Expert on Japan Retail and Consumer Markets, JapanConsuming

Michael Causton

Expert on Japan Retail and Consumer Markets

Real Insight on Japanese Consumer Markets

JapanConsuming

JapanConsuming is a specialist research firm producing intelligence on Japanese retail and consumer markets. Founded in 2000, JapanConsuming has become the leading provider of insights on Japanese retailers and consumer trends to retailers, brands, government agencies and investors. As well as a highly regarded monthly report on the market, JapanConsuming produces in-depth reports on retail sectors, seminars on key trends and telephone consulting to investors on trends and retailers.

JapanConsuming was founded by Michael Causton and Roy Larke. 

Thematic (Sector/Industry)

Interbrand’s annual valuation of top brands saw growing numbers of Japanese firms in retail and FMCG (Fast Moving Consumer Goods) enter its global brand ranking.
At home, online companies like Zozo and Mercari are also climbing the rankings.

Interbrand’s annual valuation of top brands saw growing numbers of Japanese firms in retail and FMCG (Fast Moving Consumer Goods) enter its global brand ranking.
At home, online companies like Zozo and Mercari are also climbing the rankings.

Uniqlo Japan’s Most Valuable Retail Brand

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

ja research

ja research is an independent research platform focused exclusively on Japanese equities. Leveraging data and graphic analysis provided by Japan Analytics, we provide insights on small and medium-sized companies that have been ignored by the sell-side as well as challenging conventional wisdom on larger companies. We also offer analyst and corporate access, the latter with translation if required. 

Quantitative Analysis

<div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/080/728/original/2019-03-02_20-40-55.png?1551526871" class="editor-image img-responsive" data-smartkarma-image-id="80728"></figure>Source: Japan Analytics
</div>LIQUIDITY RULES - Despite the continuous stream of negative macroeconomic news from Japan and other economies, financial liquidity trends are the strongest in over two years, and much of this 'boom' is flowing into risk assets. Large-scale repatriation of offshore funds by US companies has also helped boost the US dollar against the yen. The Market Composite responded by rising 2.3% over the last two weeks, although only by 1% in US dollar terms.WEAK MACRO - Net exports and higher inventories offset private investment and consumption during the fourth quarter, resulting in flat GDP growth year-on-year. January industrial production fell to the lowest level in 30 months, and, with the manufacturing PMI nearing 50, the prospect is for further weakness this quarter. Inventories continue to rise and, in North Asia, to levels last seen in 2005. Combined with the sharp fall in exports in Japan, Korea and Taiwan, export pricing in back in deflationary territory, putting further upward pressure on real interest rates.  Meanwhile, January retail sales saw the largest month-on-month decline in over three years as department stores saw fewer Chinese tourists over the New Year.  Equity markets are living on 'borrowed time'.  <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/080/722/original/2019-03-02_18-02-59.png?1551517390" class="editor-image img-responsive" data-smartkarma-image-id="80722"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/080/724/original/2019-03-02_18-07-56.png?1551517689" class="editor-image img-responsive" data-smartkarma-image-id="80724"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/080/729/original/2019-03-02_20-41-51.png?1551526925" class="editor-image img-responsive" data-smartkarma-image-id="80729"></figure><div class="content-caption">Source: Japan Analytics</div>HOLD FOR NOW - This bear market rally is two months old and is maturing. The Value Traded ratio is below trend again, the RSI is neutral, and the Toraku is signalling caution. We expect another month of liquidity/weak Yen-driven strength before the economic realities begin to prevail.MARKET/SECTOR STRATEGY- We continue to recommend an underweight position in Japan in global portfolios and favour undervalued domestically-orientated companies in the Information Technology, Internet, Media, Transportation, Healthcare and Telecommunications sectors. We would avoid or short the financial sectors Banks, Non-Bank Finance and Multi-Industry. We would underweight the Auto, Retail and Other Consumer Products sectors as consumer spending contracts further in the US, Europe, China and Japan. In the DETAIL section below, we will review Sector performance, company results, revisions and stock performance over the previous two weeks, as well as adding some brief comments on <a href="https://www.smartkarma.com/entities/10020" target="_blank" data-smartkarma-citation="entities:10020:1">Sakai Moving Service (9039 JP)</a>, <a href="https://www.smartkarma.com/entities/20269" target="_blank" data-smartkarma-citation="entities:20269:1">Sumitomo Chemical (4005 JP)</a>, <a href="https://www.smartkarma.com/entities/8431" target="_blank" data-smartkarma-citation="entities:8431:1">Parco (8251 JP)</a>, <a href="https://www.smartkarma.com/entities/4489" target="_blank" data-smartkarma-citation="entities:4489:1">Chugai Pharmaceutical (4519 JP)</a>, <a href="https://www.smartkarma.com/entities/14674" target="_blank" data-smartkarma-citation="entities:14674:1">Nichias (5393 JP)</a>, <a href="https://www.smartkarma.com/entities/27043" target="_blank" data-smartkarma-citation="entities:27043:1">Raksul (4384 JP)</a>, <a href="https://www.smartkarma.com/entities/10503" target="_blank" data-smartkarma-citation="entities:10503:1">Daito Trust (1878 JP)</a>, and <a href="https://www.smartkarma.com/entities/14502" target="_blank" data-smartkarma-citation="entities:14502:1">Benefit One (2412 JP)</a>.


Source: Japan Analytics
LIQUIDITY RULES - Despite the continuous stream of negative macroeconomic news from Japan and other economies, financial liquidity trends are the strongest in over two years, and much of this 'boom' is flowing into risk assets. Large-scale repatriation of offshore funds by US companies has also helped boost the US dollar against the yen. The Market Composite responded by rising 2.3% over the last two weeks, although only by 1% in US dollar terms.WEAK MACRO - Net exports and higher inventories offset private investment and consumption during the fourth quarter, resulting in flat GDP growth year-on-year. January industrial production fell to the lowest level in 30 months, and, with the manufacturing PMI nearing 50, the prospect is for further weakness this quarter. Inventories continue to rise and, in North Asia, to levels last seen in 2005. Combined with the sharp fall in exports in Japan, Korea and Taiwan, export pricing in back in deflationary territory, putting further upward pressure on real interest rates.  Meanwhile, January retail sales saw the largest month-on-month decline in over three years as department stores saw fewer Chinese tourists over the New Year.  Equity markets are living on 'borrowed time'.  Source: Japan AnalyticsHOLD FOR NOW - This bear market rally is two months old and is maturing. The Value Traded ratio is below trend again, the RSI is neutral, and the Toraku is signalling caution. We expect another month of liquidity/weak Yen-driven strength before the economic realities begin to prevail.MARKET/SECTOR STRATEGY- We continue to recommend an underweight position in Japan in global portfolios and favour undervalued domestically-orientated companies in the Information Technology, Internet, Media, Transportation, Healthcare and Telecommunications sectors. We would avoid or short the financial sectors Banks, Non-Bank Finance and Multi-Industry. We would underweight the Auto, Retail and Other Consumer Products sectors as consumer spending contracts further in the US, Europe, China and Japan. In the DETAIL section below, we will review Sector performance, company results, revisions and stock performance over the previous two weeks, as well as adding some brief comments on Sakai Moving Service (9039 JP), Sumitomo Chemical (4005 JP), Parco (8251 JP), Chugai Pharmaceutical (4519 JP), Nichias (5393 JP), Raksul (4384 JP), Daito Trust (1878 JP), and Benefit One (2412 JP).   

🇯🇵 Japan • Fortnightly Update - Liquidity Rules

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

<ul>
<li>In this report, we compare the recent dynamic foreign tourists trend to Korea and Japan. In January 2019, the number of <a href="https://www.japantimes.co.jp/news/2019/02/20/national/number-foreign-visitors-japan-rises-7-5-2-69-million-january/#.XG4GyqIzbIV" target="_blank">foreign visitors to Japan</a> rose 7.5% YoY to 2.69 million. A total of 0.78 million from South Korea visited Japan in January (DOWN 3% YoY) followed by 0.75 million people from China (up 19.3% YoY).</li>
<li>According to Korea Ministry of Economy &amp; Finance (MoEF), the number of people from China to Korea increased 35.1% YoY in January 2019.</li>
<li>As evidenced by the better than expected Chinese visitors to Korea and worse than expected South Korean visitors to Japan in January, there is an increasing indication that this trend could continue in 2019. Many of the Korean related cosmetics stocks have positively reacted to the recent data. One of the interesting trades to be long on a basket of Korean cosmetics related stocks and be short on a basket of Japanese cosmetics related names. </li>
</ul>


In this report, we compare the recent dynamic foreign tourists trend to Korea and Japan. In January 2019, the number of foreign visitors to Japan rose 7.5% YoY to 2.69 million. A total of 0.78 million from South Korea visited Japan in January (DOWN 3% YoY) followed by 0.75 million people from China (up 19.3% YoY).
According to Korea Ministry of Economy &amp; Finance (MoEF), the number of people from China to Korea increased 35.1% YoY in January 2019.
As evidenced by the better than expected Chinese visitors to Korea and worse than expected South Korean visitors to Japan in January, there is an increasing indication that this trend could continue in 2019. Many of the Korean related cosmetics stocks have positively reacted to the recent data. One of the interesting trades to be long on a basket of Korean cosmetics related stocks and be short on a basket of Japanese cosmetics related names. 


A Comparison of Recent Visitors Trend to Korea and Japan

Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

<ul>
<li>The declining and ageing population in Japan has been a major cause for concern to many Japanese companies.</li>
<li>
<a href="https://www.smartkarma.com/entities/15862" target="_blank" data-smartkarma-citation="entities:15862:1">Fancl Corp (4921 JP)</a>, is a relatively small player in the Japanese cosmetics and nutritional supplements space who is expected to benefit from the declining and ageing population.</li>
<li>Compared to the peer average, EV/Sales discount narrowed down significantly over the course of the last year. But we believe the discount remains the same on a growth adjusted basis.</li>
<li>Still too small for institutional investors to notice. But we expect them to start noticing the company over the coming years.</li>
<li>One of the cheapest stocks on a long term forward multiple, as we expect FANCL to sustain its high growth over a long period of time.</li>
</ul>We are not sure if <a href="https://www.smartkarma.com/entities/15862" target="_blank" data-smartkarma-citation="entities:15862:1">Fancl Corp (4921 JP)</a> can ever be in the same league as Shiseido or Kao, but we certainly believe the company doesn’t deserve to be about 10% of the size of Shiseido. Thus, we have a very long-term bullish view on FANCL and expect to see the company’s market cap to double over the next 5-7 years


The declining and ageing population in Japan has been a major cause for concern to many Japanese companies.

Fancl Corp (4921 JP), is a relatively small player in the Japanese cosmetics and nutritional supplements space who is expected to benefit from the declining and ageing population.
Compared to the peer average, EV/Sales discount narrowed down significantly over the course of the last year. But we believe the discount remains the same on a growth adjusted basis.
Still too small for institutional investors to notice. But we expect them to start noticing the company over the coming years.
One of the cheapest stocks on a long term forward multiple, as we expect FANCL to sustain its high growth over a long period of time.
We are not sure if Fancl Corp (4921 JP) can ever be in the same league as Shiseido or Kao, but we certainly believe the company doesn’t deserve to be about 10% of the size of Shiseido. Thus, we have a very long-term bullish view on FANCL and expect to see the company’s market cap to double over the next 5-7 years

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/079/068/original/2019-02-17_10-57-33.png?1550368676" class="editor-image img-responsive" data-smartkarma-image-id="79068"></figure><div class="content-caption">Source: Japan Analytics</div>PEAK CYCLE EARNINGS - In our <a href="https://www.smartkarma.com/insights/japan-winter-results-revisions-flash-cycle-earnings-peak-was-december-26th" target="_blank" data-smartkarma-citation="insights:28022">Winter Results &amp; Revisions Flash</a> Insight of yesterday, we noted that Japanese listed corporate earnings, after nine consecutive 'up' quarters, peaked on December 26th, two days before the market reached a twenty-month low having declined 22.5% in the preceding three months. Forecast earnings peaked on November 7th and have led reported earnings to the downside since August last year.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/079/069/original/2019-02-17_11-06-28.png?1550369207" class="editor-image img-responsive" data-smartkarma-image-id="79069"></figure><div class="content-caption">Source: Japan Analytics</div>ONE-YEAR LAG - Reported and forecast earnings are a lagging indicator and, in this instance, lagged by just under one year. Our preferred leading indicator, the Results &amp; Revision Score which includes earnings momentum factors, peaked on 11th November 2017, 44 trading days ahead of the peak in the Market Composite. As of Friday's close and with 99% of this quarters' announcements made, the Results &amp; Revisions Score is at a new 21-month. The score has now fallen by 70% and has halved since October 26th last year. We will cover the outlook in more detail in our upcoming quarterly Results and Revision review. However, the last two cycles (2009 and 2016) saw 'trough' scores of -9.6 and -2.1, respectively. There is ample room on the downside as export volumes continue to decline and the increase in the consumption tax in October tips Japan into a recession by year-end.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/079/070/original/2019-02-17_11-59-44.png?1550372400" class="editor-image img-responsive" data-smartkarma-image-id="79070"></figure><div class="content-caption">Source: Japan Analytics</div>SIDEWAYS - The market has moved sideways through the reporting window rising 0.7% in Yen terms and falling 0.7% in US$ terms. The weakness in the currency has helped offset the slide in profits.MARKET/SECTOR STRATEGY- We continue to recommend an underweight position in Japan in global portfolios and favour undervalued domestically-orientated companies in the Information Technology, Internet, Media, and Telecommunications sectors. We would avoid or short the financial sectors Banks, Non-Bank Finance and Multi-Industry (Japan Post). We would underweight the Auto and Other Consumer Products sectors as consumer spending contracts further in the US, Europe, China and in Japan later in the year. In the DETAIL section below, we will review Sector performance over the last two weeks, and, in addition to our regular roundup of company results, revisions and stock performance over the previous two weeks, including brief comments on <a href="https://www.smartkarma.com/entities/5439" target="_blank" data-smartkarma-citation="entities:5439:1">Subaru (7270 JP)</a>, <a href="https://www.smartkarma.com/entities/1301" target="_blank" data-smartkarma-citation="entities:1301:1">Infomart (2492 JP)</a>, <a href="https://www.smartkarma.com/entities/16576" target="_blank" data-smartkarma-citation="entities:16576:1">Lion (4912 JP)</a>, <a href="https://www.smartkarma.com/entities/4102" target="_blank" data-smartkarma-citation="entities:4102:1">Nissan Chemical (4021 JP)</a>, <a href="https://www.smartkarma.com/entities/3077" target="_blank" data-smartkarma-citation="entities:3077:1">Keyence (6861 JP)</a>, <a href="https://www.smartkarma.com/entities/6267" target="_blank" data-smartkarma-citation="entities:6267:1">Suruga Bank (8358 JP)</a>, and <a href="https://www.smartkarma.com/entities/27149" target="_blank" data-smartkarma-citation="entities:27149:1">Mercari (4385 JP)</a>.

Source: Japan AnalyticsPEAK CYCLE EARNINGS - In our Winter Results &amp; Revisions Flash Insight of yesterday, we noted that Japanese listed corporate earnings, after nine consecutive 'up' quarters, peaked on December 26th, two days before the market reached a twenty-month low having declined 22.5% in the preceding three months. Forecast earnings peaked on November 7th and have led reported earnings to the downside since August last year.Source: Japan AnalyticsONE-YEAR LAG - Reported and forecast earnings are a lagging indicator and, in this instance, lagged by just under one year. Our preferred leading indicator, the Results &amp; Revision Score which includes earnings momentum factors, peaked on 11th November 2017, 44 trading days ahead of the peak in the Market Composite. As of Friday's close and with 99% of this quarters' announcements made, the Results &amp; Revisions Score is at a new 21-month. The score has now fallen by 70% and has halved since October 26th last year. We will cover the outlook in more detail in our upcoming quarterly Results and Revision review. However, the last two cycles (2009 and 2016) saw 'trough' scores of -9.6 and -2.1, respectively. There is ample room on the downside as export volumes continue to decline and the increase in the consumption tax in October tips Japan into a recession by year-end.Source: Japan AnalyticsSIDEWAYS - The market has moved sideways through the reporting window rising 0.7% in Yen terms and falling 0.7% in US$ terms. The weakness in the currency has helped offset the slide in profits.MARKET/SECTOR STRATEGY- We continue to recommend an underweight position in Japan in global portfolios and favour undervalued domestically-orientated companies in the Information Technology, Internet, Media, and Telecommunications sectors. We would avoid or short the financial sectors Banks, Non-Bank Finance and Multi-Industry (Japan Post). We would underweight the Auto and Other Consumer Products sectors as consumer spending contracts further in the US, Europe, China and in Japan later in the year. In the DETAIL section below, we will review Sector performance over the last two weeks, and, in addition to our regular roundup of company results, revisions and stock performance over the previous two weeks, including brief comments on Subaru (7270 JP), Infomart (2492 JP), Lion (4912 JP), Nissan Chemical (4021 JP), Keyence (6861 JP), Suruga Bank (8358 JP), and Mercari (4385 JP). 

Japan

Shiseido Company, Limited manufactures cosmetic and toiletry products. The Company offers an array of makeup and skin-care products, toiletries, beauty salon, pharmaceuticals, foodstuffs, and fine chemicals.

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Shiseido Company (4911 JP)

Uniqlo Japan’s Most Valuable Retail Brand

Interbrand’s annual valuation of top brands saw growing numbers of Japanese firms in retail and FMCG (Fast Moving Consumer Goods) enter its global...

Michael Causton

🇯🇵 Japan • Fortnightly Update - Liquidity Rules

LIQUIDITY RULES - Despite the continuous stream of negative macroeconomic news from Japan and other economies, financial liquidity trends are the...

Campbell Gunn

A Comparison of Recent Visitors Trend to Korea and Japan

In this report, we compare the recent dynamic foreign tourists trend to Korea and Japan. In January 2019, the number of foreign visitors to...

Douglas Kim

FANCL: Playing the Long Game

The declining and ageing population in Japan has been a major cause for concern to many Japanese companies. Fancl Corp (4921 JP), is a relatively...

Oshadhi Kumarasiri

Japan: Fortnightly Update: Past the Peak

PEAK CYCLE EARNINGS - In our Winter Results & Revisions Flash Insight of yesterday, we noted that Japanese listed corporate earnings, after...

Campbell Gunn

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