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)

No one really knows what will happen after the initial shock of the coronavirus fades away. Many observers in Japan, expert and otherwise, are already predicting a completely new world in one way or another, but the reality is likely more prosaic.What is certain is that the Japanese consumer economy will recover and it is just a question of when.The most likely effect of the crisis is that it will catalyse a period of change already in process and which also happens to be one of the most dramatic and far-reaching seen so far in retail.But there is one trend that may well reverse as more businesses go under or contract, providing relief for many retailers: the labour shortage and rise in wages.The following offers an in-depth review of both the impact of the current crisis and implications as well as the long-term trends in Japanese retailing, providing insight into which sectors, formats and specific companies will win and lose in the next three years.For a short read, we provide the conclusions and winners and losers first.

No one really knows what will happen after the initial shock of the coronavirus fades away. Many observers in Japan, expert and otherwise, are already predicting a completely new world in one way or another, but the reality is likely more prosaic.What is certain is that the Japanese consumer economy will recover and it is just a question of when.The most likely effect of the crisis is that it will catalyse a period of change already in process and which also happens to be one of the most dramatic and far-reaching seen so far in retail.But there is one trend that may well reverse as more businesses go under or contract, providing relief for many retailers: the labour shortage and rise in wages.The following offers an in-depth review of both the impact of the current crisis and implications as well as the long-term trends in Japanese retailing, providing insight into which sectors, formats and specific companies will win and lose in the next three years.For a short read, we provide the conclusions and winners and losers first.

After Covid: The Future for Japanese Retail: Winners & Losers

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

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.

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/127/200/original/2020-04-09_06-30-15.png?1586381444" class="editor-image img-responsive" data-smartkarma-image-id="127200"></figure><div class="content-caption">Source • NHK</div>SOCIAL SPREADING - As the restrictions are implemented with varying degrees of compliance in the designated prefectures in Japan, Japan's case-count continues to climb and is becoming more widespread geographically. There is anecdotal evidence of movement by those that can afford to do so to other areas of the country, which perhaps explains some of these increases. The Governor of Okinawa, which saw five new cases yesterday, has pleaded with citizens of other parts of Japan not to travel there. Meanwhile, the Mayor of Nagoya has been over-ruled by the Bolsonaro-like Governor of Aichi Prefecture in his request to implement stricter controls. A similar dynamic is playing out between the Governor of Tokyo, which saw a new high of 144 new cases yesterday, and the national government.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/127/201/original/IMG_1197.jpg?1586382076" class="editor-image img-responsive" data-smartkarma-image-id="127201"></figure><div class="content-caption">Source • NHK</div>THE PATH TO 80% -  Japan's goal is to reduce social mobility by 80% and, as measured by activity on the Yamanote rail loop-line around central Tokyo, this was largely achieved last weekend. The reduction on weekdays at peak times from 30th March to 3rd April is still 40% as is activity at the famous Shibuya 'scramble' crossing as shown above. From personal observation, the public and businesses have yet to respond fully to the government's recommendations and there is still confusion as to which business can stay open and if so under what conditions they should operate. The default position, so far, for most non-leisure-related consumer-facing companies is to remain open with customer-distancing.  As the UK has learned to its cost, consistent and repeated messaging is required to ensure even a minimal level of compliance.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/127/205/original/2020-04-09_07-03-22.png?1586383423" class="editor-image img-responsive" data-smartkarma-image-id="127205"></figure><div class="content-caption">Source • OECD, Financial Times</div>FALLOUT - Forty-two companies have already declared bankruptcy since the onset of COVID-19, all of which are hotels or tour companies. In light of the unclear messaging on compensation for businesses, a Tokyo taxi company yesterday laid off all of its 600 drivers recommending that claiming unemployment benefit would be the quickest way for them to receive benefits while suggesting they would be rehired at a later date. Unsurprisingly the 'Economy Watchers' survey which measures confidence in an array of 1,812 retail, restaurant and service-industry staff fell to 14.2 in March, the lowest score since the series started in 2002. The more robust Cabinet Office index of consumer confidence covering 6,806 households reached an eleven-year low of 30.9, slightly ahead of the March 2009 low of 29.4 and downgraded its assessment to 'worsening'. The OECD has published some ominous forecasts for the potential impact on GDP broken down by sector. We consider this to be a 'worst-case' scenario in the event of a full shutdown of social activity which the government is trying to avoid at all costs.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/127/212/original/File%202020-04-09%204%2005%2042.jpeg?1586384975" class="editor-image img-responsive" data-smartkarma-image-id="127212"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/127/214/original/2020-04-09_03-38-04.png?1586385031" class="editor-image img-responsive" data-smartkarma-image-id="127214"></figure><div class="content-caption">Source • Financial Times</div><div class="content-caption"></div>PROPORTIONATE RESPONSE - In this respect, it is important to reflect that the case and absolute fatality rates from COVID-19 in Japan (as is also true in Taiwan, Singapore and South Korea) are very low. Medical scientists and several recent <a href="https://www.icnarc.org/About/Latest-News/2020/03/22/Report-On-196-Patients-Critically-Ill-With-Covid-19" target="_blank" rel="noopener">studies</a>have posited that these benign outcomes may be related to a variety of physiological and environmental factors such as nutrition, obesity, air quality and exposure to Vitamin-D producing sunlight. Such factors may also explain the outcomes so far in Australia and Argentina relative to Spain and Italy. Having experienced the twin traumas of the 2008 financial crisis and the events of "3/11", the Japanse government and Japanese industry are pursuing a measured response which, we believe, will result in a less traumatic economic outcome than other developed countries may experience. Some Twitter 'wags' have compared the chart above to Hokusai's famous ukiyo-e print "Kanagawa-oki Nami Ura". The natural metaphor is quite apt as is the enduring quality of Fuji-san in the distance.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/127/216/original/2020-04-09_03-36-31.png?1586386089" class="editor-image img-responsive" data-smartkarma-image-id="127216"></figure><div class="content-caption">Source • Hokusai</div>In the DETAIL below, we shall review the fourteen results announcements and twelve revisions or initial forecasts. The positive/negative balance for results was 9:5, for revisions and forecasts the split was 2:0:9 continuing the recent trend of pessimistic outlooks for consumer-orientated businesses.

Source • NHKSOCIAL SPREADING - As the restrictions are implemented with varying degrees of compliance in the designated prefectures in Japan, Japan's case-count continues to climb and is becoming more widespread geographically. There is anecdotal evidence of movement by those that can afford to do so to other areas of the country, which perhaps explains some of these increases. The Governor of Okinawa, which saw five new cases yesterday, has pleaded with citizens of other parts of Japan not to travel there. Meanwhile, the Mayor of Nagoya has been over-ruled by the Bolsonaro-like Governor of Aichi Prefecture in his request to implement stricter controls. A similar dynamic is playing out between the Governor of Tokyo, which saw a new high of 144 new cases yesterday, and the national government.Source • NHKTHE PATH TO 80% -  Japan's goal is to reduce social mobility by 80% and, as measured by activity on the Yamanote rail loop-line around central Tokyo, this was largely achieved last weekend. The reduction on weekdays at peak times from 30th March to 3rd April is still 40% as is activity at the famous Shibuya 'scramble' crossing as shown above. From personal observation, the public and businesses have yet to respond fully to the government's recommendations and there is still confusion as to which business can stay open and if so under what conditions they should operate. The default position, so far, for most non-leisure-related consumer-facing companies is to remain open with customer-distancing.  As the UK has learned to its cost, consistent and repeated messaging is required to ensure even a minimal level of compliance.Source • OECD, Financial TimesFALLOUT - Forty-two companies have already declared bankruptcy since the onset of COVID-19, all of which are hotels or tour companies. In light of the unclear messaging on compensation for businesses, a Tokyo taxi company yesterday laid off all of its 600 drivers recommending that claiming unemployment benefit would be the quickest way for them to receive benefits while suggesting they would be rehired at a later date. Unsurprisingly the 'Economy Watchers' survey which measures confidence in an array of 1,812 retail, restaurant and service-industry staff fell to 14.2 in March, the lowest score since the series started in 2002. The more robust Cabinet Office index of consumer confidence covering 6,806 households reached an eleven-year low of 30.9, slightly ahead of the March 2009 low of 29.4 and downgraded its assessment to 'worsening'. The OECD has published some ominous forecasts for the potential impact on GDP broken down by sector. We consider this to be a 'worst-case' scenario in the event of a full shutdown of social activity which the government is trying to avoid at all costs.Source • Financial TimesPROPORTIONATE RESPONSE - In this respect, it is important to reflect that the case and absolute fatality rates from COVID-19 in Japan (as is also true in Taiwan, Singapore and South Korea) are very low. Medical scientists and several recent studieshave posited that these benign outcomes may be related to a variety of physiological and environmental factors such as nutrition, obesity, air quality and exposure to Vitamin-D producing sunlight. Such factors may also explain the outcomes so far in Australia and Argentina relative to Spain and Italy. Having experienced the twin traumas of the 2008 financial crisis and the events of "3/11", the Japanse government and Japanese industry are pursuing a measured response which, we believe, will result in a less traumatic economic outcome than other developed countries may experience. Some Twitter 'wags' have compared the chart above to Hokusai's famous ukiyo-e print "Kanagawa-oki Nami Ura". The natural metaphor is quite apt as is the enduring quality of Fuji-san in the distance.Source • HokusaiIn the DETAIL below, we shall review the fourteen results announcements and twelve revisions or initial forecasts. The positive/negative balance for results was 9:5, for revisions and forecasts the split was 2:0:9 continuing the recent trend of pessimistic outlooks for consumer-orientated businesses. 

🇯🇵 JAPAN • Revisions & Results 8th April - Getting to 80%▼& The GDP Contraction Lottery

Pan-Asia Catalysts/Events, Quiddity Advisors

Travis Lundy

Pan-Asia Catalysts/Events

Quiddity Advisors

Equity Bottom-Up

Today after the close, <a href="https://www.smartkarma.com/entities/yamada-denki-co-ltd" target="_blank" data-smartkarma-citation="entities:641:1" rel="noopener">Yamada Denki (9831 JP)</a> announced it would buy back up to 100,000,000 shares for up to ¥50 billion. The <a href="https://www.yamada-denki.jp/topics/download.t.pdf/1833" target="_blank" rel="noopener">announcement</a> is only in Japanese. The buyback will take place from 2 April 2020 (today) through 24 March 2021. The announcement has a blank spot where normally a company tells you what percent of shares outstanding the buyback is for. The arithmetic is easy. It is 11.4%. Which is a LOT. Often these buybacks are slightly compromised compared to the announcement because if you divide the total yen amount that could be spent by the total number of shares which could be bought, you end up with a price well below the price at time of announcement (i.e. they will run into the limit of amount spent before reaching the share count. In this case, there is a buffer of 20% to the upside.This buyback appears designed to buy back shares at an average price below the conversion price of the convertible bond which was converted last summer, and increase capital efficiency. The possibilities, modalities, parameters, and methods are discussed below.

Today after the close, Yamada Denki (9831 JP) announced it would buy back up to 100,000,000 shares for up to ¥50 billion. The announcement is only in Japanese. The buyback will take place from 2 April 2020 (today) through 24 March 2021. The announcement has a blank spot where normally a company tells you what percent of shares outstanding the buyback is for. The arithmetic is easy. It is 11.4%. Which is a LOT. Often these buybacks are slightly compromised compared to the announcement because if you divide the total yen amount that could be spent by the total number of shares which could be bought, you end up with a price well below the price at time of announcement (i.e. they will run into the limit of amount spent before reaching the share count. In this case, there is a buffer of 20% to the upside.This buyback appears designed to buy back shares at an average price below the conversion price of the convertible bond which was converted last summer, and increase capital efficiency. The possibilities, modalities, parameters, and methods are discussed below. 

Yamada Denki Buyback - Big Impact But Risky

Consumer electronics retailer <a href="https://www.smartkarma.com/entities/k-s-holdings-corp" target="_blank" data-smartkarma-citation="entities:13745:1" rel="noopener">K'S Holdings (8282 JP) </a>has had two excellent years by pursuing a policy that its rivals have all but abandoned. It has cut its range down to concentrate on home appliances, removing more technologically fast-moving gadgets, while focusing on large stores out in the suburbs. Despite this success, it faces market saturation.<a href="https://www.smartkarma.com/entities/k-s-holdings-corp" target="_blank" data-smartkarma-citation="entities:13745:1" rel="noopener"> </a>

Consumer electronics retailer K'S Holdings (8282 JP) has had two excellent years by pursuing a policy that its rivals have all but abandoned. It has cut its range down to concentrate on home appliances, removing more technologically fast-moving gadgets, while focusing on large stores out in the suburbs. Despite this success, it faces market saturation. 

Event-Driven

Major Japanese broadcaster <a href="https://www.smartkarma.com/entities/tokyo-broadcasting-system" target="_blank" data-smartkarma-citation="entities:12981:1" rel="noopener">Tokyo Broadcasting System (9401 JP)</a> has a long history of being a target for wannabe activists. The company has long held a large securities portfolio, anchored by shares in <a href="https://www.smartkarma.com/entities/tokyo-electron-ltd" target="_blank" data-smartkarma-citation="entities:280:1" rel="noopener">Tokyo Electron (8035 JP)</a> (Tokyo Electron was originally a spinoff of TBS) and <a href="https://www.smartkarma.com/entities/recruit-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:15070:1" rel="noopener">Recruit Holdings (6098 JP)</a>. The company has long had cash and other securities, and a decent chunk of real estate in a prime area of Akasaka (for a while I even used to work next to their HQ, and walked through the grounds on the way to the subway every day). But the company has long rebuffed corporate overtures to bring it into new businesses, and investor overtures to get to With a new buyback program announced last week after a sale of some securities, the company has finally thrown shareholders - and the two known activists - a bone.It is a tiny bone, with most of the meat already picked off.These two activists together may hold &lt;3% of shares out. They have too little heft to compete against management backed by corporate and financial crossholders who appear to hold more like 55+%. While there is tremendous value in the shares, it is not clear that TBS has any interest in selling its assets other than little by little, providing a little cash to shareholders here and there, and investing the rest.More below.

Major Japanese broadcaster Tokyo Broadcasting System (9401 JP) has a long history of being a target for wannabe activists. The company has long held a large securities portfolio, anchored by shares in Tokyo Electron (8035 JP) (Tokyo Electron was originally a spinoff of TBS) and Recruit Holdings (6098 JP). The company has long had cash and other securities, and a decent chunk of real estate in a prime area of Akasaka (for a while I even used to work next to their HQ, and walked through the grounds on the way to the subway every day). But the company has long rebuffed corporate overtures to bring it into new businesses, and investor overtures to get to With a new buyback program announced last week after a sale of some securities, the company has finally thrown shareholders - and the two known activists - a bone.It is a tiny bone, with most of the meat already picked off.These two activists together may hold &lt;3% of shares out. They have too little heft to compete against management backed by corporate and financial crossholders who appear to hold more like 55+%. While there is tremendous value in the shares, it is not clear that TBS has any interest in selling its assets other than little by little, providing a little cash to shareholders here and there, and investing the rest.More below.

The Activism at TBS - There's a History, And There Is NEW Activity, But Don't Hold Your Breath

Japan

BIC CAMERA INC. operates electronic retail stores throughout Japan focusing on the Tokyo metropolitan area.  The Company sells audio and video equipments, electrical home appliances and telecommunication equipments.  Bic Camera also runs an Internet shopping site.

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Bic Camera Inc (3048 JP)

After Covid: The Future for Japanese Retail: Winners & Losers

No one really knows what will happen after the initial shock of the coronavirus fades away. Many observers in Japan, expert and otherwise, are...

Michael Causton

🇯🇵 JAPAN • Revisions & Results 8th April - Getting to 80%▼& The GDP Contraction Lottery

SOCIAL SPREADING - As the restrictions are implemented with varying degrees of compliance in the designated prefectures in Japan, Japan's...

Campbell Gunn

Yamada Denki Buyback - Big Impact But Risky

Today after the close, Yamada Denki (9831 JP) announced it would buy back up to 100,000,000 shares for up to ¥50 billion. The announcement is only...

Travis Lundy

K’s Holdings: Thriving in the Suburbs

Consumer electronics retailer K'S Holdings (8282 JP) has had two excellent years by pursuing a policy that its rivals have all but abandoned. It...

Michael Causton

The Activism at TBS - There's a History, And There Is NEW Activity, But Don't Hold Your Breath

Major Japanese broadcaster Tokyo Broadcasting System (9401 JP) has a long history of being a target for wannabe activists. The company has long...

Travis Lundy

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