of what they have in stock, thereby reducing their "home inventories."
Q: What is the long-term trend for cosmetics?
A: Essentially, the conventional practice of having salespeople at the counter to explain and sell cosmetics has become less prevalent in Japan. The divergence between high-end and low-end products is also growing. Cosmetics do not sell as detergents do. We cannot just expect rational consumer behavior to provide a lift to cosmetics sales.
Q: The domestic population is continuing to fall. The domestic markets for cosmetics and daily items don't have any more great potential, do they?
A: To go more global, we will have to reinvest profits earned in Japan, the U.S. and Europe in other markets. China and Indonesia are good investment opportunities. Vietnam is also promising. We will beef up the growth segments of detergents, disposable diapers and sanitary products, which have large markets.
Q: How will you strengthen those operations?
A: Asia is not a single market. Mature markets and growing markets are mixed up together in Asia. We have to figure out what kinds of products are acceptable, and where. We just can't bring Japanese products and technologies as they are to Asian markets.
We will need to launch mass-market products that help expand its size. It is essential to use local wholesalers and sales agents to keep pace with demand. China, for example, has as many as 600 big cities. As in the U.S., many sales agents in China are expected to be consolidated in the future.
Q: How will you reach emerging markets?
A: Apart from the issue of the hollowing out of domestic industries, we have to figure out an optimal production network worldwide. Basically, we make our daily items in consuming areas. We will begin local production of disposable diapers in Anhui Province, China, for example.
We are conducting market surveys in India and Brazil. We want to secure at least a 5-10% share in both markets by 2020. We are aiming to become the second-largest maker in the industry as soon as possible to take on the industry leader.
--Interviewed by Nikkei staff writer Yuji Takahashi
(The Nikkei Marketing Journal Sept. 11 edition)
TOKYO (Kyodo)--Sales within Japan of Toyota Motor Corp.'s Prius gasoline-electric hybrid vehicle topped 1 million last month, the automaker said Monday.
Domestic sales reached 1.02 million as of the end of August, Toyota said.
The automaker took the wraps off the environmentally friendly Prius hatchback in December 1997 in Japan, and began selling it overseas in 2000.
Cumulative worldwide sales of the Prius totaled 2.36 million vehicles as of Aug. 31, with the hybrid sold in 70 countries and territories, Toyota said.
After releasing the second-generation Prius in 2003, Toyota unveiled in 2009 the third-generation Prius, which offers a fuel economy of 38.0 kilometers per liter of gasoline under Japan's official gas mileage measurement standards, known as the 10/15 mode.
In the January-August period of 2011, Toyota domestically sold a combined 143,200 Prius models after posting a record annual Prius sales of 315,400 units the previous year, it added.
(The Nikkei Sept. 12 edition)
SINGAPORE (Nikkei)--The Japanese government and businesses have banded together to promote the Japanese fashion industry in Southeast Asia.
Apparel-Web Inc., a fashion industry portal site operator, Mizuho Corporate Bank and Chori Co. (8014), a textile trading house, established a joint investment company in Singapore earlier this month to offer Japanese clothing brands to local consumers.
The new firm will increase its capital to 1.5 million Singapore dollars (95 million yen) by the end of the current fiscal year, with a plan to open its first store in May next year.
Japanese clothing brands have yet to establish a high profile in Singapore. To raise awareness, the company will organize a three-month-long promotional event called "Harajuku Street Style" at department stores on Orchard Road in downtown Singapore.
Nine companies will showcase 15 brands, such as Beams and United Arrows Ltd.'s (7606) Beauty & Youth, at the event, which may run longer than three months if it proves popular and demand is high. The Ministry of Economy, Trade and Industry will contribute about 50 million yen to the event.
(The Nikkei Sept. 7 evening edition)
The Office of Commercial Affairs, Royal Thai Embassy in Tokyo, Japan
Source : http://www.depthai.go.th