TOKYO -(Dow Jones)- Sony Corp. (6758) Thursday joined a lengthening list of big-name Japanese manufacturers like Honda Motor Co. (7267) and Toyota Motor Corp. (7203) in saying Thailand's extreme flooding has derailed production, closing down either plants or key parts suppliers in recent days.
But while Japan's auto makers, dominant in Thai car manufacturing, say hefty inventories will help them get through the crisis more easily than after the giant March 11 earthquake at home, the shutdowns highlight how Thailand has attracted much of the external investment poured out by Japanese players seeking cheaper production overseas, despite infrastructure that can struggle to cope with disaster.
And with the yen's relentless grind higher versus other currencies prompting more and more of Japan's manufacturers to consider moving factories overseas to underpin profitability, Thailand's apparent attractiveness versus other low-cost Southeast Asian manufacturing nations like Indonesia has exposed Japan blue chips' efforts to stay competitive to the vagaries of a natural disaster, just seven months after the bitter experience of March.
Consumer electronics giant Sony's decision to delay the launch of new digital camera products due to flood damage at subcontractors and parts suppliers in Thailand was the latest in a series of announcements by Japan's technology players like camera company Nikon Corp. (7731) and conglomerate Toshiba Corp. (6502), which like its peers suspended production of hard disk drives used in personal computers in Thai plants.
But with Japanese auto makers accounting for 95% of Thai car making, according to the Japan Automobile Manufacturers Association, a total of nine Japanese auto and motorcycle makers have suspended production in Thailand since the beginning of this week or even earlier this month, according to JAMA chairman Toshiyuki Shiga, also chief operating officer of Nissan Motor Co. (7201).
They also use Thai factories as their export base to ship vehicles built there mainly to neighboring markets, Mr. Shiga said at a news conference Thursday.
If the impact continues to last, the flooding may result in a combined output loss of about 6,000 vehicles a day for Japanese auto makers, he said.
But Japanese auto makers have all-too-recent experience of reestablishing parts supply chains, Shiga said, referring to the post-March 11 recovery process. They've "already worked on similar tasks when the quake hit," he said.
There's another more significant reason why the Thai flooding's impact will have a more limited impact on production, Shiga said. "In general, parts supplies are leaner in Japan. Production could stop within three days" once the supply gets disrupted, the executive said. "In Thailand, (Japanese car makers) carry (inventories) for a longer time such as three weeks or a month."
In fact, most of the Japan auto makers' factories haven't been affected directly, but rather parts suppliers have been hit by the disaster. Only Honda has suffered flood damage directly, with one of its two plants in Rojana Industrial Park, Ayutthaya province, being submerged.
Just how aggressively Japanese corporations have been investing in low-cost Thailand production in recent years is borne out by trade statistics.
In 2000, according to the Japan External Trade Organization, or Jetro, Japan's outward foreign direct investment in Thailand was $593 million, or about one-third of all such investment in the principal four countries in the Association of Southeast Asian Nations -- Thailand, Indonesia, Malaysia and the Philippines.
By 2010, the number had nearly quadrupled to $2.25 billion -- more than half the $4.31 billion invested in the Asean 4 countries, more than double the $1.06 billion invested in Malaysia and not much less than the $2.86 billion invested in India.
Still, while there are some signs that Japan's yen-rich corporations are seeking out other Asian locations for overseas plants -- foreign direct investment in Vietnam was $748 million in 2010, rocketing up from $39 million in 2000, according to Jetro -- some say that the severe flooding won't tarnish Thailand's established position of long-term attractiveness as a production location, at least in some industries.
"Automotive production in Thailand will be affected in the near term due to the lack of auto parts supply as a result of the floods," analysts at consultancy Frost & Sullivan wrote in a note published Thursday, "but is not likely to have a medium-long term effect on Thailand as an automotive production hub in the region."
(The Nikkei October 20 edition)
TOKYO (Nikkei)--The government is considering low-interest loans to help Japanese companies affected by Thai floods resume operations as soon as possible, according to a draft plan seen by The Nikkei on Friday.
The program would expand state-backed banks' soft loans for small and midsize businesses that have operations overseas. The loans by Japan Finance Corp. are intended to help such firms finance new projects and business expansions, but officials plan to widen the scope so they are usable for post-flooding restoration efforts.
The government is also considering expediting visas for Thai engineers if Japanese companies want to temporarily shift production back home from Thailand.
The government will finalize the program as early as next week.
The draft plan also calls for relief measures through the Japan Bank for International Cooperation and the Nippon Export and Investment Insurance agency. One idea is to tap the JBIC's fund designed to help companies mitigate the impact of the strong yen.
The program also calls for measures to help the Thai government and its people. Giving grant aid and dispatching medical teams and flood-response experts are among prospective short-term measures. Longer-term steps would include helping Thailand develop infrastructure rebuilding plans.
(The Nikkei Oct. 22 morning edition)
TOKYO (Dow Jones)--The Bank of Japan and the Bank of Thailand are working to set up a new lending facility to make Thai baht funding more accessible to Japanese companies, a program that may help firms affected by the devastating floods in the Southeast Asian country.
The move comes amid growing concerns that the worst flooding in decades to hit Thailand--a major production hub for global companies--is hurting Japanese manufacturers based in the country. The Japanese government says that there are 447 Japanese companies located in seven flooded industrial parks.
"The measure would add another option for obtaining Thai baht funds for financial firms in Thailand, including Japanese banks, and encourage them to extend more loans, helping to stabilize fund-raising conditions for Japanese companies," a BOJ official said.
"The facility should be effective in terms of flood aid," he added.
The Japanese and Thai central banks have been in talks about the program since last year, and decided to announce the deal before a final agreement has been reached due to the disaster.
The Bank of Thailand has yet to work out the interest rate it will charge on the facility, but has decided not to provide any subsidies to the program, which is expected to be effective in a week or two, Bank of Thailand Gov. Prasarn Trairatvorakul told a press conference in Bangkok.
Under the new facility, Japanese and other foreign financial institutions operating in Thailand can borrow baht funds from the BOT using Japanese government bonds as collateral.
The BOJ will manage JGBs received from financial firms, while the Thai central bank will inject baht funds to participating banks.
"This measure confirms the two central banks' commitment to ensure the continuity of longstanding economic and financial relations between the two nations," the BOJ said in a statement.
"Thailand has long been a recipient of Japanese investment, which has contributed to integrating Thai manufacturing into the global production chain," the BOJ noted.
BOT's Prasarn said the central bank is seeking cooperation with counterparts in the U.S., U.K., and Germany to come up with similar programs aimed at easing liquidity constraints for firms troubled by the floods.
Separately, Japan's trade and industry ministry said Tuesday it will expand loan guarantee and trade insurance programs for Japanese companies in Thailand. For long-term reconstruction, Japan will receive local engineers and give them training in rebuilding flood-damaged facilities. The government will also provide loans to industrial parks where Japanese companies operate.
(The Nikkei October 25 edition)
TOKYO (Nikkei)--Automakers and marine shippers are likely to be hurt the most from the buoyant yen, which briefly touched an all-time high of 75.78 against the dollar in New York on Friday.
Leading firms in the Nikkei Stock Average were ranked according to the impact of the rising yen on their business. The ranking was calculated by dividing group operating profit by the reduction in operating profit resulting from each 1-yen uptick versus the dollar.
Fuji Heavy Industries Ltd. (7270) and Mazda Motor Corp. (7261), which are heavily reliant on domestic production, came in first and second. Both are vulnerable to an ascending yen considering Fuji Heavy exports some 70% of domestic output and Mazda around 80%. The duo anticipate operating profits of 20-30 billion yen each this fiscal year. But Fuji Heavy's profit could be wiped out given that the yen is 6-yen stronger against the greenback than the Subaru-brand maker had expected.
Marine transport firms also ranked highly, with Nippon Yusen KK (9101) in third and Mitsui O.S.K. Lines Ltd. (9104) in sixth. Freight revenue is mainly denominated in dollars.
Machinery manufacturers with shipyards and other major production bases in Japan, including Kawasaki Heavy Industries Ltd. (7012) and Mitsubishi Heavy Industries Ltd. (7011), placed in the top 10 as well.
Yet the fallout on electronics manufacturers, which rank side-by-side with automakers as exporters, will be relatively light. Operating profit will be hurt a mere 1% or so at 19th-placed Panasonic Corp. (6752) and 23rd-ranked Hitachi Ltd. (6501). Sony Corp. (6758) will be insulated from any impact. Electronics manufacturers have built up their resilience against a mighty yen by outsourcing more television output overseas and ramping up production in emerging markets.
(The Nikkei Oct. 25 morning edition)
TOKYO (Dow Jones)--Japan's finance minister on Monday ratcheted up his warnings against the strong yen, helping to weaken the currency against the dollar by raising the specter of renewed yen-selling intervention by Tokyo.
The Japanese government is on high alert after the dollar quickly fell to a post-war record low of Y75.78 Friday, clouding the outlook for an economy that is heavily reliant on exports to help it recover from the devastating March 11 earthquake and tsunami.
Finance Minister Jun Azumi told reporters that the yen's move Friday was "an absolutely speculative movement and did not reflect economic fundamentals at all."
"If this becomes excessive, we must take decisive steps" in the currency market, Azumi said, using a phrase that usually refers to market intervention in Japan's currency policy lexicon.
He added that he had instructed finance ministry bureaucrats Saturday to stay "able to respond to whatever may happen."
The tone was slightly stronger than his reported remarks over the weekend, and traders responded by pushing the dollar to as high as Y76.48 in early Asian trading.
But some traders were skeptical over whether Japan would actually intervene since Azumi's remarks could also be interpreted to mean that he would hold off on action until the current yen rise becomes "excessive" by his standards.
Barclays Capital chief strategist Masafumi Yamamoto said he believed the chance of intervention was relatively low despite the yen's strength.
He said he expects the dollar to stay in a Y76.00-Y76.50 range for now since traders are wary over intervention and are looking to a Thursday meeting of the Bank of Japan policy board, which could undertake fresh measures to add money to the economy.
Japan's finance ministry last intervened on Aug. 4, selling Y4.5 trillion, or about $59 billion based on current rates, and pushing the dollar up around Y3 within the day.
The dollar's fall versus the yen makes Japanese exports less competitive in the U.S. and other dollar-linked markets and reduces the yen value of profits sent home. The U.S. currency's current levels are well below an average Y81.15 on which roughly 1,200 large Japanese manufacturers have told the Bank of Japan they are basing their profit forecast for the ongoing business year.
The current dollar-yen rate "is having a big impact on the Japanese export industry on the whole, including car makers, and could undermine the strong (economic) rebound from the earthquake," Azumi said.
Azumi also urged Japan's parliament to quickly pass a new Y12.1-trillion reconstruction budget so the government can implement measures worth Y2 trillion to soften the impact of yen rises on the Japanese economy.
But analysts viewed the government's efforts as a tacit acknowledgment that they are increasingly resigned to managing a muscular yen instead of fighting it.
Yen Hits Record High On Doubts On Japan Battle Plan
NEW YORK (Dow Jones)--The yen surged to a record high against the dollar Friday, as measures devised by Japan to mitigate the effects of a strong yen prompted traders to question the country's resolve to halt its rise.
On Friday, Japan's cabinet approved the expansion of a nearly Y12 trillion plan to help companies contend with the rising yen, at a time when the world's third largest economy is trying to engineer a recovery. A strong currency hurts Japan's export-driven economy by making it more expensive to produce goods domestically, and pricier to buy overseas.
In theory, Japan's moves would satisfy the currency needs of exporters who put upward pressure on the yen whenever they recycle dollars. In practice however, analysts viewed the government's efforts as a tacit acknowledgment that they are increasingly resigned to managing a muscular yen instead of fighting it.
"I look at these measures as [a sign] the Ministry of Finance as essentially throwing in the towel, amid an inability to come up with a dramatic solution to the yen strength problem," said Paresh Upadhyaya, director of G-10 FX strategy at Bank of America Merrill Lynch. Although Japan's economy has been battered by recession and a natural disaster, its high trade surplus and lack of external financing makes its currency a source of safety during periods of global uncertainty.
As Europe's debt crisis roils markets worldwide, market observers think Japan is unlikely to find international support for its preferred method of taming its currency: direct yen-selling intervention. In March, a coordinated effort among the world's largest economies successfully weakened the yen, but a renewed bid by all G7 members is seen as unlikely for now, if not completely out of the question. Unilateral intervention -- or an explicit dollar/yen level, such as the euro/Swiss franc target recently adopted by Switzerland -- is also viewed as ineffective.
In early U.S. trading, automatic stop-loss orders to buy yen and sell dollars triggered frenzied trading that drove the greenback as low as Y75.78, its weakest level ever.
Late Friday, the euro was at $1.3899 from $1.3780 late Thursday, according to EBS via CQG. The dollar was at Y76.19 from Y76.81, while the euro was at Y105.87 from Y105.81. The U.K. pound was at $1.5959 from $1.5796. The dollar was at CHF0.8819 from CHF0.8942.
The ICE Dollar Index, which tracks the U.S. dollar against a basket of currencies, was at 76.284 from about 76.974.
Safe-haven buying of the yen has its roots in the debt crisis battering the euro zone. Investors are anxiously looking toward a weekend summit for indications of whether Europe's EUR440 billion bailout fund can be expanded, and whether private investors in Greek bonds will be forced to take a large write-down on their holdings.
However, investor frustrations with the whole saga are mounting. Protracted negotiations and a lack of political consensus in Europe have triggered head-spinning volatility. As European Union leaders were forced to convene a supplemental meeting for next Wednesday amid continued divisions, analysts say the likelihood of a disorderly and painful end to the crisis is increasing.
"You may exit Europe or you may bet against it but those are the only two positions that I would entertain at present," said Mark Grant, managing director at Southwest Securities. "My words may be harsh but the Europeans have earned them and the sword that they are swinging, I predict, will result in their being impaled upon it."
(The Nikkei October 22 edition)
TOKYO (Nikkei)--Japan is caught in political wrangling over whether it should take part in the Trans-Pacific Partnership free trade talks, with many ruling party members afraid of losing the farm vote.
There is little doubt Prime Minister Yoshihiko Noda is committed to Japan's participation in the talks, but he cannot decide the issue unilaterally. To proceed, Noda will have to find a way to build a consensus within his Democratic Party of Japan and pass a bill authorizing TPP negotiations. To that end, Noda has set up a project team within the DPJ policy study group that aims to compile a report on TPP before he leaves for the Asia-Pacific Economic Cooperation (APEC) summit on Nov. 12.
The Trans-Pacific Partnership has many skeptics among ruling DPJ lawmakers.
Tough sell on the farm
The project team is embroiled in a debate, as many members question why Japan needs to take part in the TPP talks now. The major concern voiced by skeptics is the impact of trade liberalization on Japan's agriculture. Opposition is even stronger in the cross-party Diet member league. A rally held on Friday attracted about 120 lawmakers opposed to the talks. Masahiko Yamada, a former agriculture minister, went so far as to say, "I pledge my life to prevent Japan from participating in the TPP."
Many DPJ lawmakers are worried that pushing the TPP will cost them farmers' votes. The Central Union of Agricultural Cooperatives, or Zenchu, has launched a campaign against the proposed free trade agreement, asking DPJ lawmakers to support a petition to be submitted to the Diet. It has already collected signatures from about 1.65 million people opposed to the TPP.
Mired in low public approval ratings, the ruling party cannot ignore big voting blocs. Within the DPJ alone, about 200 lawmakers are backing the petition drive, which was initiated by a cross-party group.
A house divided
The DPJ has no time for internal strife, with quake reconstruction and the drafting of a budget for fiscal 2012 under way. Still, its long-term challenges remain: With a declining birthrate, an aging population and continuing deflation, Japan will have a hard time growing without freeing up trade with other countries.
The Cabinet Office estimates that joining the TPP would boost gross domestic product by 0.48-0.65% annually in real terms. "If Japan shows it is willing to engage in free trade, it will put a stop to domestic firms moving production overseas, to some extent," said Takahide Kiuchi, chief economist at Nomura Securities Co.
Some DPJ members are seeking common ground on the issue within the party. "If Japan participates in the TPP and this doesn't serve our national interest, we can pull out," said Seiji Maehara, the party's policy chief, on Sunday, as he sought to calm nervous legislators.
"Agriculture is important, but we should turn a pinch into a chance," DPJ Secretary-General Azuma Koshiishi told Akira Banzai, chairman of Zenchu.
The government hopes to go ahead with the TPP talks while placating farmers with promises of financial support. A government panel on agriculture, forestry and fisheries has devised a policy aimed at shoring up the agricultural sector by encouraging larger farms, but there is nothing on the table so far that could head off further opposition.
After the Uruguay Round of global trade talks in 1993, which partially opened Japan's rice market, the government spent more than 6 trillion yen on agricultural support. But much of the money went to civil engineering projects; there was little restructuring of the industry itself. Farms stayed small and the workforce continued to age. The average farmer is now 66 years old.
Even assuming Noda wins the argument, getting into the TPP talks is just the beginning. The talks are likely to be tortuous. It took six years for the U.S. and South Korea to give final approval for their free trade agreement, which will take effect in January. The pact faced fierce domestic political opposition in both countries.
Mitoji Yabunaka, a former vice foreign minister, said the Asia Pacific region is Japan's home ground. Its decision on the TPP will determine whether it plays a leading or supporting role in the region, he said.
Japanese lawmakers need a clear vision of the country's future and a strong dose of political resolve if they hope to move forward with the TPP talks.
(The Nikkei Oct. 24 morning edition)
TOKYO (Nikkei)--As neighbors in an important part of Asia, Japan and South Korea must foster mutual cooperation despite a host of unresolved bilateral issues.
The importance of the relationship was underscored by Wednesday's meeting in Seoul between Prime Minister Yoshihiko Noda and South Korean President Lee Myung-bak.
Noda and Lee agreed to push working-level negotiations for an economic partnership agreement as a key part of building economic ties. Talks on a Japan-South Korea EPA have been suspended since 2004. Meanwhile, Seoul has concluded a free trade agreement with the European Union and is moving ahead with a similar deal with the U.S. Japan should seek an early resumption of the EPA talks to avoid being left out in the cold.
Noda and Lee also agreed to a big expansion their bilateral currency swap arrangement, against the backdrop of the South Korean currency's accelerating depreciation due to the European sovereign debt crisis and other uncertainties. Given the circumstances, is natural for Japan to lend a hand to South Korea to minimize the effect of global economic woes on Asia.
Economics first, but more needed
There are a number of unresolved issues between Japan and South Korea, such as who should have sovereignty over a pair of islets, known as Takeshima in Japan and Dokdo in South Korea, and differences over the two countries' troubled history.
To prevent those issues from unduly straining ties, Japan and South Korea have no choice but to work to build trust by promoting economic and diplomatic cooperation. It was wise, therefore, that the two leaders avoided delving into territorial and other disputes at their latest meeting.
Nevertheless, Japan and South Korea cannot fully live up to their responsibilities as major players in Asia by focusing only on their two-way relationship. They must also work together to enhance regional stability.
Their first big test in this regard will be dealing with North Korea's weapons program. While Noda and Lee affirmed their commitment to work together on the issue, visible actions are needed.
Japan and South Korea should work to broaden security ties in other areas as well. If a crisis occurs on the Korean Peninsula, Japan, the U.S. and South Korea will need to work together to evacuate civilians, for example.
Japan and South Korea cooperate far less on security issues than the U.S. does with either country. Japan's Self-Defense Forces and South Korea's military should start reinforcing their security partnership through joint drills and personnel exchanges.
It is also important for the two countries to promote strategic cooperation so as to nudge China into acting more responsibly in the region as it builds up its military. The U.S., Southeast Asia and Australia are also growing alarmed by China's growing naval power.
The East Asia Summit in November will discuss cooperation in maritime security with China in mind. Japan and South Korea should lead the discussion, together with the U.S.
(The Nikkei Oct. 20 morning edition)
TOKYO (Nikkei)--The Japanese economy had not surpassed its pre-earthquake level as of August, according to an index that uses a revised calculation method. The previous version of the index indicated that the economy had recovered by summer.
Using a new method to more accurately reflect the impact of events such as the March 11 disaster and the 2008 financial crisis, the coincident index gave a reading of 90.3 for August. The previous method charted economic activity at 107.4.
The new computational method, proposed by an expert group commissioned by the Cabinet Office, will be used in a report due out next month based on September data.
The previous method discounted the March catastrophe's impact as an extraordinary factor, causing the August index to exceed its pre-earthquake level by 1.3%. But the new method puts the August figure 4.2% below the pre-quake level, and even short of levels predating the collapse of Lehman Brothers in fall 2008.
Under the previous method, the economy was seen to be basically recovering since March. But with the new method, the economy was still at risk of plunging into a recession until May. "In retrospect, the economy may have been in a lull," said one study group member.
(The Nikkei Oct. 20 morning edition)
TOKYO (Kyodo)--Japan and Tokyo topped the rankings of highly satisfactory travel destinations, compiled by British newspaper The Guardian, the Japan National Tourism Organization said Thursday.
It is the first time that both Japan and its capital were top ranked simultaneously in the categories of "favorite long-haul country" and "favorite overseas city," both of which exclude European countries and cities, according to the JNTO.
The Guardian said the coexistence of traditional culture and advanced things in Japan must be highly praised and that it hopes "this recognition helps speed the recovery of tourism" in Japan following the March earthquake and tsunami disaster.
The rankings were compiled from voting conducted from February to April among the paper's readers who traveled.
Japan marked a 98.9 percent satisfaction level, followed by the Maldives and Peru in the country category. Among cities, Tokyo ranked at the top for the second straight year, followed by Sydney and Cape Town.
(The Nikkei October 20, 2011 edition)
TOKYO (Nikkei)--Aiming to reverse the decline in guests from abroad since the March 11 disaster, nine major domestic hotels have developed exclusive reduced-rate plans for foreign businesspeople traveling in groups.
The plans are sold worldwide via U.S. hotel reservation agent Preferred Hotel Group.
For 35,000 yen per person, the Capitol Hotel Tokyu includes a one-night stay, breakfast, lunch, and two days' use of conference rooms. This is more than half off its regular rate.
For groups booking conference rooms, a plan from the Prince Park Tower Tokyo sells at 40% off. It starts from 22,700 yen a night per person, with breakfast included.
While the precise offerings vary from hotel to hotel, the special-price plans will generally be available through March.
In July, Japanese hotels with Preferred Hotel Group memberships offered foreigners plans for 10,000 yen a night. These plans for individuals proved popular, leading the hotels to draw up plans for group business travelers this time around. The Royal Park Hotel and Keio Plaza Hotel are among the nine offering such plans.
(The Nikkei Oct. 25 morning edition)
TOKYO (Nikkei)--Sales through the Internet and other channels outside of brick-and-mortar stores picked up steam in fiscal 2010, beating the previous year's growth for the first time in five years. Such sales rung up by 235 companies surged 4.1% to 2.23 trillion yen, with the pace of growth widening 2.4 points on the year, according to data tabulated Tuesday by The Nikkei.
Apparel and food companies as well as retail giants that do not specialize in mail order and other direct marketing services drove growth, lifting sales from such channels by 5.6%. In contrast, companies that specialize in mail-order shopping and other services generated only a 3.8% increase. Clothing chain operator United Arrows Ltd.'s (7606) online sales surged 30% after it expanded its offerings through such venues as Amazon Japan KK's virtual shopping mall and began accepting orders for certain items exclusively online first.
Furniture and interior design retailer Nitori Holdings Co. (9843) also boosted its home shopping services by 50% after it expanded online operations. Fast Retailing Co.'s (9983) online Uniqlo sales surged 20%, while Suntory Holdings Ltd.'s sales through a subsidiary that handles mail orders for health foods and other products rose 13%.
Among the different sales channels, online shopping was a clear winner, showing an 11.5% increase in revenue. Of this, purchases conducted through mobile phones, including smartphones, rose 12.3% in fiscal 2010 and are expected to jump 19.5% in fiscal 2011.
Catalog-based purchases dipped 1.2%, in contrast.
For fiscal 2011, the direct marketing sales are expected to increase 5.3% at 140 companies with comparable data on the year, suggesting ongoing growth in online and other shopping channels.
(The Nikkei Oct. 19 morning edition)
TOKYO (Nikkei)--Struggling with intensifying price competition, food makers, wholesalers and retailers are working together more closely to cut costs and improve their bottom lines.
Manufacturers, wholesalers and retailers discuss greater collaboration in Tokyo at a forum in May. In the summer, Seven & i Holdings Co. (3382) group stores started selling a 400ml bottle of top-quality green tea for 138 yen. Although it costs about 70% more than comparable products sold by supermarkets, the drink became the top seller in its category in its first week on the shelves at Ito-Yokado Co., selling 1.92 million bottles in about a month.
The bottle lists only Ito En Ltd. (2593) as the manufacturer but it is a private-label product of Seven & i. The retail giant was deeply involved in developing the drink, selecting the variety of green tea used and determining the taste.
Seven & i is hoping to raise sales of its Seven Premium brand-products to about 420 billion yen a year. Because private-label products are priced around 20-30% less than national brands and offer thinner margins, food processors are often reluctant to work with retailers to develop them. Seven & i succeeded in bringing Ito En, a major tea drink maker, on board by creating a lower-volume, premium drink. "These products help broaden the price range of our offerings, while makers do not have to spend money advertizing them," said Yasushi Kamata, an executive at Seven-Eleven Japan Co.
Better together
Some food makers see advantages in private-label products and are trying harder to win orders from retailers. This past spring, seafood firm Nippon Suisan Kaisha Ltd. (1332) set up a "collaboration room" at its R&D center in Hachioji, western Tokyo, focusing on development of store-brand products.
Nippon Suisan now works with retailers in the early stages of product planning to help retailers differentiate their products from those of competitors. From March to September, about a dozen firms visited the collaboration room to negotiate deals and sample products. "The response from clients has been bigger than we expected," said Nippon Suisan President Naoya Kakizoe.
Retailers and food processors still battle it out in their price negotiations, with retailers acutely aware of the needs of their penny-pinching customers. "We need to negotiate fiercely, but at the same time we should be able together to cut the waste of creating hundreds of unpopular items," said Takeshi Niinami, president of convenience store operator Lawson Inc. (2651).
Lawson now provides several drink and confectionery makers with its customer purchase data, including shoppers' ages, in exchange for getting new products on the shelves ahead of its competitors. Of every 1000 new drinks that come out, only about three survive in the market, according to industry lore.
Better analysis of what consumers really want can reduce unsold inventories and the need for profit-eating discounts. In this way, Niinami believes a virtuous cycle will be created, allowing for more development of high-quality products.
If unnecessary costs are eliminated in supply chains, even low-end products can be money-makers. Based on this idea, the Trade Ministry is spearheading an effort to foster collaboration between manufacturers, wholesalers and retailers.
Ito-Yokado Co., Aeon Retail Co., Ajinomoto Co. (2802) and Kao Corp. (4452) are among the companies working together to tackle excessive product deliveries and returns.
Improving profitability is a major challenge for both consumer goods makers and retailers. Major U.S. and European food makers typically have operating profit margins of around 10%, while their Japanese counterparts rarely do so well. The situation is similar for retailers. U.S. and Europe giants' return on equity averages 15-20%, while at Aeon Co. (8267) and Seven & i the figure is less than 7%.
Strengthening the supply chain for daily necessities during natural disasters and other emergencies has become a major issue since the Great East Japan Earthquake. "It's time for makers, wholesalers and retailers to step up cooperation more than ever," said Yukio Kawano, chairman of Yaoko Co. (8279), a supermarket operator.
(The Nikkei Oct. 15 morning edition)
TOKYO (Nikkei)--Despite the deteriorating retail environment due to growing concerns of an economic downturn, the appetite for jewelry, art, luxury foreign automobiles and other high-priced items has remained strong in recent months.
The Japan Department Stores Association reported Tuesday that nationwide same-store sales dropped 2.4% on the year in September, marking a third consecutive month of declines. But sales of art, jewelry and precious metals climbed 1.1%, maintaining a growth streak dating back to June. "In addition to the 1-2 million yen price range, 10 million yen watches have been selling well," an association official said.
At major department stores, the bulk of paintings sales consist of works under 1 million yen, but a work priced at several dozen million yen has reportedly been sold.
Among watches, Rolex and other imported brands have been doing well. And pearls are among the popular items at department store jewelry sections.
To tap the demand for high-priced items, Daimaru Matsuzakaya Department Stores Co. plans to hold about 35 exclusive sales events for wealthy customers in the Tokyo metropolitan area by the end of February, up around 10% from a year earlier.
Sogo & Seibu Co. has created a section for handling events for sales staff specializing in high-income customers, with the goal of cultivating new customers in the 20-40 age range.
Takashimaya will bolster its lineup of costlier jewelry.
Takashimaya Co. (8233) plans to bolster its lineup of products that sell for more than 2 million yen at its jewelry section, which has mostly displayed merchandise priced at 1 million yen or less. Even the cheapest of Rolls-Royce Plc's new vehicles sell for nearly 30 million yen in Japan. This year's sales so far stand at 63, up 20% from the same period a year earlier.
At major import car dealership Yanase & Co., Mercedes-Benz CLS models have been driving off the lot at a pace of 160 a month, which is similar to the level seen before the Lehman Brothers collapse. The large luxury sedans are priced at around 10 million yen.
Royal Road Ginza, a JTB Corp. travel agency that focuses on high-priced packages, has been enjoying growing sales of made-to-order tours that fly business class or higher.
Such tours for Europe cost at least 1 million yen per person, but reservations for October-December departures are up 50% from a year earlier.
"The strong yen is acting as a tail wind, but some of the demand may be a reaction to the voluntary consumption restraint after the March disaster," a JTB official said.
(The Nikkei Oct. 19 morning edition)
TOKYO (Kyodo)--Japan's convenience store sales in September fell 4.0 percent from a year earlier to 677.94 billion yen on a same-store basis, the first decline in 11 months, an industry body said Thursday.
The decline was due to the year-earlier rush to buy cigarettes before a tax increase took effect in October, according to the Japan Franchise Association.
However, sales of boxed lunches and sweets were strong during the reporting month.
As reconstruction demand following the March earthquake and tsunami continues, most convenience stores in the Tohoku region kept posting year-on-year sales increases.
With housewives and aged people inclined to continue shopping for daily necessities and ready-to-eat meals at convenience stores after the disaster, the number of people who visited convenience stores nationwide edged up 0.4 percent to 1.14 billion for the sixth straight monthly increase.
On an all-store basis, sales of perishable food such as boxed lunches and sweets increased 9.6 percent and those of processed food including soft drinks grew 6.5 percent, while sales of cigarettes and other nonfood products plunged 18.5 percent.
(The Nikkei October 21 edition)
TOKYO (Nikkei)--Retailers are offering a broader line of foods for people who will be alone for year-end traditions like Christmas dinner and New Year's "osechi" meals.
Convenience store chain Seven-Eleven Japan Co. will for the first time sell year-end gift boxes containing an assortment of seafood and seasonal delicacies in small portions. Tokyu Department Store Co. and Keio Department Store Co. have increased the number of osechi dishes for one to two people by 10%.
Sogo & Seibu is the first department store chain to sell single-serving osechi dishes.
In Japan, people usually share holiday meals with their families. But household sizes are falling along with the birthrate, and more people are eating alone these days.
Sogo & Seibu Co. is the first department store chain to sell single-serving osechi dishes, which are prepared by a high-end Japanese restaurant in Kyoto. The dishes go for 4,000 yen to 8,000 yen. Unit sales of osechi foods for two people surged 17% on the year last year, so the company expects demand from singles to be brisk as well.
Convenience store chain Lawson Inc. began taking orders for sushi priced at 1,500 yen that one or two people can eat for Christmas. It aims to tap demand from elderly people and young singles.
(The Nikkei Oct. 18 evening edition)
The Office of Commercial Affairs, Royal Thai Embassy in Tokyo, Japan
Source : http://www.depthai.go.th