TOKYO SKY TREE TREE TOKYO SKY DITP TOKYO (2013 April13 – April19) Weekly News From Tokyo
29 June – 5 July 2013
Japan Mulls Cutting Tariffs On Rice For Processing TOKYO (Nikkei)--The government may agree to reduce import tariffs on rice used for processing in exchange for preserving current rates on staple-food varieties under the Trans-Pacific Partnership talks, The Nikkei learned Tuesday.
The compromise will be presented to the U.S. and other trade partners in bilateral talks slated to begin as early as August once Japan officially joins the negotiations.
Japan consumes roughly 7.15 million tons of rice a year as a staple food, while rice processed into crackers, sake and other products accounts for just 600,000 tons.
There are 58 tariff categories for rice. But those targeting staple-food varieties, such as brown rice and polished white rice, total about six to eight, with the rest covering rice for processing.
The government has long excluded rice as a whole from trade negotiations and has not looked into making distinctions between the tariff categories. The types of rice subject to possible tariff cuts under the new policy will be chosen carefully by weighing the impact on producers and processors.
Rice distributed on the market for processing includes domestic crops grown for such purposes, varieties that do not meet standards for staple consumption, and foreign-grown imports bought through the minimum-access trade arrangement.
Some processed-food firms are being forced to pay high tariffs for imports. Banner rice crops last year meant smaller portions diverted for processing, leading to higher prices. Lower tariffs would thus be welcomed by food processors but likely draw protests from domestic farmers.
One government official sees a compromise as inevitable.
"The 11 countries have already begun full negotiations," this source says. "Japan cannot insist on not cutting tariffs on farm products even by 1% after coming to the negotiating table late."
By offering a concession on rice, Japan hopes to extract tariff cuts on industrial products and secure better protection of intellectual property.
The TPP aims to eliminate tariffs on all trade products. But with the U.S. and Canada also intent on keeping import taxes on sugar and dairy products, some experts say tariffs will be eliminated on 98% of all product categories.
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The rate comes to around 98% for other recently signed free trade agreements, such as those between South Korea and the European Union, and between South Korea and the U.S. (The Nikkei, July 3 morning edition)
DJ: BOJ Survey Of Consumers Shows Prices Strongly Expected To Rise TOKYO--A Bank of Japan survey showed the general public overwhelmingly expect prices to rise over the coming year, and well beyond what the central bank currently projects, as the economic policies of Prime Minister Shinzo Abe take hold with consumers.
Helping fuel this optimism, an index of data most reflective of the current state of Japan's economy rose in May, in a sign the world's third-largest economy has escaped its downturn phase and is heading for an expansion.
Three months after the BOJ launched drastic monetary easing steps to overcome deflation, Japan's economic recovery is gaining momentum as exports improve on the yen's weakness and consumers loosen their purse strings amid high hopes for better economic times ahead.
According to the BOJ's June survey of 2,273 consumers released Friday, 80.2% of the respondents said they expect the prices of goods and services to rise over the coming year.
The reading is the highest since 81.2% in September 2008 and up from 74.2% in the previous March survey, the BOJ said. The quarterly poll excludes the effects of a planned three-percentage-point sales tax hike in April next year.
The survey also showed that the respondents expect prices to rise 5.1% on average in a year's time compared with a 4.0% increase in the previous poll. That figure is the highest since a 5.7% increase in December 2008.
"Inflation expectations are starting to strengthen among households," said Toshihiro Nagahama, chief economist at Dai-ichi Life Research Institute.
One reason is the rising costs of imports due to the yen's weakness, a product of Mr. Abe's policy mix centering on bold monetary easing, he said.
The strong expectations among the public for prices to increase along with another closely-watched survey pointing to rising inflation expectations among corporations may give a sense of relief to BOJ Gov. Haruhiko Kuroda, who has made it a top policy priority to reverse what he calls the "deflationary mindset" of the Japanese. Once businesses and consumers
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29 June – 5 July 2013 become convinced that inflation is around the corner, they will spend and invest more, thereby lessening the deflationary pressure that has gripped Japan's economy for 15 years, he has argued.
But economists say the expected inflation rates in the survey of consumers often come in far above overall price levels, as the general public tends to be impressed more by products whose prices are increasing than those whose costs are stable or falling. Excluding volatile fresh food prices, Japan's nationwide consumer price index for May stood where it was a year earlier.
Regardless of what consumers think about prices, a strong reading in the May coincident composite index, an index of 11 key indicators best used to gauge the current state of the economy, showed that Japan has hit what the Cabinet Office calls a "turning point" toward an upturn. The wording means that the government, like many private-sector economists, now view the economy to be in an expansion stage. The index, which includes barometers such as industrial output and retail sales, rose 0.8 points on month to 105.9.
"The economy has been in an expansionary phase since last December after bottoming out" in November, said Akiyoshi Takumori, chief economist at Sumitomo Mitsui Asset Management.
The government's move comes as BOJ officials weigh putting back the term "recovery" in their latest monthly economic assessment due out next week, people familiar with the central bank's thinking have told Dow Jones Newswires. The bank last used that word in January 2011.
But analysts warned that even if inflation returns to Japan, bringing the BOJ a step closer to meeting its 2% inflation target, consumers would suffer unless wages grow in tandem.
The BOJ's findings on wages are indeed mixed. The percentage of respondents seeing income growth over the coming year declined to 9.2% from 9.5%. But those predicting falls in income slid to 32.3% from 37.0%--the lowest since 32.2% in March 2006. (The Nikkei, July 5)
June Tankan Shows Signs That Corp Prices Are Rising TOKYO (NQN)--The June tankan quarterly survey of business sentiment, released Monday, showed solid results.
Business sentiment among large companies and capital-investment plans by such firms surpassed market expectations. Pricing by companies and the pricing outlook will depend on how deeply easing measures by the central bank penetrate now that the BOJ has set a 2%
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29 June – 5 July 2013 inflation target over the next two years. The latest tankan survey shows signs that prices are rising.
The diffusion index for the change in output prices among large manufacturers stood at minus 4 in the June survey, up six points from the previous quarter and matching the level seen in the quarter ended December 2008.
The DI among large nonmanufacturers came in at minus 2, the highest since the quarter ended September 2008, when the index stood at 5. The index is the key to gauging the outlook for corporate prices, and it is clear that companies are beginning to hike prices instead of cutting them.
Meanwhile, the DI for the change in interest rates on loans rose across the board. The DI is obtained by subtracting the number of companies that said interest rates on loans fell from the number of those that said the opposite. Given the growing perception that the DI for several months down the road will rise, positive effects from the BOJ's easing steps may not thoroughly penetrate.
The DI for employment conditions also showed different results depending on the size of the companies and type of industry. According to a survey conducted every six months on corporate plans for hiring new graduates, employment of new graduates by all companies across all industries will likely rise 5.3% on the year in fiscal 2013. However, such hiring is expected to drop 2.6% in fiscal 2014, indicating that companies remain cautious about the future.
It will likely take more time until prices rise and employment and income improve to the degree assumed under Prime Minister Shinzo Abe's economic policy.
FT: Japan Is Not Ready For 4th Of Shinzo Abe's Arrows A tax rise now means hitting the fiscal brake while stepping on the monetary accelerator Is it the right time to fire Shinzo Abe's fourth arrow? There has been so much emphasis on arrows number one to three that many have forgotten about the fourth altogether. This entails doubling the consumption tax in two stages, starting in April next year, to 10 per cent. By some accounts, the fourth arrow, the opening shot in an effort to repair Japan's finances after years of deficits, is the most important of all. Deciding when to fire it could be the trickiest decision the prime minister has had to make.
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First, the story so far. Soon after he came to power in December, Mr Abe released arrow number one: a $110bn stimulus package, worth 2 per cent of gross domestic product, to upgrade roads and bridges. Arrow number two, shot with the most fanfare, was a pledge to escape years of deflation, backed up with the appointment of a central bank governor definitively committed to a 2 per cent inflation target. Arrow number three, which many consider the flimsiest, is a bevy of structural reforms aimed at lifting the long-term growth rate. Strictly speaking, the fourth arrow - doubling the consumption tax - is part of arrow number one. Mr Abe has promised not an expansionary fiscal policy but a "flexible" one. If he presses ahead now with legislation to raise consumption tax (initially to 8 per cent) from next April, we will know what "flexible" means: fiscal expansion followed by contraction. The question for Mr Abe is whether this is the right approach.
The consensus among those paying attention is that it most certainly is. More, they see it as Mr Abe's test by fire. If "Abenomics" is to be taken seriously, they argue, the prime minister must not balk at this vital first step in repairing Japan's crumbling finances.
There are several reasons to support this view. First, Japan's gross debt is more than 240 per cent of GDP, even if net debt is a marginally less alarming 150 per cent. Since the early 1990s, Japan has been adding to its debt pile with primary deficits (before interest payments) running at about 4 per cent of GDP. In the years after the Lehman crunch, which hit Japan's exports, and the 2011 tsunami, which hit just about everything, the deficit rocketed to almost 8 per cent. That situation has improved a bit, with the primary deficit expected to drop to 4.8 per cent this fiscal year. Still, sooner or later Japan will need to get its fiscal house in order. Raising more tax is bound to be part of that.
The second argument is that Mr Abe should make a start while his approval rating is at almost 70 per cent. If, as expected, he leads his party to a big victory in upper house elections next month, proponents of a tax rise say he should use his political capital to make an unpopular - but necessary - decision.
Third, bond markets are watching closely. If they sense a lack of resolve, they could become jittery. That could push interest rates up sharply, raising the cost of debt service, or provoke capital flight. Even consumers, some argue, might take heart from a consumption tax rise. An economic theory known as Ricardian equivalence hypothesises that people are more likely to save if they figure that public finances are unsustainable and that they will be called on to plug the gap later. Conversely, if they sense that finances are in decent shape, they may take out their wallets. These are all good arguments - with the probable exception of the last. To argue that
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29 June – 5 July 2013 people with less money in their pockets are likely to spend more requires too big a leap of faith. More likely, they will spend less.
For that reason, Mr Abe has reason to pause. If his priority is to reach his goal of 2 per cent inflation, there is a strong case for delaying the tax rise. Otherwise, Japan will be applying the monetary accelerator with one foot and stamping on the fiscal brake with the other. Paul Sheard, chief economist at Standard & Poor's, thinks that would be a mistake. He and others recall the 1997 consumption tax rise that has been blamed - unfairly according to some - for plunging the economy into recession.
The argument is far from clear-cut. At root is a fundamental division. In one camp are those who see the monetary and fiscal arrows as basically superficial efforts to improve the economy. Far more important, they argue, are structural reforms aimed at improving productivity and repairing public finances. In the second camp are those who argue that achieving nominal growth - principally via inflation - is far from superficial. Japan's debt looks huge because, thanks to deflation, nominal GDP has stalled at 1990 levels and tax revenue has shrunk. With inflation of 2 per cent and real growth of, say, 1-2 per cent, Japan would achieve nominal growth of 3-4 per cent. That would start to make the debt pile look more manageable. In other words, Japan might do better trying to inflate away its debts rather than cut or contract its way out of them.
At some stage, Japan will probably have to raise sales tax from its hardly onerous level of 5 per cent. Mr Abe should think long and hard, however, about whether that time is now.
Onward's March-May Net Profit Up 36% On Year TOKYO (NQN)--Onward Holdings Co. (8016) said Friday its net profit for the March-May quarter was 3.8 billion yen, up 36% on the year.
Sales at Onward Kashiyama Co., the group's core unit, were solid. Onward Holdings sold shareholdings in business partners as the stock market rose, bringing in a 900 million yen extraordinary profit.
The clothing company's sales rose 7% to 72.1 billion yen, while its operating profit rose 3% to 6.3 billion yen. Sales at Onward Kashiyama's online shopping site were solid. In department stores, strong sales of its 23-ku and ICB clothing lines, which are highly profitable, boosted earnings.
Onward Holdings maintained its operating profit outlook for the March-August half. Masaaki Yoshizawa, the company's senior managing director, said earnings for the first half may exceed
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29 June – 5 July 2013 its forecast due to the current high sales figures.
Bigger Bonuses Buoying Consumer Spending On Luxury Items TOKYO (Nikkei)--With many consumers seeing an uptick in bonuses for the first time in two years, department stores are reporting strong sales of luxury brands, raising expectations for a strong summer sales season.
At Sogo & Seibu Co.'s flagship store in Tokyo's Ikebukuro, sales of luxury-brand items grew 55% from a year earlier on June 30 -- the first Sunday after companies started giving out the bonuses. Sales per purchase also increased, by 25%. Consumers flocked to Louis Vuitton and Hermes products ahead of Monday's planned price hikes by the French luxury goods vendors.
Isetan Mitsukoshi Holdings Ltd. (3099) rung up year-on-year sales growth of about 3% for Friday through Sunday. Although four rivals have already kicked off their summer sales, Isetan Mitsukoshi reports that handbags and women's shoes sold briskly without big discounts.
Existing-store sales at five major department store operators -- including Hankyu Hanshin Department Stores Inc. and Daimaru Matsuzakaya Department Stores Co. -- rose for a second straight month in June. Growth at these firms ranged from 5.3% to 24%, driven by high-end watches, jewelry and name-brand products.
At Takashimaya Co. (8233), sales of Louis Vuitton products increased around 30%, while those of the Hermes brand rose nearly 10%.
Consumers are spending more on high-function appliances as well. At K's Holdings Corp. (8282), whose sales jumped 30% or so in June, the average unit price of air conditioners rose 4,000 yen on the year to roughly 90,000 yen. Refrigerators' average price climbed 2,000 yen to between 70,000 yen and 80,000 yen.
"With the hikes in electricity rates, many consumers are choosing energy-efficient models that will save them money in the long run," an employee says.
People are also opting for pricier dishes when eating out. At Royal Holdings Co.'s (8179) mainstay Royal Host restaurant chain, same-store sales grew 14% in June, with more customers ordering premium steak.
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In leisure and travel spending, the average price of hotel reservations in June on a Kakaku.com Inc. (2371) website rose 3.1% to 12,650 yen. The uptrend is seen continuing in July and August.
With the stock market rise and other positive factors having brightened consumer sentiment, people are taking their larger bonuses and spending more on luxuries. But an employee at a major supermarket operator says many consumers are still looking for low prices on daily essentials like food and household goods.
For such daily consumption to recover, regular pay like monthly salaries will need to increase, but this will take some time, says Naoko Ogata, chief researcher at the Japan Research Institute. (The Nikkei, July 2 morning edition)
Snail Facials Put The Shine Back In Skin TOKYO (Nikkei)--Cosmetics firm Dr. Ci:Labo Co. (4924) will on July 15 introduce an unorthodox facial service that uses live snails.
The Ci:z. Labo salon will introduce a skin-care treatment using live snails from July 15. The Tokyo-based esthetic salon operator claims snail slime helps the skin retain moisture, reduces inflammation from sunburn and removes dead skin.
After the customer's face is washed, a cold gel mask is applied to the skin, because the lower temperature induces movement in the snails. After the mask is removed, three to four organic snails imported from Switzerland are placed on the face for about five minutes.
The company says people may find the sensation strange at first, but that they will gradually come to enjoy the slow, random movements across their faces.
The treatment will cost 10,500 yen and be offered as an option to the salon's 60-minute Celebrity Escargot Course, which uses snail creams and essences to massage the face and is available for 24,150 yen.(The Nikkei Marketing Journal, July 5 edition)
Cute Cube Harajuku Aims To Be New Landmark TOKYO (Nikkei)--Mitsubishi Corporation Urban Development Inc. will open Cute Cube Harajuku, a commercial complex on Takeshita-dori Street in Tokyo's Harajuku district Sept. 6.
The Mitsubishi Corp. (8058) unit aims to turn the building into a landmark in the district that will
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29 June – 5 July 2013 draw many schoolgirls and foreign tourists. Cute Cube Harajuku will be roughly at the midpoint of the popular shopping street, about four minutes' walk from JR Harajuku Station. The exterior of the three-story building will be pink. It will have floor space of about 1,900 sq. meters, including an underground floor. The facility will also have an open ceiling space and an escalator that can be reached from outside the building.
Cute Convergence The slogan for Cute Cube is: "A spot for disseminating 'Kawaii (cute) Culture' -- Where people, things and events converge." It will house 10 tenants, including Monki, a fashion label affiliated with Swedish clothing chain H&M Hennes & Mauritz AB. The shop will be Monki's first in the Kanto region.
Mitsubishi Corporation Urban Development will create an official website for the building in English, Chinese and Korean to catch the eye of foreign tourists, especially those from Southeast Asia.
The company plans to develop more commercial facilities in the greater Tokyo region. "Japanese pop culture is popular among foreigners. We want to operate commercial facilities overseas in the future, said Koichi Murata, the company's president and CEO. (The Nikkei, July)
Tokyo Station To Get New Look On Yaesu Side TOKYO (Nikkei)--A construction project to give Tokyo Station's Yaesu side a makeover is slated to wrap up on Sept. 20.
The gate area's new look will feature a white roof topping a three-story commercial complex with one basement floor, as well as a pedestrian pathway stretching north to the south along the train tracks.
The Granroof complex will be managed by Tetsudo Kaikan Co. and house 15 restaurants and shops. Most of the eateries will serve cuisine from various regions of Japan. One tenant will be a chain based out of Yamagata, and the outlet will be its first in Tokyo.
The first floor of the complex will be largely used for railway-related facilities, including ticket offices.
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On the second floor, a pedestrian deck will connect the Daimaru department store to the north of Yaesu gate with Gran Tokyo South Tower to the south. The approach, which is 230m long and 9m wide, comes with benches.
One of the third-floor tenants will be a prominent tea shop with a long history. The shop plans to serve meals incorporating Japanese tea leaves, provide trial tea ceremonies and give courses on blending tea leaves.
According to East Japan Railway Co. (9020), the area surrounding Tokyo Station was redeveloped based on two different concepts: long history and tradition on the Marunouchi side and modern design representing progressiveness and innovation on the Yaesu side. (The Nikkei, July 4 morning edition)
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