Restaurant and Pub Sales down 1.9% in 2009

Restaurant sales shrank 1.5% on an absolute basis in 2009, according to data released Monday by the Japan Food Service Association, the first YOY fall since 2003. While customer traffic rose 0.2%, per-customer spending dropped 1.7% amid a brutal price war.

Family restaurants saw a 4.7 percent drop in customers, marking the second consecutive year of decline.

Pubs including "izakaya" Japanese-style food and drink outlets saw a 5.8 percent fall in sales, while sales at coffee shops tumbled 5.1 percent.

Fast-food chains, which generally offer low-price menus, logged a 2.5 percent rise in revenues and a 2.7 percent gain in the total number of customers with average spending down only 0.1 percent.

It is not surprising that family restaurants, coffee shops and pubs have suffered a decline in sales as discretionary consumer spending has been impacted by economic conditions; and as has been previously seen fast food chains have benefited as customers have shifted to lower priced food.

http://www.nni.nikkei.co.jp/e/fr/tnks/Nni20100125D25SS515.htm

http://www.breitbart.com/article.php?id=D9DEMQ2O0&show_article=1

Tokyo Residential Prices May Have Bottomed Out

According to Mitsui Real Estate Sales Co., land prices in residential areas of the Tokyo metropolitan region dropped at a slower pace in the October-December quarter of 2009 amid emerging signs that the economy is bottoming out.

Land prices fell 0.3 percent on average from the preceding quarter, which witnessed a decline of 0.7 percent.

Mitsui also said prices of existing condominiums in the region rose 0.5 percent in the reporting period, marking the third consecutive quarterly increase.

Residential land prices in the greater Nagoya and Osaka regions declined 0.6 percent and 0.9 percent, respectively, while existing condo prices fell 0.2 percent in both of the regions.

The prices of land and existing condos in the three metropolitan areas are expected to remain flat for the time being, Mitsui said.

In 2009, residential land prices decreased 4.5 percent from the previous year in both the Tokyo and Osaka regions and 3.6 percent in the Nagoya region, the company added.

http://www.breitbart.com/article.php?id=D9DC34481&show_article=1

No Punishment for Japanese Content Downloaders

The Yomiuri reports on the ineffectiveness of Japan's recent "beefed up" copyright laws designed to discourage illegal downloading of copyrighted product (music, videos etc) and notes that the lack of a penalty prescribed for illegal downloaders has made the laws ineffective.

http://www.yomiuri.co.jp/dy/national/20100124TDY03102.htm

Jobless Using Capsule Hotels as Accomodation

A report from the Scotsman describes how out of work Japanese are using capsule hotels as a form of accomodation.

During Japan's boom times, the capsule hotels were a popular choice for salarymen in the large urban centres, who had missed the last train home and couldnt afford the cabfare home. However, over the last few years, corporate entertainment has dried up and with it the market for the capsule hotel operators.

Now, these operations have re-invented themselves as budget accomodation for the unemployed and provide discounted rates for monthly or longer stays.

http://news.scotsman.com/world/Home-is---a.6008912.jp

Japanese Supermarket Sales fall by 4.9% to a 21 year low in 2009

Supermarket sales in Japan in 2009 dropped 4.3 percent on a same- store basis to a 21-year low of 12.83 trillion yen amid the anemic economy, the Japan Chain Stores Association said Friday to record a 21 year low point.

The number represented the 13th consecutive year-on-year drop on a same-store basis and December was down 5% on a YOY basis.

This tendency led supermarket operators to cut back on the unit prices of commodities, with their sales performances plunging despite their efforts to hike sales, it said.

Sales of foodstuffs, the biggest revenue-earning sector for supermarkets, fell 2.6 percent to 8.07 trillion yen, while those of clothing dived 10.8 percent to 1.37 trillion yen.

http://www.breitbart.com/article.php?id=D9DCKM600&show_article=1

Poverty in Japan

Japan Times editorial today talks about Japan's poverty rates. It reports that Japan's relative poverty rate as of 2007 stood at 15.7 percent; up from 14.9 percent in the 2004 making Japan the fourth-highest among OECD's 30 member nations.

This means that nearly one in every six, or 19 million Japanese are living below the poverty line - defined as half the median income for all income earners.

Japan may imagine itself as middle class and, compared with other OECD countries, the distribution of income before redistribution has remained better than many, but Japanese society is increasingly becoming pear-shaped. The elderly, older workers, recent unemployed graduates and especially single mothers and their children make up an ever-larger portion of those in poverty. According to the OECD survey, some 59 percent of those below the poverty line are single parents. This figure was one of the worst of all OECD countries in 2004.

http://search.japantimes.co.jp/cgi-bin/ed20100125a2.html

Japan being overtaken by China not all bad

Bill Emmett writes an interesting article where he describes China's economy overtaking Japan's as a matter of course; and he sees this as a positive development for Japan as Japan runs a balance of trade surplus with China.

However, Emmett is quick to point out that it is not the manufacturing strength of Japan which will provide the positive; noting that -

... manufacturing strength has done nothing to save Japan from nearly two decades of stagnation. If anything, Japan’s own manufacturing obsession has made things worse: to help to reduce labour costs and stay competitive, Japanese governments in 1997-2005 made repeated reforms to create a two-tier labour market. The second tier, of part-time and non-contract workers, get much lower wages, less employment protection and no benefits.

That group now makes up one third of the labour force. It is Japan’s “working poor”, and is the reason why the once famously egalitarian country now matches British levels of income inequality. Japan is the only OECD country to have seen its level of absolute poverty rise in the past two decades. Meanwhile, wages are declining, and not just those of the working poor: last Friday the Japanese Government forecast that nominal wages will decline in 2010 for the fourth consecutive year.

Emmett sees the opportunity for Japan to reform the services sector of its economy and seems to believe that the new Japanese Government will have the political will to introduce reforms into this sector.

It is less clear that Japan's Government will do much at all in this sector and if Emmett is correct; it is more likely that the Japanese private sector will be the driver of the positives from China's expansion.

http://www.timesonline.co.uk/tol/comment/columnists/bill_emmott/article7000839.ece

Shanghai Overtakes TSE as Asia's Largest Exchange

Another sign of the times as Shanghai's exchange overttakes the TSE to become Asia's largest exchange


http://www.asahi.com/english/Herald-asahi/TKY201001140163.html

International Investors Avoid JREITs

Comments from international investors continue to be negative on JREITs. Although there is in interest in operators who are consolidating and acquiring smaller rivals.

http://news.yahoo.com/s/bw/20091218/bs_bw/0952b4161072176077

New Trends in Japanese Residential Real Estate

An interesting article on how innovative landlords have re-designed large apartments to suit room sharing following vacancies of large apartments following Lehman's collaprse. In particular, it notes how Japanese ladies, in particular, are looking to move from typically tiny (20m2) rabbit hutches to now commence room sharing - a new concept in Japan.

The article provides a good snapshot as to the living conditions of young Japanese in urban Japan.

http://online.wsj.com/article/SB126213678598709767.html

Japanese Firms Exposure to Dubai

Japanese exposure to Dubai is in the billions

http://www.ameinfo.com/215180.html

Office Vacancy Rates Rise

The average office vacancy rate in 11 of 12 major cities across Japan increased from the end of September to the end of December.

The exception was Kyoto, where the rate remained unchanged at 10.7%.

During the same period, the average asking rent decreased in all 12 cities but Hiroshima.

The office rental market appears to be sagging nationwide, with the office vacancy rate in Yokohama standing at 11.5%, the highest since the survey began.

The average office vacancy rate for the 12 cities at the end of December stood at 13.2%, a rise of 0.9 percentage point from the end of September. The average asking rent fell 1.5% to 9,710 yen per 3.3 sq. meters.

The office vacancy rate in Tokyo's 23 wards, counted as a city in the survey, also rose 0.9 point, to 6.5%, in the three-month period. The vacancy rate in Osaka gained 0.7 point to 10.3% and that in Nagoya climbed 0.5 point to 12.5%.

http://www.nni.nikkei.co.jp/e/fr/tnks/Nni20100114D14HH442.htm

Global Property Guide's Report Japanese Real Estate H1 2009

Global Property reports on the performance of Japanese real estate in H1 2009; with the following outtakes -

• Seriously affected by the global financial crisis, falls in Japan’s residential property prices accelerated during the first half of 2009. The urban land price in Japan’s six largest cities dropped by 7.8% (9.2% in real terms) in H1 2009 from the previous year, according to the Japan Real Estate Institute (JREI), ending the long-anticipated recovery of Japanese property prices.
• The global financial crisis upset Japan’s real estate sector. Bankruptcies in real estate firms increased in H1 2009. Investors in Japanese real estate investment trust funds (J-REIT) have fled the market, leading to a huge drop in demand.
• New building permits in 2008 continued to be below 2006 levels, due to tighter constructions laws. Banks remained extremely cautious, making it difficult for buyers and developers to acquire loans.
• The economy however grew in Q2 2009 after four consecutive months of contraction due to the aggressive government stimulus and tax reforms.

• The global financial crisis and Japan’s recession bit hard in 2008. Land sales noticeably dropped by 10.1% in 2008, while Tokyo land sales registrations dropped no less than 15.7%. Sales in Osaka and other cities also slid, falling by 8.5% and 7.6% in 2008, respectively.

  Condominium sales in Tokyo continued to drop in 2009, declining by an average of 19.4% from January 2009 to August 2009 from the same period last year, according to data from the Real Estate Economic Institute. This followed the 28.3% drop in condominium sales in 2008. Sales in Tokyo have been declining since 2004, when 85,000 condominium units were sold.

• Real estate developers and investors have been heavily affected. Bankruptcies in the real estate sector rose by 41%, to 284 firms in H1 2009 from the same period last year, according to Teikoku Databank.
• as of September 2009, the TSE-REIT Index is 64% below its peak.
• The number of new projects has dropped due to the new laws. Housing starts in 2008 were 15.3% below the 1.3 million registered housing starts in 2006. Housing starts are expected to fall again in 2009. From January 2009 to August 2009, registered housing starts dropped by an average of 28.8%, according to data from the Ministry of Land, Infrastructure and Transport (MLIT).
• Japanese non-performing loans (NPL) ratios are low, largely because of reforms enacted by Junichiro Koizumi, prime minister from 2001 to 2006. From a high of 8.7% in March 2002, the ratio of NPLs to total loans decreased to 1.4% in March 2008, according to the Financial Services Authority (FSA). Due to the global financial crisis, the ratio of NPLs to total loans increased to 1.7% in September 2009.
• Despite the rental market issues, the average rental yield for residential properties in Tokyo was 5.5% in March 2009, according to Global Property Guide research. A 40 sq. m. apartment generates the highest yield of 5.9%, while a 250 sq. m. apartment only yields 5.2%.

• Japan’s economy grew 2.3% in Q2 2009 from the previous quarter. The recovery is due to the government’s three stimulus packages, which have pumped a total of JPY29.4 trillion (USD301 billion) into the economy. Public investment increased by 33.6% in Q2 2009 from the previous quarter. Foreign demand returned as exports increased by 28.1% in Q2 2009 from the previous year, following the 63.9% plunge in exports in Q1 2009.

  Despite the growth, the economy is expected to contract by 5.2% in 2009, according to the IMF. Private investment and private demand fell by 17.9% and 6.5% in Q2 2009 from the previous quarter.

  Deflation accelerated to 2.2% in August 2009. Unemployment rose to 5.7% in July 2009, with around 3.8 million unemployed.

http://www.globalpropertyguide.com/Asia/Japan/Price-History

CBRE Japanese Caprate Survery

CBRE released the results of its survey into expected yields for Japanese real estate investors.

The survey showed a trend of expected yield at major locations in Tokyo for each sector. Change of expected yield (NOI cap rate) for office was flat. Indicating that an upward yield trend that continued for five consecutive quarters since July 2008 has slowed down. Multi-family residential building was nearly flat, being relatively stable for the recent few quarters. Although other three sectors showed a slight increase from last quarter, it’s margin was very mild.

Rising yields in certain areas (Nagoya and Osaka) show that there is still downwards pressure on pricing.

http://www.cbre.co.jp/EN/Media_Centre/Pages/Release091210.aspx

Will Declining Yen Assist the Japanese Real Estate Market?

In the last half of 2009, the strong Yen was quoted as an empediment to the recovery of the Japanese real estate sector.

http://www.asiamoney.com/Article/2316849/Channel/18814/Japans-real-estate-recovery-hampered-by-rising-yen.html

With more recent Yen weakness; will the contrary be true? and like with recovery in Japanese stocks; Yen weakness have a positive impact on Japanese real estate? While I would say the case for the positive answer is a good one; it appears the bigger issue holding back a recovery in real estate (ex residential) remains more closely related to the availability of debt; despite Government attempts to improve credit conditions, the resolution of outstanding issues with maturing bond and bank facilities on real estate assets appears to be the major impediment to liquidity.

Deflation persists, unemployment rises, average wages decline

Japanese machinery orders unexpectedly fell to a record low in November as tumbling domestic demand overwhelmed an export revival. The reports underscore concern that Japan’s recovery from its worst postwar recession has yet to spread from exporters and spur spending by companies and households...

Producer prices fell 3.9 percent in December from a year earlier, the Bank of Japan said today. In 2009, the costs companies pay for materials plunged 5.3 percent, the most since the survey began in 1960, the central bank said...

With more than a third of factory capacity sitting idle, Japanese businesses are reluctant to increase spending on plant and equipment. Separate reports for November showed that the unemployment rate rose for the first time in four months and wages slid for an 18th month.

http://www.bloomberg.com/apps/news?pid=20601101&sid=agBCP80bNV3o

The climate for domestic demand remains negative with deflation, excess industrial capacity, high unemployment and shrinking wages. Whilst conditions for the large Japanese exporters have improved; the business climate for businesses reliant on domestic demand remains challenging; with the winners in this sector the low cost clothing and retail chains; fast food outlets and other countercyclical plays.

In the real estate sector; the only subsector which fits the countercyclical definition is the leisure hotel sector; with continued downwards pressure on commercial, industrial and residential.

Bankruptices Decline in Japan

In good news coming out of Japan today, Bloomberg reported that Japanese corporate bankruptcies fell in 2009 for the first time in four years.

Bankruptcies dropped 1.1% in 2009 and they slid 16.6% in December from a year earlier as improved consumer demand, the improved credit environment on the back of Government credit support for small businesses. The latter was marked by an easing of credit conditions and bank lending attitudes for a third quarter according to the Tankan survey. However, the export fuelled nature of the recovery benefits larger companies with smaller companies reliant on faltering domestic demand. Small firms said they expect business conditions to deteriorate by March compared with December, while their larger peers expect conditions to keep improving, the Tankan showed.

The situation in 2009 rebounded from 2008 which recorded an 11% increase, which was the biggest increase in 8 years, during the credit shock and Japan's worst postwar recession.

Ironically, this news emerges as JAL slides towards becoming Japan's 6th largest ever bankruptcy.

http://www.bloomberg.com/apps/news?pid=20601101&sid=axHMJcVlW1QE

Japanese Hostesses Unionize

The weakening conditions for Japanese consumer demand are having their impact on the lives of the "kyabajo" or night club hostesses in Japan, who are unionizing in an attempt to have the Japanese Labour Standards Bureau take their complaints about their treatment from owners more seriously.

The article reports that the high salaries and perceived lifestyle of the kyabajo have elevated working as a kyabajo to ranking within the top 10 jobs that high school girls aspire to - this results is more usually found in developing economies.

It remains to be seen whether the Japanese bureaucracy will take the side of the kyabajo against the owners of the kyabakura, who are often associated with the yakuza.

http://search.japantimes.co.jp/cgi-bin/nn20100113f1.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+japantimes+(The+Japan+Times%3A+All+Stories)&utm_content=Google+Reader

Doom and Gloom on Japan.... sounds familiar...

Ambrose Evans-Pritchard again is pushing his Japanese sovereign default and hyperinflation hyperbole on Japan and claiming support from PIMCO's Paul McCulley and Dylan Gracie of Societe Generale; presumably drawing their inspiration from the Latin American and Asian sovereign defaults.... and economic historians

Despite a series of sound bites about declining Japanese demographics; the Japanese consumer being duped as the overwhelming major buyer of their government's debt; the necessity for Japan to sell down on their ownership of 10% of entire stock of US TBs and other sovereign bonds and other disjointed titbits; Pritchard misses the blazingly obvious point that the Japanese Government's debt is largely domestically held and has a world leading export sector which still runs a massive trade surplus.

While Japan's debt situation is not healthy, it is not appropriate to contrast Japan's situation with that of major debtor nations. If anything at all, it appears that the national debt situation is pushing the Government to consider raising the consumption tax from 3% to 5% as early as next year; despite the impact that this will have on domestic consumption. On the other hand, the zero interest rate policy shows no sign of changing in the medium term.


http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100002951/a-global-fiasco-is-brewing-in-japan/

http://search.japantimes.co.jp/cgi-bin/nn20100111a3.html

Change in Japan's Richest People symbolic of Japanese trends

Forbes published its rich list of the 40 richest Japanese who despite deflation in 2009, rode the 31% Nikkei growth to became collectively richer than in 2008.

Tadashi Yani of affordable clothing chain, Uniqlo topped the list for a second year as his chain grew in value by 30% as Japanese consumers defensively moved their clothing purchasing away from brands and high priced clothing as a result of the difficult consumer income climate. The entry into the list of Takao Yasuda of discount retail chain Don Quijote also benefited from similar moves by consumers in general goods.

Other gainers in the list included the major Japanese "new" industry players such as Masayoshi Son of Softbank which owns Japan's 3rd largest mobile operator and Hiroshi Mikitani of online shopping mall Rakuten.

The losers included consumer finance bosses, Hiroki Takie of Takefuji, Ryochi Jinnai of Promise and Katsuhiro Kinoshita of Acom who all suffered from the crackdown by the financial authorities on their grey lending practices; and also featured the more traditional manufacturering and construction company owners amongst the decliners.

The list and movements within the list are symbolic of Japan's continual shift away from manufacturing into services as its economy go through the continual maturing process.

source:- http://www.forbes.com/2010/01/12/japan-richest-tycoons-billionaires-japan-rich-10-social-networking-intro.html?feed=rss_home

Japanese Retail Investors Look to Leisure Hotels for High Yields

The Japan Times reports Initia Securities is marketing a love hotel fund. Initia Star group also owns Comuei Inc., a leisure hotel management company. Comuei uses the money raised from investors to acquire and renovate leisure hotels, while looking for ways to boost individual hotels' operational efficiency and sales. The emergence of these specialised funds offering high yields signals a continued search by Japanese investors for yield.

Initia Star offers dividends yielding 5-8%, with the investment maturing in three years at which time Initia Star Securities says it will either find a buyer for the hotels or set up a new fund to pay for redemptions.

Initia Star, which is now soliciting investors for a 7th fund, has raised a total of about ¥1.2 billion from the previous six funds. It has paid half-year dividends of 2.53% in the 2nd fund and 2.87% in the 3rd so far. Investors in the first fund have not received dividends yet because of a delay in the opening of a hotel the fund had invested in.

While the returns may appear attractive to retail investors compared to poor yields elsewhere; it seems that the returns offered are poor on a risk adjusted basis. The article quotes Kadokura of BRICs Research Institute saying that land prices are unlikely to fall fast enough to offset the increase in sales and the value of buildings after they are renovated. However, this assumes that the renovation works are properly budgeted and executed and attain the desired uptick in business which would re-value the hotel upwards to at least cover the cost of acquisition and renovation and other costs/fees. It also involves construction risk... as appears has impacted the first fund.

A further concern would be governance; with Initia Star owning the operator and so establishing a structure which is not aligned and subject to conflicts. From the information available, it appears that leverage is not being used; which raises further questions over the review of the reasonableness of original acquisition value; the costs and execution of the renovation project; supervision of the operator and final valuations

The leisure hotel industry itself is well known as a high yielding and counter cyclical industry in Japan with some 37,000 hotels and 3-4 trillion per year in total sales. There is a lot of room in the industry for consolidation. Comuei manages more than 20 love hotels, which makes it one of the largest companies in the industry. The other major players in the industry are -

• Kato Leisure with some 75 hotels http://www.chapel-hotel.co.jp/list.html
• Restay with 48 hotels http://www.restay.com/tenpolist.html
• Will Group in the Kanto area with 32 hotels http://www.hotelwill.com/
  
• Fine Group in the Osaka area with 28 hotels http://www.hotel-fine.co.jp/
  
• Urban Resorts Japan with 15 hotels http://www.urbanresortsjapan.jp/

The article quotes leisure hotel operating profit margins as ranging from 20 percent to 30 percent on average for older properties, while more modern hotels have margins of 40 percent to 60 percent.

While this high yielding industry has very interesting dynamics and metrics; it is not clear that the Initia Star product would be paying attractive returns on a risk adjusted basis; considering acquisition, renovation and operational risk.

Source:- http://search.japantimes.co.jp/cgi-bin/nb20100107a1.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+japantimes+(The+Japan+Times%3A+All+Stories)&utm_content=Google+Reader