Japan Consumes, Produces, Profits – and “Feels” Better

1 Jul, 2013 –

Monthly Business News Digest

by Ziv Magen (Manager, Asia-Pacific @ NTI)

Japan Real EstateCollated news items from around the world (highlights below) point to big things happening in the land of the rising sun – as PM Shinzo Abe’s economic rejuvenation policy takes firmer hold of the country’s formerly lagging economy, consumer spending is on the rise – leading, in turn, to similar rises in factory outputs, small business sentiment & even higher company profit expectations across the board –

Japanese Consumer Spending on the Rise (Highlights from “Gulf News“)

…Prime Minister Shinzo Abe’s bid to revive Japan’s deflated economy hinges on consumers…starting to feel flush enough to start splurging on the finer things in life. A wide recovery in consumer spending has been the weakest link in “Abenomics,” the bold economic stimulus strategy that Abe has pushed since taking office in late December…

…Abenomics has already brought big profit bumps to the nation’s exporters, thanks to a yen made weaker by Abe’s aggressive policies. He found a kindred spirit in Haruhiko Kuroda, the Bank of Japan’s new governor, who has committed the central bank to easing the money supply and reinflating the economy. Stock markets have rallied, as foreign investors jumped back into a country they had all but written off for its seemingly unshakable stagnation…

…Numbers released by the government provided more proof of Japan’s corporate recovery. Industrial production rose by a robust two per cent in May from the previous month. Tokyo’s benchmark Nikkei index climbed 3.5 per cent on Friday on the strong showing. Reversing a 15-year-long slide in prices, which Abe has singled out as both a cause and a symptom of waning profits, wages and consumption, is a tougher order. For companies to feel confident enough to start raising prices, Japan’s consumers have to start spending again, and data confirming that trend is still mixed…

…Separate figures released showed that household spending fell 1.6 per cent in May from a year earlier, confounding economists’ expectations of a 1.3 per cent rise. Still, for the first time in seven months, Japan’s core consumer prices in May did not fall compared to the previous year, staying flat for that month after falling 0.4 per cent the previous month…

…“We are comfortable with our view that the uptrend of consumption continues,” Masamichi Adachi, Tokyo-based economist at JP Morgan Securities Japan, said in a note Friday. “An expected rise in summer bonuses, paid in June and July, and improvement in general sentiment are the main reasons,” he said…

…Sales of Ferrari cars in Japan have jumped almost 20 per cent so far this year, figures from the Japan Automobile Importers Association show, thanks to this newfound exuberance among the nation’s rich.” At the Hankyu Umeda department store in Osaka, sales of luxury watches, jewellery and other luxury items are surging, which lifted overall sales in May by 63 per cent compared with the previous year, the sixth straight month of double-digit increases…

Japan Factory Output Surges (Highlights from “Gulf Daily News“)

Japanese factories put in an unexpectedly strong performance in May, data showed, a further sign that the world’s number three economy is picking up as Tokyo embarks on a huge drive to boost growth…

…The figures showed industrial production jumped two per cent in May from a month earlier and add to an improving trade picture as exports to the US and China surge on the back of a weaker yen. The rise was the best since December 2011 and beat expectations of a 0.2pc uptick…

…Japan’s sleep-walking economy has been given a jolt by the moves, with the yen shedding some of its export-sapping strength and the stock market surging. However, while the output data was impressive it was partly driven by an uptick in production of large machinery such as turbines and boilers, which were likely to be temporary, said Yasuo Yamamoto, senior economist at Mizuho Research Institute.

Japan Small Business Sentiment Strengthens in June (Highlights from “RTT News“)

Japan’s small business confidence improved in June, survey data from Shoko Chukin Bank showed. The business sentiment index rose to 49.6, the highest reading since March, from 48.2 in May. Nonetheless, it remained below the neutral level.

Confidence among manufacturers came in at 48.7, up from 47.2 a month ago. At the same time, non-manufacturers sentiment reached 50.4 compared to 49 in May.

According to survey participants, overall business confidence was set to improve to 50.7 in July.

More Japan Firms Expect Profit Growth this Year (Highlights from “Reuters” survey)

A rising number of Japanese firms are expecting profit growth this business year on a weaker yen and improving consumer sentiment, with recent volatility in financial markets having little effect on most earnings outlooks, the Reuters Corporate Survey showed.

The proportion of Japanese companies expecting a modest climb in profits ticked up to 48 percent, 1 percentage point more than three months earlier. Those predicting a steep rise in earnings jumped to 12 percent from 7 percent, the survey showed.

Corporate outlooks have become much rosier on the back of bold new policies from Japanese Prime Minister Shinzo Abe that have served to weaken the yen since late last year, boosting  exports. Exports last month rose at their fastest clip in more than two years…

…While the yen has climbed 5 percent since marking a 4-1/2 year low on May 22, it is still some 30 percent weaker than it was in mid-November. It is now trading around 98 to the dollar. “The difference in an exchange rate at 80 yen and one at about 100 yen is huge,” said one respondent at a metals & machinery company that is expecting a steep rise in profits…

…Firms also cited improving demand, both overseas and at home, as a reason behind their better earnings outlooks. “We are seeing profits rise on a recovery in the amount of volume we handle,” said one auto-related firm.

Electronics, machinery and petroleum companies were also among the firms saying they were seeing a pickup in demand. Although concerns about how soon the U.S. Federal Reserve will begin to wind back stimulus helped to pushed the benchmark Nikkei 225 stock average into bear market territory last week, 61 percent of firms responded that stock market moves over the last month or so had only a marginal impact on their outlooks…

 

(Pic – Flag of Japan / Urawa)

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