TOKYO (Nikkei)--Food imports likely expanded the most in 15 years in 2011, sparked by the aftermath of the March earthquake and tsunami as well as the strong yen.
Imports totaled some 5.33 trillion yen for the 11 months through November, up 12.4% on the year, according to Finance Ministry trade data. Surging international market prices led to a jump in the import value of grains, while most meats, dairy products, vegetables and beverages are up sharply in both value and volume terms.
Imports of beverages zoomed up 34.7% in volume. With domestic drinking water scarce after the earthquake, imports of bottled water soared. The popularity of cheap beers has also been a contributing factor. Aeon Co. (8267) has sold around 210 million cans of its store-brand no-malt beer sourced from South Korea since its launch in June 2010. At Aeon stores, the beverage is the best-selling no-malt beer.
Meat imports ballooned 7.1% in volume and 10.1% in value. Supermarkets and restaurant chains have ramped up beef imports after consumers shunned domestic offerings amid concern that supplies contaminated with radioactive material had reached the market. Vegetable imports grew 11% in volume and 7.7% in value. Demand for frozen foods, which are mostly from abroad, also swelled after the disaster.
By contrast, exports of food have tumbled since the quake. Exports sank 15.7% in the April-November period. More than 40 markets across the globe have restricted shipments of farm and fishery products from Japan.
(The Nikkei Dec. 31 edition)
TOKYO (Nikkei)--The government plans to ramp up free trade negotiations with China, South Korea and the European Union, alongside its effort to join a pan-Pacific trade block, with the aim of having nontariff arrangements cover 80% of Japan's trade in value terms. Nine nations, including the U.S., Australia and Peru, are negotiating a free trade zone known as the Trans-Pacific Partnership. Japan, which in November expressed interest in taking part in the TPP, will launch preliminary talks with these nations this month to obtain their approval to join the group. Because of the approval process, Japan will not be able to formally join the TPP talks until this spring or summer.
China, South Korea and the European Union, which had been skeptical of Japan's intentions, appear more willing to discuss free trade arrangements now that Tokyo has expressed interest in the TPP. In December, Japan, China and South Korea wrapped up a joint study laying the groundwork for an effective accord before the end of this month for a joint investment agreement, the precursor for a free trade pact. The leaders of the three countries are scheduled to meet in China in the first half of this year to discuss starting negotiations for trilateral free trade.
Japan also plans to hold talks with EU leaders in the first half to work toward an economic partnership agreement.
Meanwhile, Japan's joint study with Canada is set to end in the middle of this month. They may agree to launch negotiations for an economic partnership as early as this spring. If all negotiations succeed, regions covered by the TPP and other free trade agreements are slated to account for 83.9% of Japan's total trade with global partners on a value basis, up from 36.5% at present. Negotiations with China, Japan's largest partner comprising 20.5% of trade, as well as the U.S. and the EU, which account for around 13% and 11.6%, respectively, will hold the key.
The TPP, a trilateral free trade pact between Japan, China and South Korea, and an economic partnership agreement with the EU could lift Japan's real gross domestic product by a combined 1.55% after 10 years, estimates Kenichi Kawasaki, a researcher at Nomura Securities Co. But the three pacts may cancel out potential benefits for the Japanese economy, resulting in a GDP boost closer to around 1.3% to 1.4%.
(The Nikkei Jan. 4 morning edition)
Charlene Barshefsky
WASHINGTON (Nikkei)--Japan needs to offer concessions in such areas as agriculture and automobiles as part of the Trans-Pacific Partnership trade pact talks, former U.S. Trade Representative Charlene Barshefsky recently told The Nikkei. The U.S. Congress will seek concessions beyond those sought from South Korea as part of that nation's bilateral free trade agreement with the U.S., said Barshefsky, the top American trade official from 1997 to 2000.
She listed long-standing issues with Japan like agriculture, automobiles, beef imports, nontariff barriers and postal insurance as areas where the U.S. will seek concessions. The U.S. seeks to deepen its involvement in Asia in a multitude of ways, Barshefsky said, acknowledging its limited economic presence in the region.
She pointed to President Barack Obama's renewed focus on trade strategy, explaining that the TPP will increase the importance of U.S.-Japan ties. On whether the U.S. sees the TPP as a way to keep China in check, Barshefsky said that country's economic might already makes it impossible to contain.
(The Nikkei Jan. 4 morning edition)
TOKYO (Nikkei)--After railing against the government's hard-line negotiating stance, prefectural governors appear to have gotten their way last week in bargaining over revenue from the consumption tax increase.
"We got our point across," a relieved-sounding Kyoto Gov. Keiji Yamada, president of the National Governors' Association, said Thursday. The central government agreed to let local governments take 1.2 percentage points of the planned 5-point tax hike, with an additional 0.34 point in the form of grants from the national budget. Social security costs will be divided roughly 23 trillion yen to 10 trillion yen, with Tokyo taking the bigger share.
Prime Minister Yoshihiko Noda's government clearly worried that a protracted battle over revenue-sharing would hurt the ruling Democratic Party of Japan's standing at the local level.
Keiji Yamada, center, at a meeting with government officials. The government's last-minute concessions were not limited to the tax issue. For a new child care subsidy starting in fiscal 2012, Tokyo agreed to split the cost 2 to 1, backing down from an offer of an even split. This will save local governments about 200 billion yen. The initial offer would have doubled their burden.
Eager to grease the wheels for the consumption tax hike, the Ministry of Finance tried to avoid local friction at the end of last year as it worked on the fiscal 2012 budget plan. Tax revenue grants are set to go up for a fifth straight year. Lump-sum grants, which come with few strings attached, have been raised 60% to 800 billion yen at Noda's discretion.
The government's tax and social security reform plan, which is supposed to be more than a tax hike, says nothing about local-level tax reforms that might sit badly with governors.
But the central government may be merely sweeping its problems under the rug. In the negotiations on revenue-sharing, there was no apparent effort to impose mandatory administrative reform on local governments or to ensure their cooperation in passing the tax increase.
Nor was there a deeper debate on social welfare reforms that the national and local governments need to pursue together. On many points, including public assistance, which is straining municipal budgets, responsibility and funding need to be reassigned. Even with local support for a tax hike, a reform plan without substance would simply make trouble for the future.
(The Nikkei Jan. 4 morning edition)
TOKYO (Nikkei)--The government's draft plan for comprehensive social security and tax reform appears to have left certain critical issues deliberately vague after deliberations went down to the wire on the last business day of 2011.
The plan calls for the current 5% consumption tax to be raised in two stages to 10% by October 2015. But it includes a provision that would allow the government to call off the proposed hike depending on economic conditions.
Some ruling Democratic Party of Japan lawmakers had called for specific numerical targets for gross domestic product growth and other indicators as a basis for such a decision. Ministry of Finance and Cabinet Office officials, however, are said to have blocked the inclusion of such criteria. Demand associated with reconstruction efforts in disaster-stricken areas will likely lift real GDP by nearly 2% in fiscal 2012, but growth is expected to slow the following year, according to private-sector forecasts. Prime Minister Yoshihiko Noda mentioned 3% nominal growth and 2% real growth as a target at a DPJ gathering Thursday, but the consensus among economists is that such growth will likely be unattainable.
This could reignite opposition even before April 2014, when the consumption tax is scheduled to be raised to 8%.
But investors worldwide have grown increasingly critical of nations with unsound finances. "We will need to give priority to fiscal rehabilitation through tax hikes" if a debt crisis, be it in Europe or elsewhere, threatens to spill over here, says a senior MOF official.
The government also faces the pressing task of fleshing out the details of measures designed to lessen the burden of the higher consumption tax on low-income earners. The draft plan calls for income tax credits or cash disbursements to those whose income is so low that they will not benefit from tax cuts. But it falls short of going into detail about the types of assistance to be offered to specific income groups.
Such tax credits and cash disbursements could require an annual 1 trillion yen in funds, but the draft leaves their funding source unspecified. In addition, because tax authorities need to have accurate information about an individual's income, the proposed tax credit is premised on the launch of a national taxpayer identification system scheduled for introduction in January 2015.
Some DPJ officials have urged one-time cash benefits to be paid out to low-income earners until then. But some in government assert the burden can be offset through social security reform, including lower national health insurance premiums.
(The Nikkei Dec. 31 edition)
TOKYO (Nikkei)--For Japanese companies, 2011 has turned out to be a year of investments. It saw businesses increase capital investment overseas and go on aggressive M&A sprees. And businesses are rapidly diversifying their portfolios, and all this looks likely to gain even more momentum in 2012. Japanese industry has reached an unprecedented, historic turning point.
Companies' overseas capital investment rose to a record 22% of their domestic capital investment in the July-September quarter, according to the Survey of Business Activities by the Ministry of Economy, Trade and Industry. The survey is often called the "hollowing-out survey."
Also, more businesses are engaging in another form of capital investment: mergers and acquisitions. Research firm Dealogic reports that Japanese firms have spent 80 billion dollars in mainly M&A activities overseas this year, which is likely to be a new record.
Japanese companies cannot expect much from the shrinking domestic market. By contrast, emerging markets are expected to account for more than 30% of global gross domestic product by 2030, becoming one of the global economy's major players. Under such circumstances, Japanese firms are shifting gears and globalizing management. Trade deficit
"Despite the hollowing-out of industry at home, we'll have to generate revenue by investing overseas and will repatriate the capital gained overseas to Japan to create more jobs. I think that's what it boils down to," said Yoshimitsu Kobayashi, president of Mitsubishi Chemical Holdings Corp. (4188). Apparently, other business leaders share this view. Japan's trade statistics show that the country reported a trade deficit for the January-October period this year. And it looks very likely that Japan's trade balance for 2011 will turn negative for the first time in 31 years.
Since the mid-2000s, the Japanese economy has seen a surplus in its income balance, including yields from foreign direct investment and securities investment, surpassing its trade surplus. In other words, Japan has been teetering at the brink of a trade deficit for some time. At a time like this, Japanese businesses have begun moving their production overseas, undermining the very foundation of an export-reliant Japan.
Impacts from the soaring yen, the March 11 disaster, and the subsequent disruptions in the supply chain also played a significant role.
Takeda Pharmaceutical Co. President Yasuchika Hasegawa announced a bid to acquire Swiss drugmaker Nycomed in May. Even if those major events had not occurred, Japanese companies would have gone overseas aggressively, regardless. Takeda Pharmaceutical Co. (4502) has acquired Swiss drugmaker Nycomed, the biggest M&A this year for Japan. Nippon Steel Corp. (5401) and Sumitomo Metal Industries Ltd. (5405) have agreed to merge. All these moves were agreed upon even before the March disaster.
For many businesses, the effects of the dot-com bubble around 2000 and the collapse of Lehman Brothers Holdings Inc. in late 2008 have became relics of history. According to a survey by The Nikkei, listed companies saw their net profits for fiscal 2010 in dollar terms return to levels recorded for fiscal 2007.
Japanese companies, meanwhile, have also accumulated high levels of cash reserves. As of the end of September, cash reserve levels came to 60 trillion yen, down 8% from levels seen as of the end of March. After the Lehman demise, Japanese firms focused on maintaining stable finances and increased capital on hand. But now they are switching gears to making more investments. "In the world after the Lehman Brother's debacle, business leaders are required to back-calculate all sorts of factors in their management," said Yutaka Mizukoshi, head of Boston Consulting Group in Japan.
As businesses have shifted their focus to emerging countries in a wide range of products and services, what is considered an appropriate size for companies also has changed considerably. Just how big does firm need to be to survive these tumultuous times? This is exactly what drove the merger between Nippon Steel and Sumitomo Metal Industries. Divided priorities
Nevertheless, it is important to note corporate-government relationships. When companies go overseas to earn profits, there tends to be a decoupling of interests between companies and their home governments.
While Nissan Motor Co. (7201) has pledged to produce 1 million cars at home, the automaker now has its main procurement center in Shanghai. The company also plans to move its luxury car section and overseas PR and marketing operations to Hong Kong.
The government will increasingly have to deal with such delicate situations involving more companies making similar moves. Clearly, the strong yen, high corporate tax rate, power shortages, lack of government leadership and other problems have been weighing heavily on Japanese businesses.
However, the government still needs to do something about the industrial hollowing-out. The country is now experiencing a wave of changes, from a trade balance to an income balance, and from GDP to gross national product. Now is the time to seriously consider how to go about using the money companies are making overseas to create new businesses and industries in Japan.
Both the government and companies will have to tap their wisdom more than ever in the years ahead. As they try to come up with a grand design for the country, their vision and creativity will be put to the test. --Translated from an article by senior Nikkei staff writer Atsushi Nakayama
(The Nikkei Business Daily Dec. 27 edition)
TOKYO (Nikkei)--Like the earthquake that struck the country this year, a major disaster can destroy a market leader's competitive edge in an eyeblink.
Maruzen Petrochemical Co.'s Chiba plant had been the only facility in Japan making diisobutylene (DIB), a plastic raw material vital to printing ink. But the practice of concentrating production at home to ensure steady profits was turned on its head when the plant took damage from the March 11 disaster.
Toyo Ink SC Holdings Co. (4634) and Sakata Inx Corp. (4633) depended on the plant for making their products, so the suspended output there dealt a potentially fatal blow. The industry as a whole urged the Ministry of Economy, Trade and Industry to relax import procedures, paving the way for stable imports of alternatives in April. And since summer, JX Nippon Oil & Energy Corp. and Idemitsu Kosan Co. (5019) have started up their own DIB businesses. The disrupted supply chain has thus been mended without having to wait for Maruzen Petrochemical to resume production. Quake damage forced plant shutdowns at Shin-Etsu Chemical Co. (4063) and Sumco Corp. (3436), ranked No. 1 and No. 2 globally in semiconductor silicon wafers. Despite resuming output in June, they have lost some market share to South Korean upstart LG Siltron, which has expanded its own production.
Companies leaving supply chains unrepaired run the risk of having market share stolen away by rivals. But some firms are overhauling their business models, exploiting the opportunity presented by the disaster to take a second look at costs and labor.
Renesas Electronics Corp. (6723) suspended output of automobile microcontrollers for a few months at its main plant because of damage from the catastrophe. With clients' help, it set out to develop the equivalent of the traceability systems used in the food industry. The system monitors amounts of inventories already in the market and work-in-process products at its plants, as well as preparedness for alternative output at other plants. The system, which also includes data that has not been disclosed externally in order to prevent information leaks to rivals, enables Renesas to indicate suitable inventory levels for each client.
(The Nikkei Dec. 31 edition)
TOKYO (Nikkei)--The industrial machinery and machine tool industries face "cloudy" conditions in the January-March period, after enjoying "partly sunny" skies the previous quarter, according to a Nikkei Inc. survey.
The yen's persistent strength is a drag for industrial machinery and machine tool makers, which are linked closely to the global economy. Furthermore, capital spending in the key markets of China and the U.S. is projected to be sluggish. Plant developers and shipbuilders, as well as steelmakers and nonferrous metals companies, are also likely to suffer from the yen's rise.
Department stores, which have slogged through a long spell of "rain," are expected to encounter "drizzle." Overall consumption remains weak, yet a growing number of department store operators are seeing increased sales of art, jewelry and other big-ticket items. Production, which had been on the skids due to flooding in Thailand, has almost recovered at automakers, while sales are strong at restaurant operators. Both sectors' outlooks have improved from "drizzle" to "cloudy."
"Partly sunny" conditions continue for telecommunications firms and online service providers, stoked by strong smartphone demand, as well as for amusement companies benefiting from the proliferation of handheld game devices.
For the second straight quarter, no sectors are projected to bask in the "sun." Just one sector -- electricity providers, which are structurally plagued by rising costs -- is expected to be pelted with "rain." "Drizzle" is forecast for 12 sectors, down one from the October-December term. Fourteen sectors are predicted to be "cloudy," up three and accounting for almost half the total 30 industries in the survey.
(The Nikkei Jan. 4 morning edition)
TOKYO (Nikkei)--With baby boomers now reaching their mid-60s, the growing ranks of elderly Japanese comfortable with online shopping are emerging as a key market for a wide range of products and services.
Senior citizens take a class on how to use the iPad in Tokorozawa, Saitama Prefecture. Japanese who are 65 or older now spend some 70 trillion yen annually, accounting for more than 30% of the nation's overall consumer spending, according to Hideo Kumano, an economist at Dai-ichi Life Research Institute Inc. For many companies, catering to the needs of this cohort is assuming growing importance.
Baby boomers differ from previous generations in some important ways, two of which are that they are more familiar with computer and other digital technologies and more interested in spending to enrich their lives.
The ratio of Internet users among people in their 70s is 39%. But the figure jumps to 57% for people ages 65-69 and climbs to even an higher 70% for those ages 60-64, an age group that roughly corresponds with the baby-boomer generation. Social networking
These Net-savvy seniors tend to spend more money for the purpose of finding "something to live for," according to Hiroyuki Murata, a professor at Tohoku University and an expert in businesses aimed at elderly consumers. For these people, the Internet, especially social-networking sites, is a powerful tool for collecting information and finding people who share the same interests.
To meet the social-networking needs of this group, DeNA Co. (2432) partnered with Club Tourism International Inc. to create an online service for middle-age and older people in 2007. About 270,000 people have signed up for the service, which enables members to communicate with each other about their hobbies and interests.
Operators of online shopping malls, such as Rakuten Inc. (4755), will be major beneficiaries of the expected growth in online spending by retirees. Takahiro Kazahaya, a senior analyst at Deutsche Securities Inc., sees huge growth potential in the electronic book market due to the growing population of pensioners who spend a lot of time on the Web. Doting grandparents
Another potentially important trend among elderly consumers is a growing interest in their grandchildren. When they were young, many male baby boomers were workaholics supporting Japan's rapid economic growth. They tended to leave the job of raising their kids to their wives while they toiled at the office from morning to night.
Many now feel guilty for not spending more time with their children and so are trying to make up for that by playing a more active role in the lives of their grandchildren. Sensing a business opportunity, Tokyo-based publisher Kirakusha Inc. has launched a magazine for such doting grandpas and grandmas.
Housing-related businesses, meanwhile, are looking to capitalize on strong demand for home remodeling among retirees. In a survey of elderly Japanese conducted by the Cabinet Office in fiscal 2010, only 36.4% of the respondents said their housing would be comfortable to live in even if their physical abilities declined.
(The Nikkei Veritas Jan. 1 edition)
TOKYO (Nikkei)--It has been about 14 years since Toyota Motor Corp. (7203) released its first-generation of the Prius hybrid car. And this year, plug-in hybrid vehicles that combine the functions of both conventional HVs and electric vehicles are set to be the next big thing environmentally friendly cars.
Toyota will offer its Prius PHV from 3.2 million yen, which will drop to 2.75 million yen under the government's subsidy program to promote eco cars.
PHVs have a high-capacity battery that can be charged by plugging it into a standard wall socket. The EV function is for short-distance driving. When the battery runs out of juice on longer drives, the vehicle operates as a hybrid.
The coming release of PHVs will start a new competitive stage in the development and marketing of eco-friendly cars. Toyota in position
As it has done with hybrids, Toyota is moving ahead of the competition in the nascent PHV market, announcing that it will release a PHV version of the Prius on Jan. 30, making it the first mass-market PHV.
Making this announcement in November, Toyota Executive Vice President Takeshi Uchiyamada said the automaker has developed the Prius PHV to be the pillar of next-generation green cars. "PHVs are the best for applying electricity to power ordinary passenger cars," he added. The Prius PHV has a lithium-ion battery, rather than the conventional Prius' nickel-hydrogen battery. While it is officially said to have a fuel economy equivalent to 61 kilometers per liter of gasoline when fully charged, it is effectively an EV when used for short-distance driving, provided the battery is frequently charged up.
In Toyota's three-month demonstration experiment from last June, a housewife in Toyota, Aichi Prefecture, drove the Prius PHV in such a manner, finding it consumed only about 10 liters of gasoline after nearly 2,500km of use. This comes to a staggering 249km per liter. Different drives
Mitsubishi Motors Corp. (7211) and Honda Motor Co. (7267) will also put PHVs on the market this year. Mitsubishi will release a PHV based on its popular sport utility vehicle to attract buyers different from Prius fans.
Displaying a prototype at the Tokyo Motor Show in December, Mitsubishi President Osamu Masuko said the automaker will try to have the vehicle "run more than 50km as an EV" on a full charge, evidently having the Prius PHV's 26.4km in mind.
Nissan Motor Co. (7201), meanwhile, has been promoting pure EVs that use no gasoline, but this limits these cars to short journeys. The fuel efficiency of gasoline-powered vehicles has drastically improved as well. Daihatsu Motor Co. (7262) and Suzuki Motor Corp. (7269) have released vehicles that can run more than 30km to a liter under Japan's JC08 testing method, which closely mimics actual driving conditions.
All in all, sales of green cars are very likely to have a major impact this year on the stock prices of automakers.
(The Nikkei Veritas Jan. 1 edition)
The Office of Commercial Affairs, Royal Thai Embassy in Tokyo, Japan
Source : http://www.depthai.go.th