Interesting comments on JLH and its valuation from its analyst Hardman and Co.
http://hardmanandco.com/Research/JPLH_Dec2010.pdf
It is very interesting that Hardman believes that Japan Leisure Hotel's hotels should be valued in line with international hotel chain valuations; when it is common knowledge in Japan that Leisure Hotels or Love Hotels trade at much bigger caprates compared to their traditional hotel cousins in Japan
In the current market climate in Japan; combined with lack of financing, JLH's poor performance (most recently posting a loss in H1 2010) and also the upcoming regulatory change in the LH industry http://japanrealestatecommentary.blogspot.com/2010/05/japan-leisure-hotels-law-to-change.html
it is difficult to see any buyer emerging for the Bonita hotel chain
Tuesday, December 28, 2010
Japan Leisure Hotels - Board Statement
20 December 2010
Japan Leisure Hotels Limited
("JPLH" or the "Company")
Potential Offer for the Company
Funds managed by DKR Oasis Management Company, LP ("DKR Oasis") own approximately 87.6% of the Company's issued share capital. DKR Oasis recently informed the Board that it wanted to exit its investment in the Company and was taking active steps to achieve this end. There are a number of ways such an exit could be structured including an offer being made for its shares or a sale of the Company's assets.
The Takeover Panel has ruled that an offer for the Company will be subject to the City Code on Takeovers and Mergers (the "Code"). If an offer is made under the Code, DKR Oasis is in a position to deliver control of the Company by selling its shares (in which event the buyer will be required to make a cash offer on no less favourable terms to the remaining minority shareholders) or by providing an irrevocable undertaking to accept a takeover offer made for the Company's shares.
Under the AIM Rules, the Company cannot liquidate its assets without first obtaining the approval of shareholders in general meeting. At any such meeting, DKR Oasis would be in a position to vote through the required resolution. Although DKR Oasis does not currently control the Board, and so cannot force the Board to enter into contracts to liquidate its investments in the Bonita hotel portfolio, DKR Oasis can under Guernsey law gain control of the Board or requisition shareholder meetings to achieve its ends should it wish to do so.
The Board has recently been working with DKR Oasis to help maximise any sale proceeds for the benefit of all shareholders but it is not anticipated that the proceeds of any offer for the Company will deliver a premium to the current share price and it may even result in a discount.. Also, a sale of the assets to realise value in the short term is likely to be at a substantial discount to the previously announced net asset value per ordinary share which was based on the value of the assets on a going concern basis..
The Board believes that given additional time it might be possible to deliver greater value to shareholders than has been offered to date and is in discussions with DKR Oasis to explore whether it would be prepared to exit its investment in the Company over a longer timeframe.
The Board is willing to consider proposals from any new party interested in considering an offer for the Company or its assets. The asset manager New Perspective has indicated its willingness to continue as manager or alternatively to resign in order to facilitate any preferred exit structure
A further announcement updating shareholders will be made when appropriate. There can be no certainty that any offer will be made nor as to the terms on which any offer may be made.
In accordance with Rule 2.10 of the Code, the Company confirms that, as at 20 December 2010, it had 44,100,002 ordinary shares in issue. The International Securities Identification Number (ISIN) reference for these securities is GG00B28QMS50 and the SEDOL code is B28QMS5.
In accordance with Rule 19.11 of the Code, a copy of this announcement will be published on the Company's website: www.japanleisurehotels.com.
http://www.investegate.co.uk/article.aspx?id=201012201506323044Y
Japan Leisure Hotels Limited
("JPLH" or the "Company")
Potential Offer for the Company
Funds managed by DKR Oasis Management Company, LP ("DKR Oasis") own approximately 87.6% of the Company's issued share capital. DKR Oasis recently informed the Board that it wanted to exit its investment in the Company and was taking active steps to achieve this end. There are a number of ways such an exit could be structured including an offer being made for its shares or a sale of the Company's assets.
The Takeover Panel has ruled that an offer for the Company will be subject to the City Code on Takeovers and Mergers (the "Code"). If an offer is made under the Code, DKR Oasis is in a position to deliver control of the Company by selling its shares (in which event the buyer will be required to make a cash offer on no less favourable terms to the remaining minority shareholders) or by providing an irrevocable undertaking to accept a takeover offer made for the Company's shares.
Under the AIM Rules, the Company cannot liquidate its assets without first obtaining the approval of shareholders in general meeting. At any such meeting, DKR Oasis would be in a position to vote through the required resolution. Although DKR Oasis does not currently control the Board, and so cannot force the Board to enter into contracts to liquidate its investments in the Bonita hotel portfolio, DKR Oasis can under Guernsey law gain control of the Board or requisition shareholder meetings to achieve its ends should it wish to do so.
The Board has recently been working with DKR Oasis to help maximise any sale proceeds for the benefit of all shareholders but it is not anticipated that the proceeds of any offer for the Company will deliver a premium to the current share price and it may even result in a discount.. Also, a sale of the assets to realise value in the short term is likely to be at a substantial discount to the previously announced net asset value per ordinary share which was based on the value of the assets on a going concern basis..
The Board believes that given additional time it might be possible to deliver greater value to shareholders than has been offered to date and is in discussions with DKR Oasis to explore whether it would be prepared to exit its investment in the Company over a longer timeframe.
The Board is willing to consider proposals from any new party interested in considering an offer for the Company or its assets. The asset manager New Perspective has indicated its willingness to continue as manager or alternatively to resign in order to facilitate any preferred exit structure
A further announcement updating shareholders will be made when appropriate. There can be no certainty that any offer will be made nor as to the terms on which any offer may be made.
In accordance with Rule 2.10 of the Code, the Company confirms that, as at 20 December 2010, it had 44,100,002 ordinary shares in issue. The International Securities Identification Number (ISIN) reference for these securities is GG00B28QMS50 and the SEDOL code is B28QMS5.
In accordance with Rule 19.11 of the Code, a copy of this announcement will be published on the Company's website: www.japanleisurehotels.com.
http://www.investegate.co.uk/article.aspx?id=201012201506323044Y
Japan Leisure Hotels - Main Investor to Exit
Following the half year loss posted by Japan Leisure Hotels in H1 2010; it has been announced by the Board of JLH that its main investors, DKR Oasis, is looking to exit either by selling its shares in a TOB under the Takeovers Code or by Japan Leisure Hotels selling its hotels. According to the Financial Times, this could mean that Japan Leisure Hotels will be listed from AIM.
the FT says -
One of the more colourful companies on Aim looks set to join the hundreds that have left the junior market over the past two years.
Japan Leisure Hotels operates a portfolio of so-called love hotels, one of those Japanese idiosyncrasies that make sense to the country’s inhabitants.
They act as a refuge for married couples who live with family, philanderers and those – often backpacking foreigners – looking for a cheap room for the night.
Japan Leisure’s biggest shareholder is DKR Oasis Management, which has an 87.6 per cent stake. It has told the board it wants to realise its investment. Japan Leisure said it did not expect the proceeds of any offer to “deliver a premium to the current share price, and it may even result in a discount”.
In the short term, said the company, a sale was likely to be at a substantial discount to the previously announced net asset value per share of 77p, based on the value of the assets on a going concern basis.
Japan Leisure tried to raise £100m when it listed in 2007, convinced that it would be able to consolidate the fragmented Japanese industry. In the event it had to settle for £3m at 50p a share, leaving DKR Oasis with its large stake. Another attempt at a £50m fundraising in 2009 failed.
The shares fell 2½p to 23p on Tuesday, giving a market capitalisation of £10m.
The Takeover Panel has ruled that any offer will be subject to the City Code, so any buyer would have to offer similar terms to minority shareholders. The board is willing to consider proposals from any new party for either the company or its assets.
The board believes that given additional time it might be possible to deliver greater value to shareholders than has been offered to date, and it is talking to DKR Oasis to see if it “would be prepared to exit its investment over a longer time frame”.
So far this year 178 companies have delisted from Aim, against 293 departures in 2009. The total number of companies on the junior market fell below 1,200 at the end of November, the lowest level since 2004.
http://www.ft.com/cms/s/0/15a512b6-0d2e-11e0-82ff-00144feabdc0.html#axzz19RwfLEcf
the FT says -
One of the more colourful companies on Aim looks set to join the hundreds that have left the junior market over the past two years.
Japan Leisure Hotels operates a portfolio of so-called love hotels, one of those Japanese idiosyncrasies that make sense to the country’s inhabitants.
They act as a refuge for married couples who live with family, philanderers and those – often backpacking foreigners – looking for a cheap room for the night.
Japan Leisure’s biggest shareholder is DKR Oasis Management, which has an 87.6 per cent stake. It has told the board it wants to realise its investment. Japan Leisure said it did not expect the proceeds of any offer to “deliver a premium to the current share price, and it may even result in a discount”.
In the short term, said the company, a sale was likely to be at a substantial discount to the previously announced net asset value per share of 77p, based on the value of the assets on a going concern basis.
Japan Leisure tried to raise £100m when it listed in 2007, convinced that it would be able to consolidate the fragmented Japanese industry. In the event it had to settle for £3m at 50p a share, leaving DKR Oasis with its large stake. Another attempt at a £50m fundraising in 2009 failed.
The shares fell 2½p to 23p on Tuesday, giving a market capitalisation of £10m.
The Takeover Panel has ruled that any offer will be subject to the City Code, so any buyer would have to offer similar terms to minority shareholders. The board is willing to consider proposals from any new party for either the company or its assets.
The board believes that given additional time it might be possible to deliver greater value to shareholders than has been offered to date, and it is talking to DKR Oasis to see if it “would be prepared to exit its investment over a longer time frame”.
So far this year 178 companies have delisted from Aim, against 293 departures in 2009. The total number of companies on the junior market fell below 1,200 at the end of November, the lowest level since 2004.
http://www.ft.com/cms/s/0/15a512b6-0d2e-11e0-82ff-00144feabdc0.html#axzz19RwfLEcf
Sunday, November 28, 2010
October - Export Growth slows for 8th Straight Month
Japan's annual export growth slowed
for an eighth straight month in October due to a stronger yen,
and a central banker said downside risks to the Japanese economy
outweigh upside risks due to uncertainties abroad.
Slowing exports bode ill for an economy bracing for a
possible contraction in the final quarter of this year as a
temporary boost from stimulus-driven consumption tapers off.
Overseas demand for Japanese goods is likely to pick up again
next year and help Japan avoid recession, economists say, but
China's monetary policy tightening, European sovereign debt woes
and developments in the U.S. economy pose risks to the outlook.
Bank of Japan (BOJ) board member Seiji Nakamura said exports
could recover next year, but he warned of growing risks facing
the U.S. and European economies and said he remained on alert for
a possible spike in the yen stemming from problems in major
economies.
Nakamura sounded less upbeat than Governor Masaaki Shirakawa,
who has described risks to Japan's economy as evenly balanced,
suggesting Nakamura would not dissent if the BOJ were to boost
its 5 trillion yen ($59.87 billion) asset-buying scheme in
response to a worsening in the economy.
"Overall, downside risks (to the Japanese economy) seem
somewhat stronger than upside risks," Nakamura told a news
conference, citing strong uncertainties about the outlook for the
U.S. economy.
"There are worries ... sovereign debt problems in peripheral
Europe could affect the European economy by triggering spikes in
bond yields and worsening sentiment," he said in a speech.
"We tend to think that the economy could rebound as early as
January-March, because leading indicators for Japanese exports,
such as U.S. new orders, are stabilising," said Satoru Ogasawara,
an economist at Credit Suisse in Tokyo.
"If Nakamura sees further downside risks, it could mean he's
worried new orders overseas will start falling, and that would be
a risk to our economic forecasts."
One of the BOJ's two deputy governors, Hirohide Yamaguchi,
also said this month that the central bank needs to be mindful of
downside risks to Japan's economy.
Exports rose 7.8 percent in October from a year earlier, the
finance ministry said on Thursday, less than the median forecast
for a 10.7 percent rise. [JPEXPY=ECI]
Financial markets shrugged off the data. The Nikkei average
.N225 edged toward a five-month high on demand from overseas
investors.
Shipments to the United States in October rose 4.7 percent
from a year earlier, slower than the previous month's 10.4
percent, while exports to Europe fell an annual 1.9 percent, the
first decline in almost a year as worries about Ireland's debt
burden pushed bond yields higher. [ID:nLDE6AM25A]
In one positive sign, exports to China, the biggest
destination for Japanese goods, rose 17.5 percent from a year
earlier, faster than the 10.2 percent annual rise in September
due to higher shipments of metal-processing machines.
Data on jobless benefit claims and consumer spending suggests
the U.S. economic recovery is gaining strength, but a high
unemployment rate, weakness in the housing market and a reduction
in household debt cloud the outlook. [ID:nN24211131]
The BOJ eased monetary policy last month by pledging to keep
rates in a range from zero to 0.1 percent until the end of
deflation is in sight and announcing a plan to buy assets ranging
from government bonds to corporate debt.
The size of the 5 trillion yen asset buying pool now
effectively serves as a gauge of the BOJ's monetary easing.
Nakamura was cautious about setting the policy rate at zero,
saying it could reduce commercial banks' incentive to lend and
harm the money market.
Shirakawa has said topping up the asset buying plan is a
clear option if the looming economic slowdown proves worse than
expected. But the yen's retreat from 15-year highs scaled early
this month makes any radical near-term action unlikely.
[ID:nL3E6MI0E3]
Japan's economy grew a solid 0.9 percent in the third quarter
as expiring government incentives gave consumption a last-minute
boost before a long-anticipated slowdown.
http://www.reuters.com/article/idUSTOE6AN06020101125
for an eighth straight month in October due to a stronger yen,
and a central banker said downside risks to the Japanese economy
outweigh upside risks due to uncertainties abroad.
Slowing exports bode ill for an economy bracing for a
possible contraction in the final quarter of this year as a
temporary boost from stimulus-driven consumption tapers off.
Overseas demand for Japanese goods is likely to pick up again
next year and help Japan avoid recession, economists say, but
China's monetary policy tightening, European sovereign debt woes
and developments in the U.S. economy pose risks to the outlook.
Bank of Japan (BOJ) board member Seiji Nakamura said exports
could recover next year, but he warned of growing risks facing
the U.S. and European economies and said he remained on alert for
a possible spike in the yen stemming from problems in major
economies.
Nakamura sounded less upbeat than Governor Masaaki Shirakawa,
who has described risks to Japan's economy as evenly balanced,
suggesting Nakamura would not dissent if the BOJ were to boost
its 5 trillion yen ($59.87 billion) asset-buying scheme in
response to a worsening in the economy.
"Overall, downside risks (to the Japanese economy) seem
somewhat stronger than upside risks," Nakamura told a news
conference, citing strong uncertainties about the outlook for the
U.S. economy.
"There are worries ... sovereign debt problems in peripheral
Europe could affect the European economy by triggering spikes in
bond yields and worsening sentiment," he said in a speech.
"We tend to think that the economy could rebound as early as
January-March, because leading indicators for Japanese exports,
such as U.S. new orders, are stabilising," said Satoru Ogasawara,
an economist at Credit Suisse in Tokyo.
"If Nakamura sees further downside risks, it could mean he's
worried new orders overseas will start falling, and that would be
a risk to our economic forecasts."
One of the BOJ's two deputy governors, Hirohide Yamaguchi,
also said this month that the central bank needs to be mindful of
downside risks to Japan's economy.
Exports rose 7.8 percent in October from a year earlier, the
finance ministry said on Thursday, less than the median forecast
for a 10.7 percent rise. [JPEXPY=ECI]
Financial markets shrugged off the data. The Nikkei average
.N225 edged toward a five-month high on demand from overseas
investors.
Shipments to the United States in October rose 4.7 percent
from a year earlier, slower than the previous month's 10.4
percent, while exports to Europe fell an annual 1.9 percent, the
first decline in almost a year as worries about Ireland's debt
burden pushed bond yields higher. [ID:nLDE6AM25A]
In one positive sign, exports to China, the biggest
destination for Japanese goods, rose 17.5 percent from a year
earlier, faster than the 10.2 percent annual rise in September
due to higher shipments of metal-processing machines.
Data on jobless benefit claims and consumer spending suggests
the U.S. economic recovery is gaining strength, but a high
unemployment rate, weakness in the housing market and a reduction
in household debt cloud the outlook. [ID:nN24211131]
The BOJ eased monetary policy last month by pledging to keep
rates in a range from zero to 0.1 percent until the end of
deflation is in sight and announcing a plan to buy assets ranging
from government bonds to corporate debt.
The size of the 5 trillion yen asset buying pool now
effectively serves as a gauge of the BOJ's monetary easing.
Nakamura was cautious about setting the policy rate at zero,
saying it could reduce commercial banks' incentive to lend and
harm the money market.
Shirakawa has said topping up the asset buying plan is a
clear option if the looming economic slowdown proves worse than
expected. But the yen's retreat from 15-year highs scaled early
this month makes any radical near-term action unlikely.
[ID:nL3E6MI0E3]
Japan's economy grew a solid 0.9 percent in the third quarter
as expiring government incentives gave consumption a last-minute
boost before a long-anticipated slowdown.
http://www.reuters.com/article/idUSTOE6AN06020101125
Japanese men working shorter hours: survey
"Workaholic" may no longer be the most appropriate label for Japanese businessmen.
A survey has shown that Japanese men spend less time at work than they once did amid an economic slowdown and use their leisure time surfing the Internet at home rather than going out to drink, a news report said Saturday.
They now work eight hours and 39 minutes a day on average, around one hour less than they did in 2000, Jiji Press said, reporting the results of a survey covering 400 male corporate employees in their 20s to 50s.
In their private time, workers spent a record seven hours and 59 minutes a week on the Internet or catching up with email, the survey showed.
The previous survey in 2000 showed they spent seven hours and 52 minutes watching television -- then the top leisure-time activity.
Drinking at coffee shops or bars now took up just two hours and 25 minutes a week, down from a high of seven hours and 52 minutes in 1990, it said.
http://news.yahoo.com/s/afp/20101127/lf_afp/japanlifestylejobs_20101127121836
A survey has shown that Japanese men spend less time at work than they once did amid an economic slowdown and use their leisure time surfing the Internet at home rather than going out to drink, a news report said Saturday.
They now work eight hours and 39 minutes a day on average, around one hour less than they did in 2000, Jiji Press said, reporting the results of a survey covering 400 male corporate employees in their 20s to 50s.
In their private time, workers spent a record seven hours and 59 minutes a week on the Internet or catching up with email, the survey showed.
The previous survey in 2000 showed they spent seven hours and 52 minutes watching television -- then the top leisure-time activity.
Drinking at coffee shops or bars now took up just two hours and 25 minutes a week, down from a high of seven hours and 52 minutes in 1990, it said.
http://news.yahoo.com/s/afp/20101127/lf_afp/japanlifestylejobs_20101127121836
Q3 - Land Values decline at fewer key sites
Land values declined at fewer prime sites for the fourth consecutive quarter as buyers returned to buy condominiums amid incentives including housing-related tax breaks, a quarterly government survey showed Friday.
Values fell at 87 of 150 prime locations nationwide, according to a survey by the Land, Infrastructure, Transport and Tourism Ministry. Values fell at 58 percent of monitored sites as of Oct. 1 from July 1, it said. That compares with 70 percent three months earlier, 82 percent in the quarter before that, and 96 percent in the prior quarter.
The declines in land values slowed as the drop in prices of condominiums attracted buyers and as those in the major commercial areas reversed their slide after rent adjustments, the report said. The survey consists of the 150 most expensive locations taken from the government's annual land survey, reflecting the latest movement in land value, according to the government.
"Prices in residential sites are starting to stabilize and some are signaling increases, while it may take a bit more time for the commercial sites to see a real recovery," said Yutaka Iwaki, a director of Land Price Research Division, said at a briefing in Tokyo.
Sites that saw prices that remain little changed increased by 20, while those where the values fell declined by 18, the report showed. Prices at 79 percent of residential sites surveyed rose or were unchanged, compared with 57 percent three months earlier, the survey said.
http://search.japantimes.co.jp/cgi-bin/nb20101127n3.html
Values fell at 87 of 150 prime locations nationwide, according to a survey by the Land, Infrastructure, Transport and Tourism Ministry. Values fell at 58 percent of monitored sites as of Oct. 1 from July 1, it said. That compares with 70 percent three months earlier, 82 percent in the quarter before that, and 96 percent in the prior quarter.
The declines in land values slowed as the drop in prices of condominiums attracted buyers and as those in the major commercial areas reversed their slide after rent adjustments, the report said. The survey consists of the 150 most expensive locations taken from the government's annual land survey, reflecting the latest movement in land value, according to the government.
"Prices in residential sites are starting to stabilize and some are signaling increases, while it may take a bit more time for the commercial sites to see a real recovery," said Yutaka Iwaki, a director of Land Price Research Division, said at a briefing in Tokyo.
Sites that saw prices that remain little changed increased by 20, while those where the values fell declined by 18, the report showed. Prices at 79 percent of residential sites surveyed rose or were unchanged, compared with 57 percent three months earlier, the survey said.
http://search.japantimes.co.jp/cgi-bin/nb20101127n3.html
October - Consumer Prices Slide for 20th Straight Month
Japan's consumer prices slid for the 20th straight month in October, data showed, underscoring fears of a delayed exit from crippling deflation as economic recovery loses steam.
While the pace of the year-on-year decline eased compared to previous months, analysts on Friday said this was due to one-off effects such as a hike in cigarette prices after a tax rise that month, with weak domestic demand still haunting the economy.
Japan's core consumer price index fell 0.6 percent in October year-on-year, compared to a 1.1 percent fall in September, as the deflation-mired economy laboured under a strong yen, which tends to harm its exporters.
Japan has been stuck in a deflationary spiral since its asset bubble burst in the early 1990s, and consumer spending has never fully recovered to become a major driver of growth.
A stronger yen exacerbates price declines as it makes imports cheaper.
"Even though the pace of the fall in prices slowed by 0.5 percentage points from the previous month, this was not due to an improved demand-supply balance", said Atsushi Matsumoto, economist at Mizuho Research Institute.
Data issued Thursday showed Japanese exports grew at their slowest pace of the year in October -- further evidence that the country's trade-reliant recovery is ebbing.
"Weak growth in exports could worsen corporate earnings, thus lowering household incomes to dampen consumer demand," said Matsumoto.
The latest price data "boils down to one-off effects" such as the tobacco price hike, he said. "Exit from deflation will be slower than previously thought."
Continued price falls undermine Prime Minister Naoto Kan's efforts to overcome deflation in the next fiscal year and work towards reining in the world's biggest public debt, which amounts to 200 percent of GDP, analysts said.
Deflation, a general fall in prices, has remained a challenge for Japan as it cuts into corporate profits and leads consumers to delay purchases while awaiting further price drops.
The Bank of Japan said last month that Japan's core consumer price index would turn to a positive figure during the fiscal year 2011, starting next April.
"We have to make efforts toward the government's goal of having a positive (CPI) figure in the next fiscal year," economy minister Banri Kaieda told a regular news conference Friday.
But analysts warn a return to inflation will take longer.
Matsumoto said he expects the positive figure to come only in fiscal 2012 due to weak consumer demand and a subdued appetite for corporate investment on the backdrop of slowing export growth.
The core consumer price index for Tokyo -- the leading indicator of nationwide prices -- in November fell 0.5 percent from a year earlier, the internal affairs ministry said.
Taro Saito, economist at NLI Research Institute, said "the overall picture is that falls in prices are improving but not worsening.... But the pressure from the government on the Bank of Japan to take further monetary easing measures will continue."
Parliament is likely to pass a supplementary budget later Friday to finance an economic stimulus plan worth 5.1 trillion yen (61 billion dollars) featuring job programmes, welfare spending and schemes for small businesses and infrastructure, local media reported.
Matsumoto of Mizuho said the extra budget "is surely a positive factor on the economy but not enough."
Japanese shares closed 0.40 percent lower on Friday. The benchmark Nikkei index has however stayed above the psychologically key 10,000 mark in recent sessions, buoyed by expectation-beating company earnings.
http://news.yahoo.com/s/afp/20101126/ts_afp/japaneconomy_20101126125159
While the pace of the year-on-year decline eased compared to previous months, analysts on Friday said this was due to one-off effects such as a hike in cigarette prices after a tax rise that month, with weak domestic demand still haunting the economy.
Japan's core consumer price index fell 0.6 percent in October year-on-year, compared to a 1.1 percent fall in September, as the deflation-mired economy laboured under a strong yen, which tends to harm its exporters.
Japan has been stuck in a deflationary spiral since its asset bubble burst in the early 1990s, and consumer spending has never fully recovered to become a major driver of growth.
A stronger yen exacerbates price declines as it makes imports cheaper.
"Even though the pace of the fall in prices slowed by 0.5 percentage points from the previous month, this was not due to an improved demand-supply balance", said Atsushi Matsumoto, economist at Mizuho Research Institute.
Data issued Thursday showed Japanese exports grew at their slowest pace of the year in October -- further evidence that the country's trade-reliant recovery is ebbing.
"Weak growth in exports could worsen corporate earnings, thus lowering household incomes to dampen consumer demand," said Matsumoto.
The latest price data "boils down to one-off effects" such as the tobacco price hike, he said. "Exit from deflation will be slower than previously thought."
Continued price falls undermine Prime Minister Naoto Kan's efforts to overcome deflation in the next fiscal year and work towards reining in the world's biggest public debt, which amounts to 200 percent of GDP, analysts said.
Deflation, a general fall in prices, has remained a challenge for Japan as it cuts into corporate profits and leads consumers to delay purchases while awaiting further price drops.
The Bank of Japan said last month that Japan's core consumer price index would turn to a positive figure during the fiscal year 2011, starting next April.
"We have to make efforts toward the government's goal of having a positive (CPI) figure in the next fiscal year," economy minister Banri Kaieda told a regular news conference Friday.
But analysts warn a return to inflation will take longer.
Matsumoto said he expects the positive figure to come only in fiscal 2012 due to weak consumer demand and a subdued appetite for corporate investment on the backdrop of slowing export growth.
The core consumer price index for Tokyo -- the leading indicator of nationwide prices -- in November fell 0.5 percent from a year earlier, the internal affairs ministry said.
Taro Saito, economist at NLI Research Institute, said "the overall picture is that falls in prices are improving but not worsening.... But the pressure from the government on the Bank of Japan to take further monetary easing measures will continue."
Parliament is likely to pass a supplementary budget later Friday to finance an economic stimulus plan worth 5.1 trillion yen (61 billion dollars) featuring job programmes, welfare spending and schemes for small businesses and infrastructure, local media reported.
Matsumoto of Mizuho said the extra budget "is surely a positive factor on the economy but not enough."
Japanese shares closed 0.40 percent lower on Friday. The benchmark Nikkei index has however stayed above the psychologically key 10,000 mark in recent sessions, buoyed by expectation-beating company earnings.
http://news.yahoo.com/s/afp/20101126/ts_afp/japaneconomy_20101126125159
Subscribe to:
Posts (Atom)