Weak Economic Growth in Japan

123jump.com Staff
28 Sep, 2001
New York City

In Tokyo trading Japan

[R]6:00AM New York, 7:00PM Tokyo - Stocks in Tokyo fell but for the week added nearly 3%. Unemployment level rose to 3.8%. Core consumer prices fell 0.1% and industrial production increased 3.4%.[/R]

In Tokyo trading Japan’s stock index slipped from a 6-week peak reached yesterday to close 0.28% weaker or 46.53 to 16,785.69. However, the index added 2.8%, while Topix gained 3.8% for the week. Financial stocks retreated. Commodity-related stocks and exporters rose on resurgent oil and metal prices. Oil jumped 3% in international trading lifting stocks of trading companies and oil refiners. Inpex, Japan Petroleum Exploration, and Sumitomo trading edged higher.

Of the Nikkei 225 stocks, 79 climbed, 139 slumped and 7 were unchanged. Thirty stocks gained 1%.

The Statistics Bureau revealed today Japan’s jobless rate increased 0.2% for the first time in eleven months to 3.8% in August, up from a nine-year low of 3.6% in July. The available jobs to job seekers ratio narrowed marginally from 1.07 to 1.06, while the unemployment rate for women edged up from 3.3% to 3.7%.

Finance Minister Fukushiro Nukaga however said the overall employment situation continued to improve. Nukaga commented that “I heard that a growing number of women job seekers led to a rise i in jobless rate. Although unemployment rates vary by region, the overall employment situation continues to improve.”

Core consumer prices, excluding fresh food, also slumped for the seventh month, shedding 0.1% from a year earlier as retailers increased prices. Prices of electronics also fell markedly, while the cost of mobile phone use also plummeted on promotions to attract new subscribers.

The Ministry of Economy, Trade and Industry revealed today industrial production 3.4% in July and household spending increased 1.2%. Automakers revved up production after the earthquake to meet inventory levels at dealers. Real consumer spending also surged 1.6% from a year earlier, beating analyst estimate of a 1.2% rise. Similarly, retail sales grew by 0.5% while spending on entertainment, education and labor spiked 11.3% stocking expectations that growing domestic demand will help forestall an economic slowdown. Steady job market has kept retail spending at healthy level but it is growing at anemic growth rate.

The Tankan survey to measure corporate confidence is expected on Monday next week.

Japanese companies are relying on exports to increase earnings as demand growth in the domestic remains anemic. The expected slowdown in the U.S. has left Japanese companies with few markets in the world to sell more. Middle East, China, India, and the rest of Asian nations are few bright spots for the Japanese companies. Companies with exposure to these markets are likely to outperform than the companies focused on domestic markets.

Asahi Newspaper report quoted on Bloomberg News service that according to the National Tax Agency the economic difference continues to increase, noting people earning less than 2 million yen increased ($17,000) by 420,000 to more than 10 million people, while those earning more than 10 million yen increased.

The yen rose against the dollar rebounding from one week low on renewed worries related to losses associated to the global credit crunch will spread from the U.S and Europe to the rest of Asia. Financial Times reports that Northern Rock had borrowed an additional 5 billion pounds to strengthen its financial position and comments by U.S. mortgage lender Fannie Mae CEO Daniel Mudd in television interview that the housing slump will extend beyond next year triggered yen buying.

The yen was quoted at 114.90, up from 115.06 to the dollar, while it rose 163.31 from 163.63 to the euro. It also gained to 232.93 against the pound from 234.45, while strengthening to 101.71 from 101.75 against the Australian dollar.

Oil and metal prices gained spurred by speculation of a further rate cut by the U.S. Federal Reserve and sustained growth from China and India. Crude oil rose 3.2% to $82.88 per barrel, the second highest close ever. Japan’s largest oil explorer gained 0.85% as a result.

Zinc, aluminium and copper climbed 3%, 1.2% and 1% correspondingly.

Of the Nikkei 225 index, NSK Limited led the gainers with a rise of 5.22% followed by rises of 4.79% in Mitsubishi Motor Company, 4.55% in Daiichi Sankyo, 3.93% in Mitsubishi Heavy Industry, and 2.71% in Sharp.

Metal processor NSK Limited led the gainers with a surge of 5.22% followed by Mitsubishi Motors Company rising 4.8%. Mitsubishi Motors revised half-year operating profit upwards from 5 billion yen to 136 billion yen. Sales forecasts were reviewed up from 1.17 trillion yen to 1.27 trillion yen.

Nisshin Oillio led the decliners with a loss of 5.81% followed by losses in Unitika Limited of 4.20%, in GS Yuasa Corporation of 4.18%, in Daiwa Securities of 4.04% and in Ebara Corporation of 3.63%.

Daiichi Sankyo, Japan’s third biggest drugmaker, won U.S. approval for a new blood pressure treatment that combines its Benicar with active ingredient in Norvasc.

Circle K Sunkus fell 2.7% after warning that it expects first half profits to fall by 20%. The company has more than 600 convenience stores.

Mitsubishi UFJ Financial Group lowered its first half profit forecast by 44% to 100 billion from 146.8 billion yen for the period ending on Sept 30, according to filing with the Tokyo Stock Exchange. Tighter consumer lending rules in Japan have battered stocks of several consumer lending companies including the largest Acom. Mitsubishi affiliate, Acom lost 50% of its market value in the last six months of trading after the new law took effect.