March - General Data & BoJ's GDP Forecast Improves

In its semiannual outlook, the Bank of Japan predicted that the world's second biggest economy would see faster growth this fiscal year, which began April 1, and a possible end to deflation within two years. Gross domestic product will probably expand 1.8 percent this year, the central bank said, better than its previous forecast of 1.3 percent.

The report credited robust growth in overseas markets, particularly in Asia, for fueling Japanese exports and production. Stock prices and corporate profits are up. That should boost capital expenditures and eventually lead to more jobs, higher wages and stronger domestic demand.
"Given these developments, the momentum for a self-sustaining recovery in private consumption is likely to build gradually," the BOJ said.

Government data Friday showed that the country's recovery, though advancing, remains uneven. Unemployment worsened, and prices continued to fall in March. At the same time, household spending rose and factory output expanded.

Japan's seasonally adjusted jobless rate rose to 5 percent in the first increase in five months. The figure is up from 4.9 percent in February. The number of jobless totaled 3.5 million during the month, up 4.5 percent from a year earlier. Those with jobs fell 0.6 percent to 62.1 million.

Goldman Sachs economist Chiwoong Lee describes the labor market as having "no spark."
"Viewed over several months, the path is flat," he said in a note to clients. "Deterioration has eased but not given way to improvement."

That has dragged prices lower as stores scramble to attract increasingly finicky consumers.
Japan's core consumer price index, which excludes prices of fresh food, declined 1.2 percent in March from a year earlier. The result marked the 13th straight month of decline. Prices fell for a swath of goods from fuel to furniture.

Core CPI for the Tokyo area, seen as a barometer of future price trends nationwide, retreated 1.9 percent in April. In its report, the central bank said CPI may turn positive next fiscal year starting April 2011.

Preliminary data show industrial production edged up 0.3 percent in March from the previous month on growing export demand.

The government also said household spending during the month jumped a real 4.4 percent from a year earlier. Economists credit the solid figure to tax breaks and other government incentives to spur shopping. But they warn that consumption may wane once the programs end later this year.

http://news.yahoo.com/s/ap/20100430/ap_on_bi_ge/as_japan_economy_5

2009 - Jobless Rate worst since 2002

Seasonally adjusted unemployment rate rose to 5.2 percent in fiscal 2009, deteriorating for the second straight year and topping the 5 percent mark for the first time in six years as the global economic downturn put pressure on payrolls, government data showed Friday

The rate, which rose 1.1 percentage points from the previous year, was the second worst on record after 5.4 percent in fiscal 2002, the Ministry of Internal Affairs and Communications said in a preliminary report.

During the 12 months, a separate report by the labor ministry said, the ratio of job offers to job seekers was at a seasonally adjusted 0.45, down from 0.77 in fiscal 2008 to the lowest ever level. The ratio means there were 45 jobs available for every 100 job seekers.

The readings reflected a tough employment condition as companies reduced their payrolls amid the lingering effect of the global financial turmoil in 2008 and subsequent economic downturn.

But there are mixed views, given the recovery of the Japanese economy.

"After the unemployment rate peaked in July (at 5.6 percent), Japan has recovered at a relatively fast rate among developed countries," said Kyohei Morita, chief economist at Barclays Capital Japan Ltd. "That is largely due to improving global economic conditions and subsequent recoveries in Japanese exports. I think we don't need to worry about a double-dip recession."

In March alone, the jobless rate deteriorated to 5.0 percent from 4.9 percent in February due largely to sluggish conditions for manufacturers. The result, which marked the first deterioration in four months, was worse than the average market forecast of 4.9 percent in a Kyodo News survey.

The number of jobless people was 3.5 million, up 150,000 from a year earlier for the 17th consecutive month of increase, said the internal affairs ministry.


A total of 1.11 million people lost their jobs involuntarily, or due to their employers' decisions, up 50,000 on year.

The number of jobholders fell 350,000 to 62.1 million for the 26th consecutive month of decline.

The ratio of job offers to job seekers was at 0.49 in March, up from 0.47 for the third straight month of improvement and recovering to levels unseen since March last year, the Health, Labor and Welfare Ministry said.

http://www.breitbart.com/article.php?id=D9FD509O1&show_article=1

April - McDonalds Differentiates Product

McDonalds has been one of the most successful companies in Japan when it comes to riding the economic cycle - their aggressive cost cutting during the beginning of the economic difficulties was successful to raise sales. However, now there seems to be a different strategy.

McDonald's Japan has opened new shops with increased comfort and higher price settings in a bid to lessen the burden of higher operating costs.

The major fast food chain operator has renovated 13 of its McDonald's shops in central Tokyo, including those in Shibuya and Minato wards, into more spacious and relaxing restaurants with elegant designs.

Designed by a French decorator, the renovated shops feature sophisticated black and brown tones, instead of the chain's trademark red and yellow colors, and a more luxurious atmosphere created using light-emitting diode (LED) lights and new staff uniforms. The company has also installed sofas at the restaurants for more customer comfort.

Meanwhile, the company has set product prices at these shops at 10 to 50 yen more expensive than those for conventional McDonald's outlets.

Despite offering its products at low uniform prices nationwide, McDonald's has been forced to pay high rent for the stores in central urban areas.

"There has been a lack of balance (between costs and prices)," a company official said, explaining that the hamburger chain has decided to embark on the new business model to see "how far customers will accept price hikes based on improved services."

The company will decide whether to increase the number of such outlets after studying their ability to attract customers.

In Europe, there are already over 790 McDonald hamburger shops with similar upscale concepts.

http://mdn.mainichi.jp/mdnnews/business/news/20100427p2a00m0na017000c.html

March - Deflation bottoming out?

Corporate service prices fell in March at their slowest pace in more than a year, backing up BOJ Policy Board members' views that deflationary pressure is easing.

The prices that firms pay for services such as transportation and advertisements slid 1.1 percent from a year earlier, the smallest decline since November 2008, the BOJ said Monday.

The drop in service prices has moderated since August as the export-led recovery spurs corporate profits, reducing the need for them to pare costs, according to economist Azusa Kato.

BOJ policy makers are expected to predict an end to consumer price declines for the year through March 2012 when they release their outlook report Friday.

http://search.japantimes.co.jp/cgi-bin/nb20100427n5.html

IMF Raises Japan GDP Growth to 1.9%; warns on deflation

In its World Economic Outlook, the IMF raised its forecast for Japan's growth this year to 1.9 percent from 1.7 percent in January, and for Asia's developing economies to 8.7 percent from 8.4 percent.

It maintained its forecast for China at a 10 percent expansion and said the withdrawal of exceptional monetary stimulus put in place in 2009 would minimize the risks from excessively loose credit conditions.

Japan, on the other hand, may need to ease its already very-loose monetary policy further, the IMF said, warning of the potential damage deflation can do to its fragile economic recovery.

http://in.reuters.com/article/businessNews/idINIndia-47887520100421

March - Consumer sentiment up for 3rd straight month

Japan's consumer sentiment rose for the third straight month in March amid signs of improving employment conditions, the government said Monday, upgrading its monthly assessment on consumer confidence.

The index of sentiment among households made up of two or more people gained 1.1 points from February to 40.9, the Cabinet Office said. The index, however, stayed below the boom-or-bust threshold of 50.

The office upgraded its assessment for the second consecutive month, saying the country's consumer confidence "has recently shown signs of recovery." It had said the confidence became "almost flat" in February.

http://www.breitbart.com/article.php?id=D9F5UV200&show_article=1

Will Japan go Bankrupt

Japan's has a public debt mountain bigger than that of any other industrialised nation.

Public debt is expected to hit 200 percent of GDP in the next year as the government tries to spend its way out of the economic doldrums despite plummeting tax revenues and soaring welfare costs for its ageing population.

Based on fiscal 2010's nominal GDP of 475 trillion yen, Japan's debt is estimated to reach around 950 trillion yen -- or roughly 7.5 million yen per person.

Despite crawling out of a severe year-long recession in 2009, Japan's recovery remains fragile with deflation, high public debt and weak domestic demand all concerns for policymakers.

Japan was stuck in a deflationary spiral for years after its asset price bubble burst in the early 1990s, hitting corporate earnings and prompting consumers to put off purchases in the hope of further price drops.

Its huge public debt is a legacy of massive stimulus spending during the economic "lost decade" of the 1990s, as well as a series of pump-priming packages to tackle the recession which began in 2008.

Standard & Poor's in January warned that it might cut its rating on Japanese government bonds, which could raise Japan's borrowing costs amid the faltering efforts of Prime Minister Yukio Hatoyama's government to curb debt.

The system of Japanese government bonds being bought by institutions such as the huge Japan Post Bank has been key in enabling Japan to remain buoyant since its stock market crash of 1990.

"There is no problem as long as there are flows of money in the bond market," said Kumano.

"It's hard to predict when the bond market might collapse, but it would happen when the market judges that Japan's ability to finance its debt is not sustainable anymore."

"And when that happens, the yen will plummet and a capital flight from Japan's government bonds to foreign bonds will occur," he said.

Yet others argue that there is no precedent for the ratio of debt to GDP nearing 200 percent being dangerous.

Nomura Securities economist Takehide Kiuchi cited Britain's government debt in the post-war period "which reached 260 percent but (the government) didn't face a debt crisis.

"There is no answer to the question of what the critical level of debt is for a government to go bust."

Instead, the most realistic hazard brought by huge Japanese debt is prolonged deflation under a shrinking economy, say analysts.

"Regaining fiscal health needs fiscal austerity, which could weigh on economic growth," said Kiuchi.

"And when the economy is bad, people don't spend money as they are worried about their future, which in turn intensifies the deflational trend," he said.

Continued deflation could further worsen Japan's fiscal health because of less tax revenue and more stimulus spending, stirring fears over big tax hikes, which in turn weigh on demand and again reinforce deflation, analysts said.

The key to breaking the vicious cycle is drafting a feasible economic growth strategy for Japan, they said.

"If the economy grows, tax revenue increases," Kumano of Dai-ichi Life said.

Since 2001 Japan's annual growth rate has peaked at 2.7 percent in 2004.

The economy shrank 1.2 percent in 2008 and 5.2 percent last year.

Prime Minister Yukio Hatoyama's centre-left government has pledged to announce details of its new strategy in June, which aims to lift annual growth to two percent by focusing on the environment, health, tourism and improved ties with the rest of Asia.

http://news.yahoo.com/s/afp/20100411/ts_afp/japaneconomydebtfocus_20100411061941