Sumitomo Bakelite Makes Tsutsunaka Plastics Wholly Owned Subsidiary
Sumitomo0 Bakelite, which already owns some 51% of Tsutsunaka Plastics, will buy its remaining shares and make it a wholly owned subsidiary. Tsutsunaka has been under pressure because of high energy costs; in the March 2006 year, ordinary income was down by half to 1,085 million yen. Sumitomo intends to absorb Tsutsunaka operations by March 2007. By combining activities, Sumitomo aims to cut indirect expenses, rationalize distribution costs, and improve technology and marketing operations. 日経

Japan's Population Declines for First Time
The population of Japan declined in 2005 for the first time in the postwar period. The verification of a stagnant population comes as no surprise, but a couple of related statistics are worth mentioning. First, the drop in Japan's population is in notable contrast to that of the U.S., which recently surpassed 300 million. Second, the number of unmarried young people in Japan, especially men, is remarkable. In the 25- to 29-year-old age group, some 72% of men and 59% of women were single. In the 30- to 34-year-old cohort, 47% of men and 32% of women were unmarried. These numbers represent significant increases of several percentage points from previous levels.

While the stats naturally have important consequences for marketers, from a broader vantage point they are also worrisome. A society with so many of its men unattached has a natural tendency toward social anomie. One wonders just how loyal many Japanese salarymen will remain to their companies without the bounds of responsibility marriage brings. By the same token, there's at least some question of how unique Japan is among Western nations. Even the relatively high U.S. marriage rate masks wide disparities among different relgious groups with different educational levels in different parts of the country.

Abe Government Remains Popular
The new government of Shinzo Abe continues to enjoy a honeymonn with the public. Its approval rate is 68%, down only a few points from the month before. On Japan's economic sanctions against North Korea following the country's nuclear test, 50% approved, while more than 30% wanted even tougher measures.

JSDA Tightens Rules for Capital Procurement
The Japan Securities Dealers Association (JSDA) has firmed up rules for securities firms' underwriting examinations of First Section firms making public offerings. Fifteen new provisions will go into effect in February 2007. The securities firms will be obligated to examine companies' record of achieving its past profit projections as well as the disclosure of appropriate data. The new rules may put a brake on companies' easy ability to raise new capital but will afford greater protections to shareholders. Securities firms will be audited under the rules set by the independent JSDA, and penalties will be prescribed for firms with violations. The rules extend widely to convertible bonds, bonds, and other types of financing.

JFSME Survey Shows Improvements
The Japan Finance Corporation for Small and Medium Businesses announced results from its business conditions survey of 13 thousand firms, of which half responded (日経). Overall, the diffusion index (DI) for the summer quarter was minus 1.8 points, 0.3 points smaller than the year-earlier period and representing the first improvement in three periods. While the impact of high oil prices was felt, stronger sales strengthened the index. The sales DI rose 2.1 points to 9.4, reaching the level of fall 1991. On the other hand, reflecting higher stock costs, the DI for net profit drive further into the red, expanding 1.5 points to a negative 12.6. DIs for both manufacturing and non-manufacturing sectors improved, as did the DI for the outloook for business conditions for the fourth quarter.

Required Disclosures for Quarterly Reports in View
Japan's accounting rule-making body has released details of required disclosures for quarterly reports. Although companies listed on the the First Section of the TSE must already file quarterlies, there are no hard rules for what they must contain and the releases differ from company to company.

The new rules are expected to take effect from March 2009. They would require disclosure of profit and loss, assets and liabilities, and cash flow, as well as a breakdown of results by product line. A summary of issued stock options and large risks would also be obligatory. In June of this year, the financial trading law established rules for quarterly disclosures by financial entities.
日経

Japanese Supermarket Store Sales Down for Ninth Straight Month
Japan's Chain Store Association reported that in September sales at the the nation's supermarkets fell 1.9% from a year earlier, the ninth straight monthly decline. In a nice bit of timing, NPR had a story today about "100 yen stores," which account for about $8.5 billion a year in sales. It would be interesting to know how much of the drop in supermarket store revenue is due to the rise of Japan's dollar shops.

Abe's China Trip Viewed Favorably
Apparently PM Abe did himself some good by choosing China as the first destination for his venture in overseas diplomacy since becoming prime minister. Most Chinese viewed the visit favorably, as did most Japanese.

Night Trading at Kabu.com Off to Slow Start
Trading at online broker during the night-time hours of 7:30 to 11:00 is doing poorly, accounting for only 1% of the broker's trades compared with the hoped-for 20%. Market analysts cite the lingering impact of the Livedoor Effect, which doesn't make complete sense: Why would night-time trading be affected by scandal? But perhaps stock trading in the darkness of DST-starved Japan (see the post below) seems dicey.

Still No Daylight Savings Time in Japan
One of the fascinating differences between Japan and the rest of the world is the adoption of Daylight Savings Time (DST). The US and most of the West has it; the Japanese don't. Alexander Jacoby in the Japan Times argues that DST offers huge benefits for the environment and would even provide a fillip to Japan's consumer spending. Jacoby traces the Japanese antipathy to DST to its apparently ham-fisted introduction, soon reversed, during the U.S. Occupation.

Maybe. But no Japanese I've ever met has expressed regret that Japan does not have DST. Indeed, Japanese in the U.S. find the whole system of pushing clocks back and forth weird, disconcerting, and difficult to get used to. I would be shocked if the Japanese adopted DST anytime soon, although I have been surprised that the Japanese have taken up anti-smoking measures as quickly as they have.

Abe Popular with Japanese Public
Two weeks after taking office, Prime Minister Abe is popular with the Japanese people, garnering an approval rating of about 70%. The public appreciates his trips to Soiuth Korea and China soon after taking office, as well as the leadership he has shown in the North Korea nuclear crisis.

The Limits of Japan's Recovery
Hisane Masaki discusses the relative weakness of the current economic expansion. Although the current recovery is one of Japan's longest, it doesn't match in breadth or scope previous high-growth periods. Growth has averaged only about 2% a year (interestingly, Masaki says many japanese households gauge economic strength by GDP figures; it's unlikely the same is now true for the U.S.)

Moreover, there is the perception, supported by some of the data, that the gap between rich and poor has widened. Rural areas and small towns, not to mention small companies, have done relatively poorly. Land prices in fashionable Tokyo sections like Roppongi are up, but rural land values are down. The Japanese government's fiscal condition remains sour, wages have fallen significantly over the past ten years, and workers are increasingly concerned whether they will receive the pensions they're due.

Notably, with the decline in wages, Japan's vaunted savings rate has dropped sharply. If Japanese decide they need to boost savings rather than buying, it is an all harbinger for a consumer-led expansion in the next phase.

Demand for Fallout Shelters Boom
It is indeed an ill wind that blows no one some good. North Korea recent nuclear test has led to booming demand for fallout shelters. A primary beneficiary in Japan has been Oribe Seiki Seisakusho (not listed) , which builds shelters guaranteed to withstand nuclear explosions. The company said that in a good year it receives about 8 orders; in the past few days alone since the explosion, it has received 10 orders.

A Different Take on the Japanese Economy
It's always refreshing to read economic analysis that differs completely from what most people are saying about Japan. In today's Japan Times, Gregory Clark rips Koizumi's economic policies, arguing that they have been the cause of massive increases in debt. He also belittles Koizumi's faith in structural form:

Koizumi's policies were the exact reverse [of what should have been done]: Cut government spending in vital areas, public works especially. Then compound that mistake with a witch hunt against all bad loans in the banking system (which creates more bad loans) combined with accounting changes that magnify losses. The result? A full-scale recession that cuts tax revenues far more than you have been able to cut government spending. A massive increase in government debtis inevitable.

This of course is blasphemy to the conventional wisdom, which was that Koizumi engineered tough reforms in Japan's economic system and thus made possible the recovery Japan now enjoys.

I'm by no means an economist, or even an astute economic observer. But Clark too seems to be framing the debate along traditional lines that seem outdated. Take the emphasis that many economists place on "public" versus "private" spending. But during Hurricane Katrina, Wal-Mart, because of its logistical expertise, did much better at providing vital "government services" than the government itself did.

By the same token, what possible use is it to a nation to have three different brands of chocolate puffed rice on supermarket shelves in three different size boxes? Couldn't the enormous private investment made in 16-oz Cocoa Pebbles have been used for something better than to give us an alternative to 21-0z Cocoa Krispies? Why is the allocation of resources to give us a hundred varieties of cereal and boxes deemed productive investment?

Can spending on OSHA really be that much worse? Maybe, if the OSHA rules are counter-productive and ideologically driven, rather than truly serve the cause of worker safety. But protecting workers is both a private and public good. And creating the rules and implementing them are both a public and private responsibility that should not be working at cross-purposes.

It seems to me Clark falls in the same trap when he argues for more public investment and dismisses criticism that Japan's public works programs build bridges to nowhere. Instead of arguing merely for greater public investment, Clark would do better to focus on what public investment would make the economy both more productive and best serve the Japanese people.

Nomura Real Estate Holdings Skyrockets
On its first day of trading, Nomura Real Estate Holdings (formerly a unit of Nomura Holdings) rose 18%, thus demonstrating the strength of the Japan real estate market.