July - Bad Month and Poor Outlook

Two leading economy watchers have struggled to name a single positive in the nation's current predicament.

Tokyo University's Professor Takatoshi Ito, who had just spent the best part of an hour dissecting the country's economic missteps, eventually plumped for the increasingly entrepreneurial attitude of Japan's women as a sole cause for some optimism.

Nomura Institute of Capital Markets Research senior fellow Chi Hung Kwan had the advantage of speaking second at the forum, where both men were challenged to find a single ray of economic sunlight in Japan.

After an agonising pause, he eventually mumbled something about technology to get himself off the hook.

They were speaking in Tokyo after the Nikkei 225 index crashed through 9000 this week, its lowest level since May last year.

Japanese stocks have been falling in response to the strength of the yen, which is choking export earnings.

The malaise is as bad outside the listed sector, with only about 30 per cent of all companies in Japan booking a profit in the most recent financial year, but tax "minimisation" methods are thought to play a role in the result.

On preliminary figures, Japan's economy grew by an anaemic 0.1 per cent between April and June, snuffing out hopes of a nascent recovery and surrendering its No. 2 size crown to China.

Calls for intervention to devalue the currency grew this week, with Sumitomo Mitsui Banking Corporation president and Japanese Bankers Association chairman Masayuki Oku calling for the government to step into the currency market to bring down the yen's value against the US dollar.

Imagine his groans when the government announced on Monday that Prime Minister Naoto Kan and Bank of Japan governor Masaaki Shirakawa had spoken by phone that day, but did not touch on intervention.

Despite the economic house falling down around their ears, neither Mr Kan nor Mr Shirakawa deemed a face-to-face meeting necessary. Although the strength of the yen, which hit a 15-year high of Y84.72 against the US dollar this month, is certainly hurting Japan's economy and delaying an end to deflation, there are more systemic and long-term problems in Japan, both Professor Ito and Dr Kwan argued during Tuesday's talk about China usurping Japan's position as the world's second largest economy.

He believes China will surge past the US by the mid 2020s as growing domestic demand joins high investment levels in fuelling growth.

"China has become more important, not just as the workshop of the world, but the market of the world," Dr Kwan told the Foreign Correspondent's Club of Japan.

He said China's economy showed many of the characteristics of Japan's economy 40 years ago, as it was about to enter its remarkable bubble period when it, too, threatened to overtake the US in terms of GDP.

He said electricity consumption, life expectancy and infant mortality figures were remarkably close when comparing the two.

Although China's per capita GDP was a 10th that of Japan's, it was on the cusp of a huge expansion before demographics would bring its growth down to 5 per cent in the 2030s, he said.

But for the current decade, Dr Kwan is still predicting growth of 8 per cent in China, tapering to 6 per cent in the 2020s.

The silver lining for Japan, which has forged close economic and diplomatic ties with China, is that its neighbour's growth is propping up Japan's economy.

Dr Kwan said he believed the two economies were complementary, China supplying cheap production and Japan technology and capital.

The only real competition in manufacturing was in low-tech industries where Japanese firms were having to be propped up anyway, he said. Professor Ito said the pain of Japan's two "lost decades" had made its workers and managers too risk-averse and inward looking, adding that its youth, in particular, had become insular and reluctant to leave their home cities, let alone their country, to pursue opportunities.

"Through these decades of stagnation Japan's people have lost their confidence and don't know what to do," he said.

"In that state of mind no one wants to take risks."

Professor Ito blamed political turmoil for the slump, along with "institutional" constraints, or archaic workplace traditions in Japanese companies that prevented hiring the best people regardless of age or gender.

His recipe for reviving Japan includes concluding a free-trade agreement with China to bring some of its manufacturing sector home after dismantling tariff barriers and reforming the country's often-criticised education system.

"If we solve these problems maybe we have the chance to avoid a third lost decade, but I have to say the prospect is not good," Professor Ito said.

http://www.theaustralian.com.au/business/economists-lost-for-kind-words-as-japans-decline-continues/story-e6frg8zx-1225910113673

July - Real Estate Prices Fall in fewer spots

Land prices dropped in fewer locations in July compared with three months earlier, reflecting a nascent pickup in demand for homes, according to a quarterly government survey.

Land prices as of July 1 were down in 105, or about 70 percent, of 42 surveyed residential and 108 commercial areas in major cities, a decrease from 123, or 82 percent, on April 1, the land ministry said.

Prices rose in four locations, up from two in the previous survey, and leveled off in 41 locations, up from 25, the ministry said.

The four locations where prices jumped were two residential areas in Chuo Ward, Tokyo, and Kawasaki, and two commercial areas in Kawasaki and the city of Fukuoka. The 41 locations with level prices included 22 residential areas.

A land ministry official said land price falls have slowed as lower condominium prices and tax breaks for mortgage loans have stimulated demand for homes.

http://search.japantimes.co.jp/cgi-bin/nb20100826a5.html

July - Export Growth Slows for 5th Month

apan's export growth slowed for a fifth month in July, adding to risks in an economy already under threat by the yen's surge to a 15-year high against the US dollar.

Overseas shipments advanced 23.5 per cent in July from a year earlier, less than June's 27.7 per cent, the Finance Ministry said today in Tokyo. The median estimate of 18 economists surveyed by Bloomberg was for 21.8 per cent. From a month earlier, exports fell 1.4 per cent.

Today's report underscores that Japan's export-fueled rebound is losing steam after gross domestic product grew at the slowest pace this year in the second quarter. The yen's advance is also threatening earnings of companies from Toyota Motor to Sony., putting pressure on policy makers to curb the currency's 10 per cent appreciation this year against the US dollar.

''We look for a gradual slowdown in export growth ahead as exports to Asia appear to have peaked,'' Takehiro Sato, chief Japan economist at Morgan Stanley MUFG Securities in Tokyo, said before the report. An economic slowdown in Europe and the yen are also risks, he said.

The yen traded at 84.19 per US dollar at 9 a.m. in Tokyo from 84.23 before the report. It reached 83.60 yesterday, the highest since 1995. The Nikkei 225 Stock Average opened 1 per cent lower, after tumbling to its lowest close since May 2009 yesterday.

Japan's currency has climbed against all of its 16 major counterparts in the past month as concern about the global recovery boosted demand for the currency as a refuge.

Policy makers have failed to formulate a response to the market volatility, with Prime Minister Naoto Kan only asking ministers to come up with fresh proposals to support the economy after an August 16 report showed growth slowed to an annualized 0.4 per cent in the April to June period, the weakest pace in three quarters. He spoke to Bank of Japan Governor Masaaki Shirakawa this week, without discussing intervention in currency markets, which Japan has refrained from doing for six years.

''The root cause of currency strength in Japan is deflation,'' said Jesper Koll, Tokyo-based head of equity research at JPMorgan Chase & Co. ''Clearly there is no one magic bullet, but it needs to be a concerted and coordinated policy effort between fiscal authorities, regulatory authorities as well as monetary authorities.''

One-sided moves

Finance Minister Yoshihiko Noda said yesterday that recent currency movements have ''clearly'' been one-sided, and his remarks failed to stem the gains. The Bank of Japan is considering further monetary easing, the Nikkei newspaper said today, without citing anyone.

Every one-yen gain in the Japanese currency against the dollar reduces Toyota's annual operating profit by 30 billion yen, according to the world's biggest carmaker. Sony, which generates more than 70 per cent of revenue outside of Japan, says it loses about 2 billion yen of annual operating profit for each yen gain against the US currency.

Slower expansions in China and the US, Japan's biggest markets, may also be a drag on the recovery. Manufacturing growth in the two countries has been cooling, pointing to softer export demand, analyst Naoki Iizuka said.

The manufacturing figures ''suggest that the pace of Japanese export growth is likely to slow in the months ahead,'' said Iizuka, a senior economist at Mizuho Securities Co. in Tokyo. ''We expect the slowdown in Japanese export growth to be clearly visible'' in the fourth quarter, he said.

http://www.smh.com.au/business/world-business/japans-export-growth-slow-on-waning-global-demand-20100825-13r3q.html

Women Struggling in Recession

TOKYO - Fifty-one year old Miharu juggles two part-time jobs at a law firm and at a design company, but is barely able to make ends meet in one of the world's richest economies.

In stark contrast to Miharu, who works as an office assistant in her two jobs, is her friend Satoko Kobayashi. A full-time dental assistant and single, the 46-year-old takes home a stable wage and has two annual bonuses that pay for a comfortable lifestyle, one that includes foreign trips and leisure time with her friends.

Divorced a decade ago, Miharu, who asked that her last name not be used, describes her future as bleak.

"I am grateful for having work at my age. But my take home [pay] barely covers my monthly expenses. I dream of quitting the daily grind," she says. On average, her monthly earnings reach US$1,800, two-thirds of which goes to rent, utilities and food.

Miharu, who has a degree in English, quit her job in a trading company after she got married three decades ago and had a child. But when she started looking for work after her separation, she realized how tough life returning to a professional career can be for women of her age or older.

The stories of Miharu and Kobayashi show not only how Japan's economic recession has taken a harder toll on women, but has also helped create a social gap between different groups of working women, says Professor Toshiaki Tachibanaki, author of Greater Choice, Greater Inequality, an analysis of the Japanese economy from the perspective of women.

"Traditionally, older women have always had problems finding stable jobs after they quit once. But with the recession the situation is worse," he said. "With companies cutting costs to meet global competition, women, who also face traditional gender discrimination, are the ones who are hurt most."

In his chapter on women and work, Tachibanaki shows how Japan's male-dominated labor culture - consisting of working hours and regular transfers from head offices to other locations - has squeezed out many opportunities for women to hold on to their jobs after getting married and having children.

When coupled with the current unemployment rate of 5.3% - and 4.9% for women - this tradition translates into an environment that is stacked against stable professional careers for women, Tachibanaki said.

His research shows that the women who stay in the work force are often self-employed, single with full-time careers like Kobayashi, or have rich spouses.

"The others [simply] struggle to survive," he explained at a press briefing.

Labor statistics illustrate this trend. New figures show that women between 20 and 64 years old comprise 13.39% of the working poor in Japan, or far higher than the percentage of men at 9.85%. The working poor are those who earn less than $11,000 annually.

At the same time, women make up the highest number in the expanding market of part-time employees. Women made up 62% of 610,000 part-timers in 2009, according to the Health, Welfare and Labor Ministry. They are usually employed at call centers, office clerks, and work as health care workers or sales representatives.

Part-timers are hired on annual or six-month contracts by companies or are sent to work by agencies under the labor dispatch law. They are paid on an hourly basis, but women are sometimes paid up to 30% less than their male counterparts.

Usually, their employment contracts do not have paid vacation or allowances to support pensions.

In fact, the Tokyo Women's Union fields around 25 inquiries a month, of which 80% are from women in their thirties and forties who report having lost contract jobs because of restructuring efforts in companies.

"Older women are the first to go in a company," said Toyomi Fujii, one of the two advisors in the union. "Their work is considered disposable by male bosses."

A major grouse among Japan's working women is the dispatch temporary work system. Because the job contracts under this system are between the agency and company - not the employees themselves - this often leads to unfair working conditions, Fujii said. It is common to see younger and attractive women hired over older women after their interviews, Fujii said.

These trends are picking up at a time when more married women are seeking jobs, in contrast to two decades ago when more than 70% of Japanese women quit work after the birth of their first child.

The ratio of married women with jobs today is much higher at 48.9% as of 2008, government data say, as women fear that their husbands might lose their jobs.

"Our cases indicate a pattern where women are struggling to survive economically," Fujii said, adding that this trend is likely to persist and widen the gap between those who have stable careers and those stuck in part-time or contractual work.

"Part-timers complain of mental depression, constant sexual harassment from male bosses and having to put in long hours to make enough money. Their lives are poor compared to career women," she said.

Women, both full-time and part-time, comprise 41% of the Japanese workforce of 66.5 million recorded in 2008. Women between 30 to 34 years of age make up more than 60% of employed women, compared to less than 50% a decade ago.

Government data in July showed that only 52 jobs are available for every 100 job seekers.


http://www.atimes.com/atimes/Japan/LH19Dh01.html

Back into Recession?

Japan's economy appears to be at turning point. Real gross domestic product for the April-June quarter grew an annualized 0.4 percent from the previous quarter — much lower than the 4.4 percent for January-March and the 4.1 percent for the October-December quarter. The value of the yen to the U.S. dollar remains near the high level that prevailed 15 years ago, hurting prospects for export-oriented firms.

"Eco-car" subsidies and "eco-point" incentives for purchase of energy-saving products, which helped underpin consumer spending, will end in September and December, respectively. The government and the Bank of Japan must take fiscal and monetary measures to prevent another dip in the Japanese economy.

A Kyodo News survey of 107 major firms — the results of which were released Aug. 16 — shows that 80 percent of them expect the economy
to deteriorate in the October-December quarter or in the first quarter of 2011.

Economic activities in the April-June quarter were supported by exports, which increased 5.9 percent from the previous quarter. But prospects for economic recovery in the U.S. and Europe are weak. Even the Chinese economy is slowing down. Exports to the U.S., Europe and emerging economies are likely to become weak.

Consumer spending, which accounts for some 60 percent of GDP, only grew 0.03 percent. The end of "eco-car" subsidies and "eco-point" incentives for other products will cause consumer spending to drop, thus making makers cut production. Although capital spending increased by 0.5 percent, the Kyodo News survey hints that enterprises may become reluctant to increase capital spending later on because of pessimistic prospects.

Nominal GDP fell an annualized 3.7 percent, the first drop in three quarters, and the GDP deflator dropped 1.0 percent, compared with a 0.3 percent rise in the previous quarter, indicating that Japan is in serious deflation. The unemployment rate was at 5.3 percent in June — worsening for four straight months. The problem is that the government is slow in response and the BOJ does not appear to have a sense of crisis. They must carry out timely measures that are effective.

Consumer Goods Companies Continue to Roll Out Lower Prices

Each week, it seems, brings news of another Japanese company rolling out a low-end product line. Lately, those moving downmarket are getting smarter about how they do it.

The step-down reflects the harsh reality of Japan's economy for most consumer-goods companies. Earnings are being squeezed by thriftier shoppers and falling prices overall.

Last week, cosmetics maker Shiseido said it too will market a line of lower-end products. The company's earnings growth is still robust-operating profit rose 57% last quarter-but it's losing market share to rivals with cheaper products.

http://online.wsj.com/article/SB10001424052748703748904575410801372024486.html

Okura Buys JAL Hotels for Y6 billion

Hotel Okura Co. announced Friday that it has decided to purchase a majority stake in JAL Hotels Co., a hotel operating unit of struggling Japan Airlines Corp.

Hotel Okura, based in Tokyo, said it will acquire 79.6 percent of the shares in JAL Hotels in late September. It said it will basically keep on 980 employees of JAL Hotels.

It did not disclose the price for the acquisition but sources familiar with the matter put it at roughly 6 billion yen.

The Hotel Okura group runs 16 hotels in Japan and five overseas, according to the company's website. JAL Hotels operates 39 hotels in Japan and 18 abroad under the Nikko and JALCITY brand names.

http://www.breitbart.com/article.php?id=D9HE02GG0&show_article=1