Osaka - Sunday, September 11, 2011
It is 6 months since 3.11, the Japan Disaster of the earthquake and tsunami followed by the Fukushima Nuclear Plant Accident broke out on March 11 this year. It is also 10 year anniversary of the U.S. 9.11 WTC incident. Thus this weekend, almost all TV channels in Japan have been broadcasting special programmes about 9.11 and 3.11.
In this article, the author would like to outline the reality of the Japan disaster, focusing on the hard hit area from the tsunami.
1. What are the key numbers of the Japan disaster?
The status as of today is that over 15,000 people are dead and over 4,000 people are still missing.
The government had promised to provide temporary housing to people in need by the end of August but only 90% of the temporary housings originally planned are complete and only 83% are filled because some are built in area that is of bad access.
Removal of wreckage is 50%+ complete but this includes those of houses and building that needs to be demolished anyway. And how to dispose the wreckage is still yet to be decided.
2. How are victims without temporary housing living today?
A case of a lady living in one of the hardest hit area in Miyagi was introduced in a special programme broadcasted by NHK, a national TV company. She has a house of 3 floors (in Japan, ground floor and 2 floors in the U.K.), of which the 2 floors became flooded by the tsunami.
She first thought of start living in temporary housing but did not win the housing by lottery. Also the available temporary housings are in mountainous area, a place that are inconvenience for her who cannot drive a car; therefore, she started living in the 3rd floor of her house.
However, lifelines such as electricity and water cannot be supplied. Thus she uses battery instead of electricity, walks to the nearby city hall with a bucket to get water, and goes to a nearby hospital for toilet.
The lady has no idea when this kind of life would end.
3. How have towns been recovering that once their administration system paralyzed due to tsunami?
In another TV programme a case of a town was introduced in which 20% of the population became dead or missing from the tsunami, including the mayor and many of his staff members working in the local government. Also the local government buildings/offices were all swayed by the huge tsunami.
In such a situation, local administration function stopped completely and recovery from the disaster did not move forward at all. A manager of the local government had an extremely tough time being a pig in the middle of the administration and the general public.
It was only recently that the manager was elected as the new mayor. He is now determined to develop a recovery plan of the village by the end of the year, but the task would be not easy and execution would be less easy.
4. The author’s final thoughts
What the author is more familiar is the Kobe earthquake that occurred in 1996. She was shocked to see the devastated town that used to be really beautiful and prosperous after a few months from the earthquake. But after about 6 months the roadmap of the recovery was made and the recovery plan was implemented with relative smoothness.
That is not the case of the 3.11 Japan Disaster. It is true that the scale of the 3.11 disaster is far greater and there are multiple factors that make the recovery extremely difficult.
However, it seems to the author that the primary reason for the slow recovery is the ambiguous distinction of the roles between the national government and local government/administration.
The national government insists democracy to say that it is the responsibility of the local government to take the initiative. And the local government claim that the national government should execute stronger leadership, especially when the local government function of the local area is stopped completely.
The author agrees more to the stance of the local government. She also believes that it is because of the “gembaryoku” (strengths of the general public) of the Japanese people/victims that minimized chaos. She strongly feels that if it had been in other country there had been turmoil.
Strong “gembaryoku” and weak management/leadership in typical Japanese companies in comparison to strong management and relatively weak “gembaryoku” in many western countries is often mentioned in management and such a trend came out in this case as well, as well as the plan the author introduced in her previous article Eco-Town Development in Sendai– Recovery from the Japan Disaster.
The author sincerely would like the new Noda administration start executing stronger leadership
Resources:-
Recovery from the Japan disaster of earthquake and tsunami after 6 months is yet still very slow. Not everyone has been able to live in temporary housing. Due to the scale and multiple factors making it complicated it is difficult to compare with recover from other disasters such as the Kobe earthquake in 1996; however, and the timing of when the victims can lead their lives as they used to before the disaster is yet known. One requirement that had been lacking for the recovery is strong leadership from the national government, when “gembaryoku”, the power of the general public is strong.
2011年9月11日日曜日
2011年9月3日土曜日
Eco-Town Development in Sendai– Recovery from the Japan Disaster
Osaka - Saturday, September 3, 2011
Nikkei, the leading Japanese newspaper specialized in economy and business, reported on September 1 that Sendai City and some 20 companies started studying to develop an eco-town in the devastated area of the Japan disaster.
This includes establishment of mega solar (huge solar generation plant), and using the power generated by the mega solar to start new businesses of hydroponic cultivation and food processing in the autumn of 2012. This will take place in the agricultural lands of the coastal area near Sendai City where it was severely hit by the tsunami.
The operating company will be established by the end of 2011. Thus, agriculture renewal and recovery from the disaster initiated by private sector is to start.
1. What is the background and positioning of the project?
On August 31 Sendai City announced the draft of the recovery plan from the Japan disaster, in which concept of creating an “eco-town (eco = ecology)” leveraging natural energy is stated. Energy shortage became a critical issue after the disaster; therefore, the project aims to develop a system that can supply minimum energy even in urgency. The new business will be a focus of the plan.
Sendai City’s Recovery Plan from the Japan Disaster (Outline of the Draft)
- Basic philosophy is “new dimensional town of disaster prevention and environment preservation”.
- Timing of the project is from 2011 to 2015.
- Anticipation of flooding from tsunami will be implemented by multiple protections of both software and hardware.
- Develop model of “eco town” implementing natural energy.
- Private sector will invest in agriculture. Production, processing and supply chain facilities will be integrated and arranged.
- Develop and attract industries related in new energy and disaster prevention.
- Adopt system of designated recovery zone to attract group relocation and land use restructuring.
2. Which companies are to join the project?
Companies that are to join the project include IBM Japan, Sharp, Kagome, Mitsui & Co., Ltd., Itochu Corporation, Tohoku Electric Power Co., Inc., Seven Eleven Japan (convenience store), York-Benimaru Co., Ltd. and local agricultural production related companies, which will be announced soon.
3. What are some examples of the focuses of the project?
1) Implementation of hydroponic cultivation that does not require water
Hydroponic cultivation that does not require water will be implemented leveraging know how provided by Kagome. This is to be implemented because it would require much investment to remove salt (included in the sea water) from the land that once was flooded by the tsunami and use the land again for agriculture.
The new company will establish a vegetable production factory with an area of 10 hectare (approximately twice as large as Toyo Dome, a large popular baseball stadium in Japan) and 1 hectare processing factory, to integrate and manage from vegetable production to processing.
2) Selling of the agricultural products
Approximately 2,000 tons of vegetables are to be produced then processed annually, which will be sold by retailers such as Seven Eleven and York-Benimaru Co., Ltd. Annual revenue of 2.5 billion yen is expected.
3) Enhance efficiency of electricity use generated by natural energy
Energy required to operate production and processing factories will be generated by mega solar capable of generating approximately 4,000 kW and thermal power generated by burning chaff in the boilers. System to enhance efficiency of energy use leveraging IT will be provided by IBM Japan.
4. How will Sendai City proceed?
Sendai City has set up a policy of making an application of designated recovery zone to the Japanese government because such application is required in constructing factories in the agricultural land.
Sendai City will conclude long term lease contract with agricultural land owners of the area and the revenue generated from the new business will be allocated as rent. The city is to start negotiating with agricultural land owners who is thinking of closing their business after the disaster.
5. The author’s final thoughts
So many people including the author have been advocating for months that the recovery from the Japan disaster should be taken as the opportunity of developing a new, advanced eco (ecological and economical) town resistant from natural and technological disasters.
To the author, the Nikkei’s report about the project is the long awaited first step in developing such a town.
What the author questions is the fact that the project is initiated by private sector and Sendai City, not by the Japanese government because the recovery from the disaster is a nationwide issue and therefore she feels it really should be initiated by the government. Following the election held on August 29, there was a change in the leadership; new Prime Minister and his cabinet just took off. She sincerely hopes the new Noda Administration will take stronger initiative for the recovery from the disaster and the Fukushima nuclear plant accident.
Resources:-
Sendai City and some 20 companies started studying to develop an eco-town in the devastated area of the Japan disaster. This includes establishment of mega solar (huge solar generation plant), and using the power generated by the mega solar to start new businesses of hydroponic cultivation and food processing in the autumn of 2012 in the agricultural lands of the coastal area near Sendai City where it was severely hit by the tsunami. This is a big step initiated by the private sector and Sendai City for the recovery, a nationwide issue, which is ideally to be initiated by the government.
Nikkei, the leading Japanese newspaper specialized in economy and business, reported on September 1 that Sendai City and some 20 companies started studying to develop an eco-town in the devastated area of the Japan disaster.
This includes establishment of mega solar (huge solar generation plant), and using the power generated by the mega solar to start new businesses of hydroponic cultivation and food processing in the autumn of 2012. This will take place in the agricultural lands of the coastal area near Sendai City where it was severely hit by the tsunami.
The operating company will be established by the end of 2011. Thus, agriculture renewal and recovery from the disaster initiated by private sector is to start.
1. What is the background and positioning of the project?
On August 31 Sendai City announced the draft of the recovery plan from the Japan disaster, in which concept of creating an “eco-town (eco = ecology)” leveraging natural energy is stated. Energy shortage became a critical issue after the disaster; therefore, the project aims to develop a system that can supply minimum energy even in urgency. The new business will be a focus of the plan.
Sendai City’s Recovery Plan from the Japan Disaster (Outline of the Draft)
- Basic philosophy is “new dimensional town of disaster prevention and environment preservation”.
- Timing of the project is from 2011 to 2015.
- Anticipation of flooding from tsunami will be implemented by multiple protections of both software and hardware.
- Develop model of “eco town” implementing natural energy.
- Private sector will invest in agriculture. Production, processing and supply chain facilities will be integrated and arranged.
- Develop and attract industries related in new energy and disaster prevention.
- Adopt system of designated recovery zone to attract group relocation and land use restructuring.
2. Which companies are to join the project?
Companies that are to join the project include IBM Japan, Sharp, Kagome, Mitsui & Co., Ltd., Itochu Corporation, Tohoku Electric Power Co., Inc., Seven Eleven Japan (convenience store), York-Benimaru Co., Ltd. and local agricultural production related companies, which will be announced soon.
3. What are some examples of the focuses of the project?
1) Implementation of hydroponic cultivation that does not require water
Hydroponic cultivation that does not require water will be implemented leveraging know how provided by Kagome. This is to be implemented because it would require much investment to remove salt (included in the sea water) from the land that once was flooded by the tsunami and use the land again for agriculture.
The new company will establish a vegetable production factory with an area of 10 hectare (approximately twice as large as Toyo Dome, a large popular baseball stadium in Japan) and 1 hectare processing factory, to integrate and manage from vegetable production to processing.
2) Selling of the agricultural products
Approximately 2,000 tons of vegetables are to be produced then processed annually, which will be sold by retailers such as Seven Eleven and York-Benimaru Co., Ltd. Annual revenue of 2.5 billion yen is expected.
3) Enhance efficiency of electricity use generated by natural energy
Energy required to operate production and processing factories will be generated by mega solar capable of generating approximately 4,000 kW and thermal power generated by burning chaff in the boilers. System to enhance efficiency of energy use leveraging IT will be provided by IBM Japan.
4. How will Sendai City proceed?
Sendai City has set up a policy of making an application of designated recovery zone to the Japanese government because such application is required in constructing factories in the agricultural land.
Sendai City will conclude long term lease contract with agricultural land owners of the area and the revenue generated from the new business will be allocated as rent. The city is to start negotiating with agricultural land owners who is thinking of closing their business after the disaster.
5. The author’s final thoughts
So many people including the author have been advocating for months that the recovery from the Japan disaster should be taken as the opportunity of developing a new, advanced eco (ecological and economical) town resistant from natural and technological disasters.
To the author, the Nikkei’s report about the project is the long awaited first step in developing such a town.
What the author questions is the fact that the project is initiated by private sector and Sendai City, not by the Japanese government because the recovery from the disaster is a nationwide issue and therefore she feels it really should be initiated by the government. Following the election held on August 29, there was a change in the leadership; new Prime Minister and his cabinet just took off. She sincerely hopes the new Noda Administration will take stronger initiative for the recovery from the disaster and the Fukushima nuclear plant accident.
Resources:-
Sendai City and some 20 companies started studying to develop an eco-town in the devastated area of the Japan disaster. This includes establishment of mega solar (huge solar generation plant), and using the power generated by the mega solar to start new businesses of hydroponic cultivation and food processing in the autumn of 2012 in the agricultural lands of the coastal area near Sendai City where it was severely hit by the tsunami. This is a big step initiated by the private sector and Sendai City for the recovery, a nationwide issue, which is ideally to be initiated by the government.
2011年6月12日日曜日
Recovery from the Japan Disaster – Achievements and Challenges
Osaka - Sunday, June 12, 2011
Nikkei, Japan’s leading newspaper specialized in economy and business, reported on June 11 about the recovery status from the Japan Disaster that resulted in 23,500 people dead or missing after 3 months. Business community in general has been recovering well. Production of many global companies is recovering even in the most hardly hit industries such as automobile and electronics.
However, recovery in other area/items remain slow. Over 90,000 people remain evacuated and much time is required for victims to return to normal lives. Financial assistance to victims and small and mid-sized companies impacted by the disaster remains insufficient. Converge of Fukushima nuclear plant accident seems to take time and electricity shortage is spreading nationwide as explained in the previous article Electricity Shortage Throughout Japan – Effects and Solutions.
1. How is the recovery status of each item?
1) Items related to lives of victims
(1) Electricity
Electricity for all houses and buildings are expected to recover by June 20 excluding those that have been swayed by the tsunami.
(2) Water
97% has recovered. 59,000 houses remain without water (as of June 7).
(3) Financial institutes
Total of 55 branches in Iwate, Miyagi and Fukushima remain closed (as of June 9).
2) Transportation infrastructure
(1) Railways
Shinkansen bullet train operation is to return to normal in autumn this year. Recovery of some local trains of East Japan Railway remains a question.
(2) Roads
All national motorways have recovered excluding those in the caution zone of the nuclear plant accident. 148 sections of prefectural motorways and local roads remain blocked (as of June 6).
(4) Ports
Approximately 45% docks of major ports have recovered (as of June 6).
3) Business community
(1) Supply chain
Overall supply chain has been recovering quicker than anticipated. This is because head offices and business partners made upmost efforts to quickly absorb the local needs to take actions for supply chain recovery.
(2) Automobile
Toyota and Nissan mostly have returned to normal production status. Honda is operating at 70 – 80% of its plan.
(3) Electronics
Semiconductor/micro computer shipment is to recover by autumn this year.
(4) Oil
Production facility of a leading Japanese oil company in Sendai is expected to recover in summer next year.
2. What is a particular case of a global company based in Japan?
An example introduced by Nikkei was of Sony.
10 production sites once stopped operating but the site in Miyagi that was the slowest to recover started partial production in the end of May. The site produces such products as Blu-ray disc recorders and the damage from the tsunami was extraordinary,
Their plan was not to recover as it was before the disaster but to remake a site to a new one. Items produced at the site were selected with care for higher efficiency and productivity. The space created is to be rented to local small and mid-sized companies that lost their offices from tsunami. Mr. Stringer, the CEO, commented when he visited the site that he felt the passion from the shop floor members to make the new site that is far better from pre-disaster.
3. How are small and mid-sized companies?
Recovery of small and mid-sized companies remain rather slow, which is why over 40,000 people in Iwate, Miyagi and Fukushima became unemployed from the disaster and seeking to fine a new job.
This is mostly because of insufficient financial assistance to such companies and individual business owners, although on June 10 Minister of Financial Affairs said with pride that maximum efforts have been made by Financial Service Agency. Some are forced to transfer not only production site but also head office function because of the ongoing effect from the nuclear plant accident, which means much financial burden.
In such a severe situation, many of them have been working hard to overcome challenges. One example is a component manufacturing company supplying to car navigation system manufacturers. The company was located in the coastal area but all production equipments were swayed by the tsunami. The top executive once gave up business continuity but transferred the facility to a warehouse which in 49km inland area and restarted its operation.
4. What are the author’s final thoughts?
Considering the geographical size and complexity of the disaster, the recovery pace is amazing in general. This seems to mostly attribute to “gembaryoku” (leadership and management capability of the local community and shop floor members), which is the strengths of Japan and its companies as often mentioned.
What is lacking yet critical to speed up the recovery in the slow recovery areas/items is strong leadership especially from the government. In contrast to “gembaryoku”, leadership and management capability of the people high up in the organization are often said as the weakness of Japan. Such weakness became prominent in the recovery from the disaster.
The last paragraph of the Nikkei article depicts this and the compelling message from the victims and the citizens. It is the fact that when Mr. Okada, Secretary General of the Democratic Party of Japan visited Sendai, a victim whose house is severely damaged with landslide said to Mr. Okada, “why don’t politicians really understand the reality of the devastated area and quickly take actions instead of fighting among politicians in the Diet”.
Resources:-
The recovery from the Japan disaster in the 3 months since March 11 is in general remarkable. This is mainly due to efforts by local people and companies. However, recovery of small and mid-sized companies and lives of victims remain slow. This is mainly due to insufficient financial support from the government. What is critical to boost recovery pace is strong leadership especially from the government.
Nikkei, Japan’s leading newspaper specialized in economy and business, reported on June 11 about the recovery status from the Japan Disaster that resulted in 23,500 people dead or missing after 3 months. Business community in general has been recovering well. Production of many global companies is recovering even in the most hardly hit industries such as automobile and electronics.
However, recovery in other area/items remain slow. Over 90,000 people remain evacuated and much time is required for victims to return to normal lives. Financial assistance to victims and small and mid-sized companies impacted by the disaster remains insufficient. Converge of Fukushima nuclear plant accident seems to take time and electricity shortage is spreading nationwide as explained in the previous article Electricity Shortage Throughout Japan – Effects and Solutions.
1. How is the recovery status of each item?
1) Items related to lives of victims
(1) Electricity
Electricity for all houses and buildings are expected to recover by June 20 excluding those that have been swayed by the tsunami.
(2) Water
97% has recovered. 59,000 houses remain without water (as of June 7).
(3) Financial institutes
Total of 55 branches in Iwate, Miyagi and Fukushima remain closed (as of June 9).
2) Transportation infrastructure
(1) Railways
Shinkansen bullet train operation is to return to normal in autumn this year. Recovery of some local trains of East Japan Railway remains a question.
(2) Roads
All national motorways have recovered excluding those in the caution zone of the nuclear plant accident. 148 sections of prefectural motorways and local roads remain blocked (as of June 6).
(4) Ports
Approximately 45% docks of major ports have recovered (as of June 6).
3) Business community
(1) Supply chain
Overall supply chain has been recovering quicker than anticipated. This is because head offices and business partners made upmost efforts to quickly absorb the local needs to take actions for supply chain recovery.
(2) Automobile
Toyota and Nissan mostly have returned to normal production status. Honda is operating at 70 – 80% of its plan.
(3) Electronics
Semiconductor/micro computer shipment is to recover by autumn this year.
(4) Oil
Production facility of a leading Japanese oil company in Sendai is expected to recover in summer next year.
2. What is a particular case of a global company based in Japan?
An example introduced by Nikkei was of Sony.
10 production sites once stopped operating but the site in Miyagi that was the slowest to recover started partial production in the end of May. The site produces such products as Blu-ray disc recorders and the damage from the tsunami was extraordinary,
Their plan was not to recover as it was before the disaster but to remake a site to a new one. Items produced at the site were selected with care for higher efficiency and productivity. The space created is to be rented to local small and mid-sized companies that lost their offices from tsunami. Mr. Stringer, the CEO, commented when he visited the site that he felt the passion from the shop floor members to make the new site that is far better from pre-disaster.
3. How are small and mid-sized companies?
Recovery of small and mid-sized companies remain rather slow, which is why over 40,000 people in Iwate, Miyagi and Fukushima became unemployed from the disaster and seeking to fine a new job.
This is mostly because of insufficient financial assistance to such companies and individual business owners, although on June 10 Minister of Financial Affairs said with pride that maximum efforts have been made by Financial Service Agency. Some are forced to transfer not only production site but also head office function because of the ongoing effect from the nuclear plant accident, which means much financial burden.
In such a severe situation, many of them have been working hard to overcome challenges. One example is a component manufacturing company supplying to car navigation system manufacturers. The company was located in the coastal area but all production equipments were swayed by the tsunami. The top executive once gave up business continuity but transferred the facility to a warehouse which in 49km inland area and restarted its operation.
4. What are the author’s final thoughts?
Considering the geographical size and complexity of the disaster, the recovery pace is amazing in general. This seems to mostly attribute to “gembaryoku” (leadership and management capability of the local community and shop floor members), which is the strengths of Japan and its companies as often mentioned.
What is lacking yet critical to speed up the recovery in the slow recovery areas/items is strong leadership especially from the government. In contrast to “gembaryoku”, leadership and management capability of the people high up in the organization are often said as the weakness of Japan. Such weakness became prominent in the recovery from the disaster.
The last paragraph of the Nikkei article depicts this and the compelling message from the victims and the citizens. It is the fact that when Mr. Okada, Secretary General of the Democratic Party of Japan visited Sendai, a victim whose house is severely damaged with landslide said to Mr. Okada, “why don’t politicians really understand the reality of the devastated area and quickly take actions instead of fighting among politicians in the Diet”.
Resources:-
The recovery from the Japan disaster in the 3 months since March 11 is in general remarkable. This is mainly due to efforts by local people and companies. However, recovery of small and mid-sized companies and lives of victims remain slow. This is mainly due to insufficient financial support from the government. What is critical to boost recovery pace is strong leadership especially from the government.
2010年11月7日日曜日
Japan Stagnates in Stock Market Recovery Unlike Worldwide – Why?
Osaka – Sunday, November 7, 2010
Nikkei, Japanese leading newspaper specialized in business and economy reported on November 6 that 70% of the worldwide stock market/share price (14 among 20 major markets including the U.S.) has recovered to the level of the pre-worldwide economic crisis of 2008 driven by additional credit ease by FRB (Federal Reserve Bank), while that of Japan stagnates. The worldwide recovery attributes to investment money generated by the easy money flowing into the stock market. Average share price of Japan stock market is still minus 20% from the level of the pre-worldwide economic crisis and its slow recovery stands out.
1. Which countries have been recovering the most?
It is the emerging markets, whose growth expectation is high. As shown in the table below, no.1 is Argentina (+103% from the level before the worldwide economic crisis), which is followed by China (+50%) and India (49%). These countries are all in upward trend.
Worldwide Main Stock Index Compared to the Level of Pre-Worldwide Economic Crisis
(Source: Nikkei, translated by the author)
Country / Advance/Decline Ratio vs Pre-Worldwide Crisis (%)
Argentina / 102.7
China / 50.5
India / 49.2
Brazil / 39.3
Taiwan / 33.9
South Korea / 31.2
Hong Kong / 28.5
Singapore / 26.0
Russia / 19.4
South Africa / 16.4
The U.K. / 8.2
Germany / 8.0
Canada / 0.9
The U.S. / 0.1
Australia / -1.7
Spain / -7.1
Switzerland / -8.6
France / -9.6
Japan / -21.6
Italy / -24.3
Majority of developed countries also recovered with capital inflow into their stock market. Dow index has recovered to the level of pre-worldwide crisis on November 4. Recovery rate of the U.K. and Germany is especially large with +8%. The reason is said to be the fact that with easy interest rate of the U.S. and Japan, yield of government bonds went down and therefore comparatively the stocks of the developed countries became attractive to investors.
2. Which countries stagnate in recovery?
It is the countries with structural problems, such as Italy, Spain and Japan. The amount of government bond of such countries is large but high growth cannot be expected; therefore, only limited capital has been flowing into their stock market. Average share price of Japan is -21.2 from the pre-worldwide crisis level, which is above only Italy i.e. second from the bottom of the 20 countries.
3. Why Japan’s recovery stagnates?
It is because the revenue recovery of Japanese companies is much slower than their overseas counterparts, due to the following.
1) High yen that seems to continue
Yen has been hovering around 80 yen per USD, the same level as the previous high yen level of around 1995 when Japanese companies suffered so much from high yen. The high yen trend seems to continue for some time, and some experts say it could reach as high as 75 yen per USD.
This is the contrary of South Korea and German companies, whose recovery have been accelerated, leveraging their low their currency. Ratio of net profit for July-Sep of Posco (South Korea) has recovered to 86% of July-Sep of 2008 while that of Nippon Steel (Japan) is only 56%. Net profit of for July-Sep of Volkswagen (Germany) is almost twice of July-Sep of 2008, when that of Toyota (Japan) is only 70%.
2) Unclear policy of the government unable to support recovery of the companies
As experts point out, with politics in chaos, the government has not been able to support improvement of global competitiveness of Japanese companies. This is another obstacle for money inflow into the Japan stock market.
Bank of Japan has started to take comprehensive easing measures including purchasing of risk assets such as ETF (Exchange Trade Fund) but many experts view that such measures are behind those of FRB.
In the upcoming article, the author would like to focus on the effects on high yen on Japan.
Nikkei, Japanese leading newspaper specialized in business and economy reported on November 6 that 70% of the worldwide stock market/share price (14 among 20 major markets including the U.S.) has recovered to the level of the pre-worldwide economic crisis of 2008 driven by additional credit ease by FRB (Federal Reserve Bank), while that of Japan stagnates. The worldwide recovery attributes to investment money generated by the easy money flowing into the stock market. Average share price of Japan stock market is still minus 20% from the level of the pre-worldwide economic crisis and its slow recovery stands out.
1. Which countries have been recovering the most?
It is the emerging markets, whose growth expectation is high. As shown in the table below, no.1 is Argentina (+103% from the level before the worldwide economic crisis), which is followed by China (+50%) and India (49%). These countries are all in upward trend.
Worldwide Main Stock Index Compared to the Level of Pre-Worldwide Economic Crisis
(Source: Nikkei, translated by the author)
Country / Advance/Decline Ratio vs Pre-Worldwide Crisis (%)
Argentina / 102.7
China / 50.5
India / 49.2
Brazil / 39.3
Taiwan / 33.9
South Korea / 31.2
Hong Kong / 28.5
Singapore / 26.0
Russia / 19.4
South Africa / 16.4
The U.K. / 8.2
Germany / 8.0
Canada / 0.9
The U.S. / 0.1
Australia / -1.7
Spain / -7.1
Switzerland / -8.6
France / -9.6
Japan / -21.6
Italy / -24.3
Majority of developed countries also recovered with capital inflow into their stock market. Dow index has recovered to the level of pre-worldwide crisis on November 4. Recovery rate of the U.K. and Germany is especially large with +8%. The reason is said to be the fact that with easy interest rate of the U.S. and Japan, yield of government bonds went down and therefore comparatively the stocks of the developed countries became attractive to investors.
2. Which countries stagnate in recovery?
It is the countries with structural problems, such as Italy, Spain and Japan. The amount of government bond of such countries is large but high growth cannot be expected; therefore, only limited capital has been flowing into their stock market. Average share price of Japan is -21.2 from the pre-worldwide crisis level, which is above only Italy i.e. second from the bottom of the 20 countries.
3. Why Japan’s recovery stagnates?
It is because the revenue recovery of Japanese companies is much slower than their overseas counterparts, due to the following.
1) High yen that seems to continue
Yen has been hovering around 80 yen per USD, the same level as the previous high yen level of around 1995 when Japanese companies suffered so much from high yen. The high yen trend seems to continue for some time, and some experts say it could reach as high as 75 yen per USD.
This is the contrary of South Korea and German companies, whose recovery have been accelerated, leveraging their low their currency. Ratio of net profit for July-Sep of Posco (South Korea) has recovered to 86% of July-Sep of 2008 while that of Nippon Steel (Japan) is only 56%. Net profit of for July-Sep of Volkswagen (Germany) is almost twice of July-Sep of 2008, when that of Toyota (Japan) is only 70%.
2) Unclear policy of the government unable to support recovery of the companies
As experts point out, with politics in chaos, the government has not been able to support improvement of global competitiveness of Japanese companies. This is another obstacle for money inflow into the Japan stock market.
Bank of Japan has started to take comprehensive easing measures including purchasing of risk assets such as ETF (Exchange Trade Fund) but many experts view that such measures are behind those of FRB.
In the upcoming article, the author would like to focus on the effects on high yen on Japan.
2010年6月27日日曜日
Asia Business Drives Recovery of Japanese Companies
Osaka – Sunday, June 27, 2010
Nikkei, Japanese newspaper specialized in business/economy, reported today that Asia business is driving revenue recovery of Japanese Companies. It came clear that Asia is the engine of generating revenue (profit) for one out of four companies when they analyzed operating revenue of financial data by region for fiscal year ending March 2010.
Operating profit from Asia business has recovered to the level of 82% of those of before the worldwide financial crisis in 2008. This is far greater than Americas (43%) and Japan (30%). It is true that there are risks such as increase in personnel cost of China. However, the Japanese government has developed the new growth strategy as explained in the previous article Japan's New Growth Strategy Approved - What Is It? making the most of growth in Asia economy and therefore it is likely that further shift in Asia business will take place among Japanese companies.
1. How did Nikkei come to the conclusion?
Nikkei collected and analyzed financial data of 419 listed companies (excluding financial and new companies) that are:- a)fiscal year ends in March; b)discloses revenues by region; and c)sequent data is available since 2000.
2. How much was the operating profit generated by Asia business?
Operating profit generated by Asia (including Oceania) business was 1.8814 trillion yen in total, which covers 26% of total operating profit generated worldwide. Although this percentage is behind Japan, which was 52%, it is far greater than Americas (11%) and Europe (3%).
3. How is Asia business driving recovery of major companies?
Companies covering 25% of 419 companies analyzed have been recovering driven by Asia business. Most of them are of major manufactures of automobile and electronics. Operating profit generated by Toyota’s Asia business was the greatest, totaling 203.5 billion yen. This attributed to Toyota’s consolidated operating profit returning to black even though their America and Europe business still remains in red.
Major Companies Generating Revenue/Profit Primarily from Asia Business
(Source: Nikkei, translated by the author)
Company Name / Amount of Operating Profit from Asia Business (billion yen) / % of Operating Profit from Asia Business*
Toyota / 203.5 / 139
Denso / 75.3 / 54
TDK / 65.9 / 251
Suzuki / 56.1 / 67
Toshiba / 46.1 / 41
Daikin / 37.9 / 88
HOYA / 34.1 / 58
Seiko Epson / 27.2 / 158
Hitachi Construction Machinery / 26.5 / 219
Rohm / 26.5 / 108
* above 100 = the total operating profit from business in other regions are negative (i.e. loss)
Suzuki’s business is strong in India, where they have market share of approximately 50% in passenger cars. Card produced locally topped 1 million for the first time. The top management commented “operating profit generated by business in India covers almost 70% of consolidated operating profit”.
Toshiba’s operating profit from Asia business doubled from previous year totaling 46.1 billion yen. This was because of business growth in their infrastructure and digital consumer electronics businesses.
4. How is Asia business recovery compared?
Revenue and profitability recovery from Asia business is outstanding. Sales have recovered to 70% and operating profit has recovered to 82% of the level of fiscal year ending March 2008, i.e. before the worldw ide financial crisis. Profitability of Asia business is also high compared with other region. Operating profit of Asia for the analyzed companies turned out to be 9% in average, which is far greater than Japan (45), Americas (3%) and Europe (1%).
This is because profit tends to expand in the process of market recovery for Asia where cost is comparatively low and inflation is comparatively high, compared with, for example Japan, whose profitability is more difficult to improve with high yen and deflation.
5. What is the outlook for fiscal year ending March 2011?
Asia is assumed to remain the engine of further business/financial performance recovery of Japanese companies for fiscal year ending March 2011.
For example, UniCharm Corporation estimates to increase its operating profit by 19%. For sales increase, third plant in China has been constructed in the end of 2009. TOTO plans to generate approximately 70% of assumed worldwide operating profit from China business. To achieve this, they will strengthen sales of housing equipment in inland area.
The government’s new growth strategy leading to strengthening economic relationship with Asia countries could mean positive effect on Asia business of Japanese companies. However, there are risks such as devaluing of the Chinese yuan (RMB) and increase in personnel cost of factory workers in high growing market of China, which has big impact on management. In addition, competition with strong companies of the west and Korea is severe. It is high likely that the quality of Asia business strategy determines how their Asia business further grows.
Nikkei, Japanese newspaper specialized in business/economy, reported today that Asia business is driving revenue recovery of Japanese Companies. It came clear that Asia is the engine of generating revenue (profit) for one out of four companies when they analyzed operating revenue of financial data by region for fiscal year ending March 2010.
Operating profit from Asia business has recovered to the level of 82% of those of before the worldwide financial crisis in 2008. This is far greater than Americas (43%) and Japan (30%). It is true that there are risks such as increase in personnel cost of China. However, the Japanese government has developed the new growth strategy as explained in the previous article Japan's New Growth Strategy Approved - What Is It? making the most of growth in Asia economy and therefore it is likely that further shift in Asia business will take place among Japanese companies.
1. How did Nikkei come to the conclusion?
Nikkei collected and analyzed financial data of 419 listed companies (excluding financial and new companies) that are:- a)fiscal year ends in March; b)discloses revenues by region; and c)sequent data is available since 2000.
2. How much was the operating profit generated by Asia business?
Operating profit generated by Asia (including Oceania) business was 1.8814 trillion yen in total, which covers 26% of total operating profit generated worldwide. Although this percentage is behind Japan, which was 52%, it is far greater than Americas (11%) and Europe (3%).
3. How is Asia business driving recovery of major companies?
Companies covering 25% of 419 companies analyzed have been recovering driven by Asia business. Most of them are of major manufactures of automobile and electronics. Operating profit generated by Toyota’s Asia business was the greatest, totaling 203.5 billion yen. This attributed to Toyota’s consolidated operating profit returning to black even though their America and Europe business still remains in red.
Major Companies Generating Revenue/Profit Primarily from Asia Business
(Source: Nikkei, translated by the author)
Company Name / Amount of Operating Profit from Asia Business (billion yen) / % of Operating Profit from Asia Business*
Toyota / 203.5 / 139
Denso / 75.3 / 54
TDK / 65.9 / 251
Suzuki / 56.1 / 67
Toshiba / 46.1 / 41
Daikin / 37.9 / 88
HOYA / 34.1 / 58
Seiko Epson / 27.2 / 158
Hitachi Construction Machinery / 26.5 / 219
Rohm / 26.5 / 108
* above 100 = the total operating profit from business in other regions are negative (i.e. loss)
Suzuki’s business is strong in India, where they have market share of approximately 50% in passenger cars. Card produced locally topped 1 million for the first time. The top management commented “operating profit generated by business in India covers almost 70% of consolidated operating profit”.
Toshiba’s operating profit from Asia business doubled from previous year totaling 46.1 billion yen. This was because of business growth in their infrastructure and digital consumer electronics businesses.
4. How is Asia business recovery compared?
Revenue and profitability recovery from Asia business is outstanding. Sales have recovered to 70% and operating profit has recovered to 82% of the level of fiscal year ending March 2008, i.e. before the worldw ide financial crisis. Profitability of Asia business is also high compared with other region. Operating profit of Asia for the analyzed companies turned out to be 9% in average, which is far greater than Japan (45), Americas (3%) and Europe (1%).
This is because profit tends to expand in the process of market recovery for Asia where cost is comparatively low and inflation is comparatively high, compared with, for example Japan, whose profitability is more difficult to improve with high yen and deflation.
5. What is the outlook for fiscal year ending March 2011?
Asia is assumed to remain the engine of further business/financial performance recovery of Japanese companies for fiscal year ending March 2011.
For example, UniCharm Corporation estimates to increase its operating profit by 19%. For sales increase, third plant in China has been constructed in the end of 2009. TOTO plans to generate approximately 70% of assumed worldwide operating profit from China business. To achieve this, they will strengthen sales of housing equipment in inland area.
The government’s new growth strategy leading to strengthening economic relationship with Asia countries could mean positive effect on Asia business of Japanese companies. However, there are risks such as devaluing of the Chinese yuan (RMB) and increase in personnel cost of factory workers in high growing market of China, which has big impact on management. In addition, competition with strong companies of the west and Korea is severe. It is high likely that the quality of Asia business strategy determines how their Asia business further grows.
2010年5月15日土曜日
Financial Performance of Japanese Companies Continues to Recover
Osaka – Saturday, May 15, 2010
Nikkei, Japanese newspaper specialized in business/economy, reported on May 13, 2010, that financial performance of Japanese listed companies has been continuously recovering in total. This information also went on air in most major TV news on Friday 14. Consolidated profit for fiscal year ending March 2010 was +25% vs. previous year, which was increase in profit after 2 fiscal year, largely attributing to cost reduction. The largest contributors were consumer electronics and automobile, which improved by 3.7 billion yen in total vs. previous year.
Outlook for fiscal year ending March 2011 is of further improvement; +38% for profit vs. fiscal year ending March 2010. This is largely because revenue is expected to increase after 3 fiscal years with demand increase of emerging countries, marking phase change from recovery driven by restructure to recovery driven by demand increase. However, there are risks such as high yen and price increase in resources.
1. How did Nikkei come to the conclusion?
Nikkei collected and analyzed financial data of 767 listed companies (excluding financial and new companies) that had been announced by May 12, covering 50% in number and 80% of profit, of total companies.
2. How much the financial performance of Japanese companies recover?
In total, sales for fiscal year ending March 2010 decreased by 12% vs. previous year but turned to black with drastic cost reduction by each company after the worldwide economy crisis broke out in the autumn of 2008. Quick economy recovery of emerging countries such as China and India also contributed to their financial performance recovery. As a result, profit was better by 13% than estimation as of February 2010, meaning that financial performance of Japanese companies are ongoing with speed above expectation.
Looking by industry, 19 out of 32 recovered. The total amount of profit recovered was 2 trillion yen for consumer electronics and 1.7 trillion yen for automobile. These two industries covered up deterioration of steel, maritime trade and trading companies, and in total recovery of almost 2.4 billion yen. As for some specific companies, refer the table below.
Improvement in Financial Performance of Some Major Companies
(Source: Nikkei, translated by the author)
Company Name / Amount (billion yen)
Hitachi / 353.4
Panasonic / 353.3
Toshiba / 304.2
Toyota / 851.8
Nissan / 380.4
Honda / 174.4
3. What contributed to the recovery?
The biggest contributor was restructuring including fixed and variable cost reduction. Honda reduced sales cost by over 420 billion yen, resulting in double in profit even though the revenue decreased by 14%. A vice president of Honda commented that the biggest reason for revenue recovery is the fact that they made much effort in cost reduction. Cost reduction of Toyota totaled 1 trillion yen (negative effects of the worldwide recalls were within their expectation) and 880 billion yen for Panasonic.
4. What is the outlook for fiscal year ending March 2011?
Sales for fiscal year ending March 2011 is estimated to go back to growth by 7% from the previous year, which is expected to contribute to further profit increase. Also, financial performance recovery is estimated to expand to 25 industries from 19. With recovery in purchase order from Asia, machinery and precision instrument also are estimated to return to black.
5. What are the 3 possible risks?
The first possible risk is high yen. This is a negative factor for export-oriented companies (most Japanese manufacturers are export-oriented); increase in cost of resources leads to cot up in wide a range of industries. For example in the case of Nippon Steel, if purchase cost of iron and steel stays at high level of April-June, it would result in 450 billion loss unless it can be reflected in pricing.
The second possible risk is negative effect from the fact that demand stimulation measures of each country aimed at driving sales of digital consumer electronics and automobiles is to come to end. For example, in Japan, incentives are given to consumers who purchase green products and services specified by the governments (e.g. automobile, consumer electronics, reforming house) which has been contributing to stimulating consumer spending but this incentive is to end soon.
The third possible risk is negative effect of weak economy of Greece on worldwide economy recovery.
6. What is the requirement for further recovery despite the possible risks?
Further improvement is possible if performance recovery effect is expanded to household and equipment investment sectors. This is because the profit outlook for 2010 is 60% of the peak, which was in 2008, meaning that there are some room for further recovery.
Nikkei, Japanese newspaper specialized in business/economy, reported on May 13, 2010, that financial performance of Japanese listed companies has been continuously recovering in total. This information also went on air in most major TV news on Friday 14. Consolidated profit for fiscal year ending March 2010 was +25% vs. previous year, which was increase in profit after 2 fiscal year, largely attributing to cost reduction. The largest contributors were consumer electronics and automobile, which improved by 3.7 billion yen in total vs. previous year.
Outlook for fiscal year ending March 2011 is of further improvement; +38% for profit vs. fiscal year ending March 2010. This is largely because revenue is expected to increase after 3 fiscal years with demand increase of emerging countries, marking phase change from recovery driven by restructure to recovery driven by demand increase. However, there are risks such as high yen and price increase in resources.
1. How did Nikkei come to the conclusion?
Nikkei collected and analyzed financial data of 767 listed companies (excluding financial and new companies) that had been announced by May 12, covering 50% in number and 80% of profit, of total companies.
2. How much the financial performance of Japanese companies recover?
In total, sales for fiscal year ending March 2010 decreased by 12% vs. previous year but turned to black with drastic cost reduction by each company after the worldwide economy crisis broke out in the autumn of 2008. Quick economy recovery of emerging countries such as China and India also contributed to their financial performance recovery. As a result, profit was better by 13% than estimation as of February 2010, meaning that financial performance of Japanese companies are ongoing with speed above expectation.
Looking by industry, 19 out of 32 recovered. The total amount of profit recovered was 2 trillion yen for consumer electronics and 1.7 trillion yen for automobile. These two industries covered up deterioration of steel, maritime trade and trading companies, and in total recovery of almost 2.4 billion yen. As for some specific companies, refer the table below.
Improvement in Financial Performance of Some Major Companies
(Source: Nikkei, translated by the author)
Company Name / Amount (billion yen)
Hitachi / 353.4
Panasonic / 353.3
Toshiba / 304.2
Toyota / 851.8
Nissan / 380.4
Honda / 174.4
3. What contributed to the recovery?
The biggest contributor was restructuring including fixed and variable cost reduction. Honda reduced sales cost by over 420 billion yen, resulting in double in profit even though the revenue decreased by 14%. A vice president of Honda commented that the biggest reason for revenue recovery is the fact that they made much effort in cost reduction. Cost reduction of Toyota totaled 1 trillion yen (negative effects of the worldwide recalls were within their expectation) and 880 billion yen for Panasonic.
4. What is the outlook for fiscal year ending March 2011?
Sales for fiscal year ending March 2011 is estimated to go back to growth by 7% from the previous year, which is expected to contribute to further profit increase. Also, financial performance recovery is estimated to expand to 25 industries from 19. With recovery in purchase order from Asia, machinery and precision instrument also are estimated to return to black.
5. What are the 3 possible risks?
The first possible risk is high yen. This is a negative factor for export-oriented companies (most Japanese manufacturers are export-oriented); increase in cost of resources leads to cot up in wide a range of industries. For example in the case of Nippon Steel, if purchase cost of iron and steel stays at high level of April-June, it would result in 450 billion loss unless it can be reflected in pricing.
The second possible risk is negative effect from the fact that demand stimulation measures of each country aimed at driving sales of digital consumer electronics and automobiles is to come to end. For example, in Japan, incentives are given to consumers who purchase green products and services specified by the governments (e.g. automobile, consumer electronics, reforming house) which has been contributing to stimulating consumer spending but this incentive is to end soon.
The third possible risk is negative effect of weak economy of Greece on worldwide economy recovery.
6. What is the requirement for further recovery despite the possible risks?
Further improvement is possible if performance recovery effect is expanded to household and equipment investment sectors. This is because the profit outlook for 2010 is 60% of the peak, which was in 2008, meaning that there are some room for further recovery.
2010年1月30日土曜日
Japanese Manufactures Drastically Recovering with External Demand
Osaka – Saturday, January 30, 2010
Nikkei, specialized in economy/business and politics, reported on January 28 that financial performance of many major Japanese manufacturers have started to recover drastically driven by external demand. It seems that Sony’s consolidated operational profit has gone back to black by 1000 billion yen after 5 quarters for October – December 2009. Honda also seems to double its consolidated operating profit for the same period from the previous quarter of July – September 2009. Ongoing revenue improvement attributes to changing to profit structure more optimized for generating profit by fixed cost reduction and productivity efficiency improvement, plus increase in external demand with worldwide economy recovery.
Better Profit Generation with Cost Reduction
(Source: Nikkei, edited and translated by the author)
Company Name / Operating Revenue (billion yen) / Operating Revenue for Previous Year (billion yen) / Factors
Sony / Approx. 100 / -17.9 / Cost reduction. TV and game business recovering
Honda / 120 - 170 / 102.4 / Strong fuel efficient car business in India and Thailand. Japan business getting stronger as well.
Toshiba / Approx. 10 / -158.8 / Improvement in fixed cost and recovery in semiconductor business.
Canon* / 92.1 / 35.8 / Recovering in worldwide camera sales. Expense compressed.
Fuji Film Holdings / Approx. 5 / 1.2 / Improvement in LCD film and business machine business.
TDK / More than 11 / -5.1 / Strong hard disk related business.
Murata Manufacturing Company / Approx. 11 / -3 / Demand increase in electronic components for PC etc.
Note: For October – December 2009. Canon’s data is of announcement, others is of Nikkei estimation.
Sony drastically improved its game and LCD TV business that were in a slump. PS (Play Station) 3 that had reduced manufacturing cost made a big hit with positive effect of price reduction in the U.S. which contributed to returning to black after 4 quarters. LCD TV sales are now strong in the U.S., Japan and China. Job cuts and site integration contributed to improving operating profit and loss to zero level. However, operating profit improvement that had once been estimated to be 20 billion yen for fiscal year ending March 2010 is expected to be limited. This is because there are anxieties such as restructuring expense to accumulate toward the end of March 2010, and uncertainties/risks such as high yen.
Honda is improving its financial performance driven by growth in the emerging market. Fuel efficient small and medium size car business has become strong in Asia such as India and Thailand, and cost reduction measures such as enhancing local content contributed to positive effect. As a result, Honda’s consolidated operating profit for October – December 2009 seems to have doubled from July – September 2009 to 120 – 170 billion yen.
Honda produced approximately 890,000 cars worldwide October – December 2009, which is increase by 80,000 from July – September. Honda’s bicycle business is also strong in emerging market in particular. Operating profit is estimated to reach 190 billion yen for fiscal year ending March 2010, but it is possible that it reaches more than 300 billion yen.
Companies such as Hitachi is benefiting from worldwide automobile sales recovery, which is decreasing its operating loss of automotive equipment business. Hitachi’s flat panel TV business is also improving. As a result, Hitachi’s consolidated operating profit seems to recover reaching 100 billion yen, which is much more than the original plan of 20 billion yen.
Although there are anxieties and uncertainties such as high yen and domestic economy plunging again, it is expected that revenue of major manufacturers continues to improve driven by external demand. Canon announced its financial performance for fiscal year ending December 2009 on January 27, 2010, in which it estimated that consolidated operating profit for fiscal year ending December 2010 is to reach 330 billion yen, which is +52% from previous year. This is due to continuation of strong sales of single-lens reflex camera, which is of high profitability, especially in China.
It is a pity that Toyota is not one of the manufacturers that is drastically recovering its financial performance, with recent recalls.
Nikkei, specialized in economy/business and politics, reported on January 28 that financial performance of many major Japanese manufacturers have started to recover drastically driven by external demand. It seems that Sony’s consolidated operational profit has gone back to black by 1000 billion yen after 5 quarters for October – December 2009. Honda also seems to double its consolidated operating profit for the same period from the previous quarter of July – September 2009. Ongoing revenue improvement attributes to changing to profit structure more optimized for generating profit by fixed cost reduction and productivity efficiency improvement, plus increase in external demand with worldwide economy recovery.
Better Profit Generation with Cost Reduction
(Source: Nikkei, edited and translated by the author)
Company Name / Operating Revenue (billion yen) / Operating Revenue for Previous Year (billion yen) / Factors
Sony / Approx. 100 / -17.9 / Cost reduction. TV and game business recovering
Honda / 120 - 170 / 102.4 / Strong fuel efficient car business in India and Thailand. Japan business getting stronger as well.
Toshiba / Approx. 10 / -158.8 / Improvement in fixed cost and recovery in semiconductor business.
Canon* / 92.1 / 35.8 / Recovering in worldwide camera sales. Expense compressed.
Fuji Film Holdings / Approx. 5 / 1.2 / Improvement in LCD film and business machine business.
TDK / More than 11 / -5.1 / Strong hard disk related business.
Murata Manufacturing Company / Approx. 11 / -3 / Demand increase in electronic components for PC etc.
Note: For October – December 2009. Canon’s data is of announcement, others is of Nikkei estimation.
Sony drastically improved its game and LCD TV business that were in a slump. PS (Play Station) 3 that had reduced manufacturing cost made a big hit with positive effect of price reduction in the U.S. which contributed to returning to black after 4 quarters. LCD TV sales are now strong in the U.S., Japan and China. Job cuts and site integration contributed to improving operating profit and loss to zero level. However, operating profit improvement that had once been estimated to be 20 billion yen for fiscal year ending March 2010 is expected to be limited. This is because there are anxieties such as restructuring expense to accumulate toward the end of March 2010, and uncertainties/risks such as high yen.
Honda is improving its financial performance driven by growth in the emerging market. Fuel efficient small and medium size car business has become strong in Asia such as India and Thailand, and cost reduction measures such as enhancing local content contributed to positive effect. As a result, Honda’s consolidated operating profit for October – December 2009 seems to have doubled from July – September 2009 to 120 – 170 billion yen.
Honda produced approximately 890,000 cars worldwide October – December 2009, which is increase by 80,000 from July – September. Honda’s bicycle business is also strong in emerging market in particular. Operating profit is estimated to reach 190 billion yen for fiscal year ending March 2010, but it is possible that it reaches more than 300 billion yen.
Companies such as Hitachi is benefiting from worldwide automobile sales recovery, which is decreasing its operating loss of automotive equipment business. Hitachi’s flat panel TV business is also improving. As a result, Hitachi’s consolidated operating profit seems to recover reaching 100 billion yen, which is much more than the original plan of 20 billion yen.
Although there are anxieties and uncertainties such as high yen and domestic economy plunging again, it is expected that revenue of major manufacturers continues to improve driven by external demand. Canon announced its financial performance for fiscal year ending December 2009 on January 27, 2010, in which it estimated that consolidated operating profit for fiscal year ending December 2010 is to reach 330 billion yen, which is +52% from previous year. This is due to continuation of strong sales of single-lens reflex camera, which is of high profitability, especially in China.
It is a pity that Toyota is not one of the manufacturers that is drastically recovering its financial performance, with recent recalls.
2010年1月24日日曜日
China Business Drives Financial Recovery of Japanese Companies
Sunday, January 24, 2010 – Osaka, Japan
Nikkei, Japan’s leading newspaper specialized in economy/business and politics, reported on January 23 that according to the outlook of financial performance for fiscal year ending March 2010, China business is to be the driver for many automobile and machinery manufacturing companies. For Nissan and Komatsu, 40%-50% of consolidated operating profit is estimated to be generated from China business and profit by region for China is to be greater than those of developed countries. This shows that Chinese economy is driving recovery of company financial performance when demand of Japan, the U.S. and Europe continues to plunge. Having said that, some experts say that Chinese economy seems to be overheated and competition is getting more and more severe. China is a promising marketing but there are challenges/issues such as risk management and thorough cost reduction.
1. How Chinese economy has been?
Chinese economy has been revitalized with positive effect of the economy stimulation measures implemented by the Chinese government (approximately 53 trillion yen) in November 2008. Chinese economy has recovered to 2 digit growth for October – December 2009 and its presence has been enhancing in the world economy.
2. How have Japanese companies been benefiting from revitalized Chinese economy?
China has become the largest automobile market (unit base) in the world last year, and Japanese automobile companies also have been increasing their sales, in particular Nissan. Nissan was quicker than other Japanese companies in strengthening product lines of small cars and developing sales/distribution network, leading to approximately 750,000 unit sales (almost +40% from previous year) for 2009. Operating profit from China business is expected to reach 50-60 billion yen, which is almost half the consolidated operating profit. Nissan estimates to enjoy consolidated operating profit of 120 billion yen when Toyota is estimated to remain in red. Nissan is quicker in recovering its financial achievement by generating profit in growing marketing of China.
Component manufacturers are also benefitting from demand growth in China. NSK’s business in the developed countries remains in low level and is expected to generate 60% - 70% of its consolidated operating profit from China business.
Chinese Business Outlook of Japanese Automobile and Machinery Manufacturers
(Source: Nikkei, edited and translated by the author)
Company Name / Operating Profit: % of China Business / Consolidated Operating Profit (billion yen) / Vs. Previous Year / Trend of Chinese Business
Nissan / Almost 50% / 120 / Returning to black / Quick in establishing sales distribution network, leading to sales growth of almost 40% for 2009
Honda / +40% / 155 / +13% / Strong sales of Accord in cities on the coast
Komatsu / About 40% / 72 / -53% / Strong hydraulic shovel business, growth by 30%, overwhelming Japan business
Furukawa Electric / +25% / 10 / +3% / With strong infrastructure investment, high voltage cable in full production in China and increase in business growth
NSK / 60% / - 70% / 8 / -64% / Bearing business grows targeting automobile and industry machinery companies, when business in Japan, the U.S. and Europe continues to plunge
Regarding machinery manufacturers, sales of China for Komatsu and Hitachi Construction Machinery are approximately 20% of worldwide business, which is greater than Caterpillar. Reducing cost by manufacturing locally, Komatsu’s operating profit from Chinese business is almost 40% of worldwide business, and Komatsu is quicker than Caterpillar in recovering its financial performance.
More companies in other industries are benefitting from growing Chinese market. For example, Toto’s business of luxurious toilets (using luxurious materials etc.) is strong in China. Their China business is expected to be in black when Japan and other business are expected to remain in red. Operating profit from China business is to reach approximately 30%, the biggest worldwide.
3. What are the anxieties and risks of Chinese economy and business?
Chinese economy seems to be overheated, according to some experts. It is prominent that increase in export of steel material to Chinese market is contributing to consolidated financial performance for iron and steel giants. However, many of the executives in this industry are cautious, commenting that “if credit squeeze measure at to be taken (to prevent overheating), the current strong steel material market trend in China may well change”.
Honda is enjoying strong sales of Accord in China but profit of joint venture business in China is to remain the same with previous year. It is because price erosion is extreme in China, when each company strengthens production and sales organization. As proportion of Chinese business increase, necessity of risk management for business fluctuation and increase in competition in this market increases.
Nikkei, Japan’s leading newspaper specialized in economy/business and politics, reported on January 23 that according to the outlook of financial performance for fiscal year ending March 2010, China business is to be the driver for many automobile and machinery manufacturing companies. For Nissan and Komatsu, 40%-50% of consolidated operating profit is estimated to be generated from China business and profit by region for China is to be greater than those of developed countries. This shows that Chinese economy is driving recovery of company financial performance when demand of Japan, the U.S. and Europe continues to plunge. Having said that, some experts say that Chinese economy seems to be overheated and competition is getting more and more severe. China is a promising marketing but there are challenges/issues such as risk management and thorough cost reduction.
1. How Chinese economy has been?
Chinese economy has been revitalized with positive effect of the economy stimulation measures implemented by the Chinese government (approximately 53 trillion yen) in November 2008. Chinese economy has recovered to 2 digit growth for October – December 2009 and its presence has been enhancing in the world economy.
2. How have Japanese companies been benefiting from revitalized Chinese economy?
China has become the largest automobile market (unit base) in the world last year, and Japanese automobile companies also have been increasing their sales, in particular Nissan. Nissan was quicker than other Japanese companies in strengthening product lines of small cars and developing sales/distribution network, leading to approximately 750,000 unit sales (almost +40% from previous year) for 2009. Operating profit from China business is expected to reach 50-60 billion yen, which is almost half the consolidated operating profit. Nissan estimates to enjoy consolidated operating profit of 120 billion yen when Toyota is estimated to remain in red. Nissan is quicker in recovering its financial achievement by generating profit in growing marketing of China.
Component manufacturers are also benefitting from demand growth in China. NSK’s business in the developed countries remains in low level and is expected to generate 60% - 70% of its consolidated operating profit from China business.
Chinese Business Outlook of Japanese Automobile and Machinery Manufacturers
(Source: Nikkei, edited and translated by the author)
Company Name / Operating Profit: % of China Business / Consolidated Operating Profit (billion yen) / Vs. Previous Year / Trend of Chinese Business
Nissan / Almost 50% / 120 / Returning to black / Quick in establishing sales distribution network, leading to sales growth of almost 40% for 2009
Honda / +40% / 155 / +13% / Strong sales of Accord in cities on the coast
Komatsu / About 40% / 72 / -53% / Strong hydraulic shovel business, growth by 30%, overwhelming Japan business
Furukawa Electric / +25% / 10 / +3% / With strong infrastructure investment, high voltage cable in full production in China and increase in business growth
NSK / 60% / - 70% / 8 / -64% / Bearing business grows targeting automobile and industry machinery companies, when business in Japan, the U.S. and Europe continues to plunge
Regarding machinery manufacturers, sales of China for Komatsu and Hitachi Construction Machinery are approximately 20% of worldwide business, which is greater than Caterpillar. Reducing cost by manufacturing locally, Komatsu’s operating profit from Chinese business is almost 40% of worldwide business, and Komatsu is quicker than Caterpillar in recovering its financial performance.
More companies in other industries are benefitting from growing Chinese market. For example, Toto’s business of luxurious toilets (using luxurious materials etc.) is strong in China. Their China business is expected to be in black when Japan and other business are expected to remain in red. Operating profit from China business is to reach approximately 30%, the biggest worldwide.
3. What are the anxieties and risks of Chinese economy and business?
Chinese economy seems to be overheated, according to some experts. It is prominent that increase in export of steel material to Chinese market is contributing to consolidated financial performance for iron and steel giants. However, many of the executives in this industry are cautious, commenting that “if credit squeeze measure at to be taken (to prevent overheating), the current strong steel material market trend in China may well change”.
Honda is enjoying strong sales of Accord in China but profit of joint venture business in China is to remain the same with previous year. It is because price erosion is extreme in China, when each company strengthens production and sales organization. As proportion of Chinese business increase, necessity of risk management for business fluctuation and increase in competition in this market increases.
2010年1月3日日曜日
How Japan’s Growth Strategy Should Be?
Sunday, January 3, 2010 – Osaka, Japan
Nikkei, Japan’s leading newspaper specialized in economy/business and politics, reported on December 31 2009 that on December 30 the Japanese government defined basic policy new growth strategy for sustainable economic growth. “Economic management is to be performed, positioning achievement of nominal growth rate* as the most important challenge” is specified. Targets including “By 2010 average nominal growth rate of 3% and bigger growth than actual growth rate of 2%” with engines of industries including environment, healthcare and tourism, and “nominal GDP (Gross Domestic Product) of 650 trillion yen for 2020” were specified. However, according to an article reported today by Nikkei, approximately 60% of 17 economy experts are dissatisfied with the government’s economic policy and estimate that it takes a few years for the economy to recover.
1. Why “nominal“ instead of “actual” is used to define growth target?
It is unusual for the government to define growth target in “nominal” instead of “actual” excluding effects of price fluctuation. “Nominal“ is used from the sense of urgency of the current economic situation; deflation mentioned in the previous article "How Japan Can Get Out From 10 Year Deflation?" and its negative effect on family budget and company business.
2. How has Japan’s nominal GDP been until today? What are the upcoming plans?
For nearly 20 years since 1990, Japan’s nominal GDP has been hovering at the low level of 500 trillion yen, and therefore 650 trillion yen level is increase by +30% vs. 2008. Growth of nominal growth rate of +3% has not been achieved since 1991.
In order to achieve both nominal growth rate of 3% and actual growth rate of 2%, first, deflation needs to be overcome then control inflation rate under 1%/year. Mr. Naoto Kan, Vice Prime Minister and Head of National Strategy emphasized in the press conference held on December 30 that “these targets are sufficiently achievable”; however, experts feel that it is difficult to achieve the targets, considering the past Japanese economy performances and financial policies.
Prime Minister Mr. Yukio Hatoyama expressed in the press conference on December 30 his determination to achieve the target, saying that he is fully aware that the effectiveness of his administration really counts. The government is to develop growth strategy action plan (roadmap/timeline) for the time span until 2020 by June.
3. Which fields are to be focused to achieve growth strategy?
The following 6 fields are specified as focuses for growth strategy.
1) Environment and energy
Expand environment related market from 70 trillion yen to 120 trillion yen. Create 1.4 million jobs. Leverage Japan’s technologies to contribute to cutting 1.3 billion ton worldwide GHG, equivalent to Japan’s emission volume. Leverage IT to make next generation transmission network pervasive to control electricity supply. Make pervasive eco-friendly housing and expand natural energy use, and LED and other energy saving lighting.
2) Healthcare
Create healthcare, nursing and medical market of 45 trillion yen and 280 jobs by leveraging technologies to create internal and external demand. Initiate R&D of innovative medical and nursing technologies such as regenerative medicine, telemedicine system, nursing robots etc. and provide healthcare related services to Asian markets expected to experience aging society. Strengthen infrastructure supporting aging society such as medical, nursing and housing to eliminate anxieties for the future to promote consumption by elders.
3) Asia
Create demand together with Asia, “the growth centre of the world”, positioning formulation of EFAAP covering 21 countries and regions that are currently members of APEC as its foundation. Develop infrastructure demand of Asia such as transportation, water and energy.
4) Tourism and revitalizing local community
Achieve in line with 1)-3)
5) Science and technologies
Achieve in line with 1)-3)
6) Employment and human resources
Achieve in line with 1)-3)
4. How effective is the growth strategy?
The author basically agrees with views of majority of experts; measures for achievement are not clear and need to focus more on motivating companies and other private sector to invest in growth sectors such as deregulation, tangible growth strategy development and execution, and develop mid-term financial policy outlook/plan. Focusing on assisting family budget, the biggest anxiety lies in whether the Hatoyama administration can educe vitality of companies, the source/engine of economic growth.
Reasons for such evaluation from experts include lack of explanation of concrete policies, and lack of perspective that main player (source/engine) of economic growth is companies. The latter is more critical.
Drivers and engines of economic growth are R&D of companies and equipment investment. It is unlikely to achieve high growth driven by inefficient public sector, and sufficient financial resource cannot be acquired, neither. In fact, in 2008, value added (personnel cost, profit, corporate tax etc.) generated by companies excluding financial institutes reached 26.4 trillion yen. This means that more than 50% of nominal GDP is generated by companies.
5. What is the ideal scenario for economic recovery and achieving the target?
The government is supposed to buy over companies and market, and give incentives and motivation, creating favourable environment for companies and other private sectors to proactively invest in growth sectors. That is the solution to solve the root cause of the ongoing economic plunge. Also minimizing interference of government is necessary and public institutions not to get in the way of private sectors making decisions.
However, from the growth strategy reported, such message is not sufficiently delivered. It does not remove anxieties mentioned in the previous articles "How Japan Can Get Out From 10 Year Deflation?", "Japanese Companies Refraining from Equipment Investmen", "Service Price Drop in Japan Prominent: The Biggest Among 10 Major Countries" and "Japan's Debt to Drastically Increase - What is the Effect on Economy?"
Mentality of “Economy for human being based on friendship and love” alone is not sufficient to achieve the economic growth. Nikkei introduces varieties of innovative technologies of all sectors and industries (environment and energy, healthcare, IT etc.) in their special reports on January 1 2010. It is with tangible growth strategy, tactics and action plan leveraging such technologies, that create new demand and market in sectors and industries where needs exist in aging society with low birthrate, ubiquitous networking society. And it is with appropriate economic policies mentioned by the economists in Nikkei’s report on January 3 such as deregulation, tangible mid-term financial policy outlook, reduction in corporate tax rate (currently 40%), concluding EPA/FTA with Asian countries/regions, and pension system reform that create favourable environment for the growth strategy to be actually executed.
It is only when companies invest in such growth sectors, (many of them contributing to improving social infrastructure and systems), collaborate with academia and other public sectors in R&D in particular, and operate efficiently with high productivity, that they would be able to generate revenue to improve their financial performance. It is with good financial performance of companies that leads to new job creation, higher salaries for their employees, pensions guarantee etc., which contributes to minimizing anxieties of citizens making their own living and live happily after retirement as well as providing citizens with better lives and society, based on the mentality of “friendship and love”. It is by eliminating their anxieties that citizens utilize allowances for consumer spending instead of setting aside for saving, meaning the government’s economy boosting measures become successful, and as a result Japan will be able to get out of deflation, its economy recovered, and achieve the target.
We would need to wait and see what kind of roadmap and action plan the government will develop and announce in June.
* Nominal Growth Rate (Source: Nikkei, edited and translated by the author)
Nominal growth rate is GDP growth rate including effects of price fluctuation. Almost equals to sum of after-tax pay of workers and profits generated by companies. In general, changes in GDP are measured by actual growth rate (excluding effects of price fluctuation) but nominal growth rate can be said to precisely reflect the actual sensation of business and economy because income and profits are all of nominal value.
Average economic growth rate by decades since 1980
Decades / Nominal Growth Rate (%) / Actual Growth Rate (%)
1980s / 6.1 / 3.8
1990s / 2.0 / 1.4
2000s / -0.5 / 0.7
Rise in nominal growth rate leads to both getting out of deflation and economic growth. In 2000s, actual growth rate was +0.7% but nominal growth rate was -0.5%, which implies that long term economic recovery was achieved but lacked in actual sensation. This was because nominal growth rate was minus.
Nikkei, Japan’s leading newspaper specialized in economy/business and politics, reported on December 31 2009 that on December 30 the Japanese government defined basic policy new growth strategy for sustainable economic growth. “Economic management is to be performed, positioning achievement of nominal growth rate* as the most important challenge” is specified. Targets including “By 2010 average nominal growth rate of 3% and bigger growth than actual growth rate of 2%” with engines of industries including environment, healthcare and tourism, and “nominal GDP (Gross Domestic Product) of 650 trillion yen for 2020” were specified. However, according to an article reported today by Nikkei, approximately 60% of 17 economy experts are dissatisfied with the government’s economic policy and estimate that it takes a few years for the economy to recover.
1. Why “nominal“ instead of “actual” is used to define growth target?
It is unusual for the government to define growth target in “nominal” instead of “actual” excluding effects of price fluctuation. “Nominal“ is used from the sense of urgency of the current economic situation; deflation mentioned in the previous article "How Japan Can Get Out From 10 Year Deflation?" and its negative effect on family budget and company business.
2. How has Japan’s nominal GDP been until today? What are the upcoming plans?
For nearly 20 years since 1990, Japan’s nominal GDP has been hovering at the low level of 500 trillion yen, and therefore 650 trillion yen level is increase by +30% vs. 2008. Growth of nominal growth rate of +3% has not been achieved since 1991.
In order to achieve both nominal growth rate of 3% and actual growth rate of 2%, first, deflation needs to be overcome then control inflation rate under 1%/year. Mr. Naoto Kan, Vice Prime Minister and Head of National Strategy emphasized in the press conference held on December 30 that “these targets are sufficiently achievable”; however, experts feel that it is difficult to achieve the targets, considering the past Japanese economy performances and financial policies.
Prime Minister Mr. Yukio Hatoyama expressed in the press conference on December 30 his determination to achieve the target, saying that he is fully aware that the effectiveness of his administration really counts. The government is to develop growth strategy action plan (roadmap/timeline) for the time span until 2020 by June.
3. Which fields are to be focused to achieve growth strategy?
The following 6 fields are specified as focuses for growth strategy.
1) Environment and energy
Expand environment related market from 70 trillion yen to 120 trillion yen. Create 1.4 million jobs. Leverage Japan’s technologies to contribute to cutting 1.3 billion ton worldwide GHG, equivalent to Japan’s emission volume. Leverage IT to make next generation transmission network pervasive to control electricity supply. Make pervasive eco-friendly housing and expand natural energy use, and LED and other energy saving lighting.
2) Healthcare
Create healthcare, nursing and medical market of 45 trillion yen and 280 jobs by leveraging technologies to create internal and external demand. Initiate R&D of innovative medical and nursing technologies such as regenerative medicine, telemedicine system, nursing robots etc. and provide healthcare related services to Asian markets expected to experience aging society. Strengthen infrastructure supporting aging society such as medical, nursing and housing to eliminate anxieties for the future to promote consumption by elders.
3) Asia
Create demand together with Asia, “the growth centre of the world”, positioning formulation of EFAAP covering 21 countries and regions that are currently members of APEC as its foundation. Develop infrastructure demand of Asia such as transportation, water and energy.
4) Tourism and revitalizing local community
Achieve in line with 1)-3)
5) Science and technologies
Achieve in line with 1)-3)
6) Employment and human resources
Achieve in line with 1)-3)
4. How effective is the growth strategy?
The author basically agrees with views of majority of experts; measures for achievement are not clear and need to focus more on motivating companies and other private sector to invest in growth sectors such as deregulation, tangible growth strategy development and execution, and develop mid-term financial policy outlook/plan. Focusing on assisting family budget, the biggest anxiety lies in whether the Hatoyama administration can educe vitality of companies, the source/engine of economic growth.
Reasons for such evaluation from experts include lack of explanation of concrete policies, and lack of perspective that main player (source/engine) of economic growth is companies. The latter is more critical.
Drivers and engines of economic growth are R&D of companies and equipment investment. It is unlikely to achieve high growth driven by inefficient public sector, and sufficient financial resource cannot be acquired, neither. In fact, in 2008, value added (personnel cost, profit, corporate tax etc.) generated by companies excluding financial institutes reached 26.4 trillion yen. This means that more than 50% of nominal GDP is generated by companies.
5. What is the ideal scenario for economic recovery and achieving the target?
The government is supposed to buy over companies and market, and give incentives and motivation, creating favourable environment for companies and other private sectors to proactively invest in growth sectors. That is the solution to solve the root cause of the ongoing economic plunge. Also minimizing interference of government is necessary and public institutions not to get in the way of private sectors making decisions.
However, from the growth strategy reported, such message is not sufficiently delivered. It does not remove anxieties mentioned in the previous articles "How Japan Can Get Out From 10 Year Deflation?", "Japanese Companies Refraining from Equipment Investmen", "Service Price Drop in Japan Prominent: The Biggest Among 10 Major Countries" and "Japan's Debt to Drastically Increase - What is the Effect on Economy?"
Mentality of “Economy for human being based on friendship and love” alone is not sufficient to achieve the economic growth. Nikkei introduces varieties of innovative technologies of all sectors and industries (environment and energy, healthcare, IT etc.) in their special reports on January 1 2010. It is with tangible growth strategy, tactics and action plan leveraging such technologies, that create new demand and market in sectors and industries where needs exist in aging society with low birthrate, ubiquitous networking society. And it is with appropriate economic policies mentioned by the economists in Nikkei’s report on January 3 such as deregulation, tangible mid-term financial policy outlook, reduction in corporate tax rate (currently 40%), concluding EPA/FTA with Asian countries/regions, and pension system reform that create favourable environment for the growth strategy to be actually executed.
It is only when companies invest in such growth sectors, (many of them contributing to improving social infrastructure and systems), collaborate with academia and other public sectors in R&D in particular, and operate efficiently with high productivity, that they would be able to generate revenue to improve their financial performance. It is with good financial performance of companies that leads to new job creation, higher salaries for their employees, pensions guarantee etc., which contributes to minimizing anxieties of citizens making their own living and live happily after retirement as well as providing citizens with better lives and society, based on the mentality of “friendship and love”. It is by eliminating their anxieties that citizens utilize allowances for consumer spending instead of setting aside for saving, meaning the government’s economy boosting measures become successful, and as a result Japan will be able to get out of deflation, its economy recovered, and achieve the target.
We would need to wait and see what kind of roadmap and action plan the government will develop and announce in June.
* Nominal Growth Rate (Source: Nikkei, edited and translated by the author)
Nominal growth rate is GDP growth rate including effects of price fluctuation. Almost equals to sum of after-tax pay of workers and profits generated by companies. In general, changes in GDP are measured by actual growth rate (excluding effects of price fluctuation) but nominal growth rate can be said to precisely reflect the actual sensation of business and economy because income and profits are all of nominal value.
Average economic growth rate by decades since 1980
Decades / Nominal Growth Rate (%) / Actual Growth Rate (%)
1980s / 6.1 / 3.8
1990s / 2.0 / 1.4
2000s / -0.5 / 0.7
Rise in nominal growth rate leads to both getting out of deflation and economic growth. In 2000s, actual growth rate was +0.7% but nominal growth rate was -0.5%, which implies that long term economic recovery was achieved but lacked in actual sensation. This was because nominal growth rate was minus.
2009年10月11日日曜日
Japanese Manufacturers’ Main Businesses Returning to Black
October 10, 2009 – Osaka, Japan,
Nikkei, Japan’s leading newspaper specialized in economy and politics, reported today that main businesses of Japanese manufacture giants especially high-tech companies that once fell in the red have been going back to black. This is because of Japanese manufactures’ efforts in cost reduction, together with digital consumer electronics and automobile sales hitting the bottom attributing to demand increase of emerging markets and positive effect of government policy such as eco-point system (incentive for consumers purchasing eco-friendly consumer electronics and automobiles). Price hovering at appropriate level due to supply volume control is also a contributor of the recovery. Continuous improvement in operational income by sector would be the overall performance support for such companies in the process of recovery, although there are some uncertainty factors such as high yen.
Market recovery is conspicuous in semi-conductors, HDD and precision component. Toshiba’s flash memories used in mobile audio music players and PC recording media have returned to black for fiscal quarter of July-September instead of original expectation of October-December. Toshiba had been cutting production by 30% January-June this year. And decrease in price stopped and then demand started to recover. Hitachi’s HDD business has also been recovering; its operation income was minus 9 billion yen for April-September but is expected to return to black for October-December.
Positive effects of emerging marketing demand and government policy have led to digital consumer electronics sales hitting the bottom. Sharp’s LCD panel business was in the red by 14.7 billion yen April-June but is expected to go back to black by 16 billion yen for fiscal year ending March 2010. With incentive/tax reduction for eco (ecological & economical) cars, sales related to EV car have been good. Koito’s Japan domestic business of light supplied for Toyota’s Prius cars has been drastically improving. Its operating income was minus 1.2 billion yen for April-June but seems to have returned to black by 5+ billion for July-September.
Cost reduction is also a contribution factor for recovery. Hoya transferred its digital camera production to overseas, and together with good new product sales its business for September seems to have returned to black. Digital camera businesses of Fuji Film Holdings and Olympus are expected to return to black as well. Energy plant business of IHI was in the red by 6.2 billion for fiscal year ending March 2009 but is expected to land on 11 billion yen in black for fiscal year ending March 2010, attributing to clearing out unprofitable overseas businesses plus drop in purchasing cost.
The worldwide economic crisis and recession started autumn last year had hit directly revenues of companies, resulting in total of approximately 3.6 trillion yen in red for total of all Japanese manufacturers for fiscal year ending March 2009. Consumer electronics, automobile and component businesses were the hardest hit, with an example of Toshiba’s semiconductor business that went in the red by 280 billion yen. And then amount of red decreased to 730 billion yen for total manufacturers for April-June, which is 1/8 of January-March. Therefore many experts assume that it has hit the bottom and if recovery trend continues it is possible that the complete recovery scenario for fiscal year ending March 2010 becomes a reality.
Some possible risks for such a recovery scenario include high yen for many Japanese manufacturers whose business relies heavily on export, and uncertain business trend for January-March 2010. Machine tool and semiconductor manufacturing equipment sectors relying on increase in production and investment are quite possible to remain in the red because few companies still refrain from increasing equipment investment with the assumption of demand recovery.
The author strongly believes that performance (operational income) recovery of Japanese manufacturers has an impact on feasibility of Japanese government’s new policy and upcoming action plans as well as on overall economic recovery. Government’s revenue (corporate tax) fluctuates by the degree of recovery in their performance, and in fact this is a big topic in recent budgeting of the government for 2010. It is also the requirement for labour market recovery and stable earnings for citizens, meaning it has big impact on consumer spending. Of course, it also greatly influence investment etc.
Nikkei, Japan’s leading newspaper specialized in economy and politics, reported today that main businesses of Japanese manufacture giants especially high-tech companies that once fell in the red have been going back to black. This is because of Japanese manufactures’ efforts in cost reduction, together with digital consumer electronics and automobile sales hitting the bottom attributing to demand increase of emerging markets and positive effect of government policy such as eco-point system (incentive for consumers purchasing eco-friendly consumer electronics and automobiles). Price hovering at appropriate level due to supply volume control is also a contributor of the recovery. Continuous improvement in operational income by sector would be the overall performance support for such companies in the process of recovery, although there are some uncertainty factors such as high yen.
Market recovery is conspicuous in semi-conductors, HDD and precision component. Toshiba’s flash memories used in mobile audio music players and PC recording media have returned to black for fiscal quarter of July-September instead of original expectation of October-December. Toshiba had been cutting production by 30% January-June this year. And decrease in price stopped and then demand started to recover. Hitachi’s HDD business has also been recovering; its operation income was minus 9 billion yen for April-September but is expected to return to black for October-December.
Positive effects of emerging marketing demand and government policy have led to digital consumer electronics sales hitting the bottom. Sharp’s LCD panel business was in the red by 14.7 billion yen April-June but is expected to go back to black by 16 billion yen for fiscal year ending March 2010. With incentive/tax reduction for eco (ecological & economical) cars, sales related to EV car have been good. Koito’s Japan domestic business of light supplied for Toyota’s Prius cars has been drastically improving. Its operating income was minus 1.2 billion yen for April-June but seems to have returned to black by 5+ billion for July-September.
Cost reduction is also a contribution factor for recovery. Hoya transferred its digital camera production to overseas, and together with good new product sales its business for September seems to have returned to black. Digital camera businesses of Fuji Film Holdings and Olympus are expected to return to black as well. Energy plant business of IHI was in the red by 6.2 billion for fiscal year ending March 2009 but is expected to land on 11 billion yen in black for fiscal year ending March 2010, attributing to clearing out unprofitable overseas businesses plus drop in purchasing cost.
The worldwide economic crisis and recession started autumn last year had hit directly revenues of companies, resulting in total of approximately 3.6 trillion yen in red for total of all Japanese manufacturers for fiscal year ending March 2009. Consumer electronics, automobile and component businesses were the hardest hit, with an example of Toshiba’s semiconductor business that went in the red by 280 billion yen. And then amount of red decreased to 730 billion yen for total manufacturers for April-June, which is 1/8 of January-March. Therefore many experts assume that it has hit the bottom and if recovery trend continues it is possible that the complete recovery scenario for fiscal year ending March 2010 becomes a reality.
Some possible risks for such a recovery scenario include high yen for many Japanese manufacturers whose business relies heavily on export, and uncertain business trend for January-March 2010. Machine tool and semiconductor manufacturing equipment sectors relying on increase in production and investment are quite possible to remain in the red because few companies still refrain from increasing equipment investment with the assumption of demand recovery.
The author strongly believes that performance (operational income) recovery of Japanese manufacturers has an impact on feasibility of Japanese government’s new policy and upcoming action plans as well as on overall economic recovery. Government’s revenue (corporate tax) fluctuates by the degree of recovery in their performance, and in fact this is a big topic in recent budgeting of the government for 2010. It is also the requirement for labour market recovery and stable earnings for citizens, meaning it has big impact on consumer spending. Of course, it also greatly influence investment etc.
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