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)

Much has been made of gradually rising wages in Japan, and this is indeed good news after 20 years of stagnation and negative growth. But while some of this is feeding into the consumer economy, making some retailers worthy targets for investors, many households remain jittery, and a lot of the new income is being squirrelled away into savings instead.
The following is a detailed analysis of consumption patterns in Japan, but here are the key highlights:
<ul class="">
<li>Average monthly incomes rose 2% in 2017 in real terms, the highest since 2010, after hitting a low in 2011, where incomes were down more than 4.5% in nominal terms compared to 2008.</li>
<li>Incomes will rise again in 2018 and 2019.</li>
<li>As a result, both nominal and real spending rose in 2017, up 1.2% and 0.6% respectively. This was the first increase in spending since 2013.</li>
<li>Real expenditure levels are still 3% below the peak reached in 2009. 
</li>
<li>This is despite a sharp rise in the cost of fresh food and some other essentials, emphasising just how much households have been cutting back on non-essentials, notably clothing which is down nearly 12% in five years, although some of this loss of value is price deflation.  
</li>
<li>We expect this lower spending on apparel to continue, a net negative for retailers like <a href="https://www.smartkarma.com/entities/11895" target="_blank" data-smartkarma-citation="entities:11895:1">Adastria (2685 JP)</a>, but people will continue to be drawn to good cost performers at the low end like Uniqlo and GU (both <a href="https://www.smartkarma.com/entities/751" target="_blank" data-smartkarma-citation="entities:751:1">Fast Retailing (9983 JP)</a>), <a href="https://www.smartkarma.com/entities/15213" target="_blank" data-smartkarma-citation="entities:15213:1">Shimamura (8227 JP)</a>, and at the premium end such as <a href="http://baycrews.co.jp" target="_blank">Baycrews</a>, <a href="http://www.urban-research.com" target="_blank">Urban Research</a>, <a href="https://www.smartkarma.com/entities/4887" target="_blank" data-smartkarma-citation="entities:4887:1">United Arrows (7606 JP)</a> , and <a href="https://www.smartkarma.com/entities/23991" target="_blank" data-smartkarma-citation="entities:23991:1">Tokyo Base (3415 JP)</a> . Zozo’s (<a href="https://www.smartkarma.com/entities/18379" target="_blank" data-smartkarma-citation="entities:18379:1">Start Today (3092 JP)</a>) private brand could fall into this category.</li>
<li>Home fashion remains the only strong performing category over the past five years, with household durables like furniture up 5.7% in 2017 and 14.1% over five years. We expect this home decoration boom to continue, providing a boost to major retailers strong in this category like <a href="https://www.smartkarma.com/entities/20386" target="_blank" data-smartkarma-citation="entities:20386:1">Nitori (9843 JP)</a> and Muji (<a href="https://www.smartkarma.com/entities/2765" target="_blank" data-smartkarma-citation="entities:2765:1">Ryohin Keikaku (7453 JP)</a>), and potentially <a href="https://www.smartkarma.com/entities/641" target="_blank" data-smartkarma-citation="entities:641:1">Yamada Denki (9831 JP)</a> .</li>
<li>Prices of fresh foods have shot up in recent years, boosting turnover for supermarkets, but pressuring mainstream households. There is no sign of softening in food prices, and we are bullish about any retailer offering discount options. Most of the discounters are still unlisted but some are worth considering such as  <a href="https://www.smartkarma.com/entities/4701" target="_blank" data-smartkarma-citation="entities:4701:1">Kobe Bussan (3038 JP)</a>, <a href="https://www.smartkarma.com/entities/3797" target="_blank" data-smartkarma-citation="entities:3797:1">Cosmos Pharmaceutical (3349 JP)</a> and <a href="https://www.smartkarma.com/entities/27329" target="_blank" data-smartkarma-citation="entities:27329:1">Kusuri No Aoki (3549 JP)</a>. A possible move into food discount retailing by <a href="https://www.smartkarma.com/entities/13475" target="_blank" data-smartkarma-citation="entities:13475:1">Don Quijote (7532 JP)</a> in the next year as it absorbs Uny is worth watching and also note that <a href="https://www.smartkarma.com/entities/3" target="_blank" data-smartkarma-citation="entities:3:1">Aeon (8267 JP)</a> has some discount formats.</li>
<li>Spending on communications – phones and networks – continues to rise, up nearly 14% in five years, and this looks set to continue, benefitting the main networks, <a href="https://www.smartkarma.com/entities/1089" target="_blank" data-smartkarma-citation="entities:1089:1">NTT Docomo (9437 JP)</a>, <a href="https://www.smartkarma.com/entities/639" target="_blank" data-smartkarma-citation="entities:639:1">KDDI (9433 JP)</a> and <a href="https://www.smartkarma.com/entities/315" target="_blank" data-smartkarma-citation="entities:315:1">Softbank (9984 JP)</a>, and potentially <a href="https://www.smartkarma.com/entities/31" target="_blank" data-smartkarma-citation="entities:31:1">Rakuten's (4755 JP)</a> new mobile service.</li>
<li>While incomes are rising slightly now, working households are not spending all of the increase but putting more income into savings instead.</li>
<li>At the same time, income sources are changing and becoming less stable, further encouraging savings, benefiting the financial sector major like <a href="https://www.smartkarma.com/entities/838" target="_blank" data-smartkarma-citation="entities:838:1">Japan Post Bank (7182 JP)</a> .</li>
<li>As a result, averages savings increased 7% in 2017 to ¥17.29 million (US$156,000). The median number was ¥10 million.</li>
<li>Although PM Abe is finally convincing companies to raise wages, if this propensity to save continues, the impact on expenditure will be a lot less than he hopes.</li>
</ul>

Much has been made of gradually rising wages in Japan, and this is indeed good news after 20 years of stagnation and negative growth. But while some of this is feeding into the consumer economy, making some retailers worthy targets for investors, many households remain jittery, and a lot of the new income is being squirrelled away into savings instead.
The following is a detailed analysis of consumption patterns in Japan, but here are the key highlights:

Average monthly incomes rose 2% in 2017 in real terms, the highest since 2010, after hitting a low in 2011, where incomes were down more than 4.5% in nominal terms compared to 2008.
Incomes will rise again in 2018 and 2019.
As a result, both nominal and real spending rose in 2017, up 1.2% and 0.6% respectively. This was the first increase in spending since 2013.
Real expenditure levels are still 3% below the peak reached in 2009. 

This is despite a sharp rise in the cost of fresh food and some other essentials, emphasising just how much households have been cutting back on non-essentials, notably clothing which is down nearly 12% in five years, although some of this loss of value is price deflation.  

We expect this lower spending on apparel to continue, a net negative for retailers like Adastria (2685 JP), but people will continue to be drawn to good cost performers at the low end like Uniqlo and GU (both Fast Retailing (9983 JP)), Shimamura (8227 JP), and at the premium end such as Baycrews, Urban Research, United Arrows (7606 JP) , and Tokyo Base (3415 JP) . Zozo’s (Start Today (3092 JP)) private brand could fall into this category.
Home fashion remains the only strong performing category over the past five years, with household durables like furniture up 5.7% in 2017 and 14.1% over five years. We expect this home decoration boom to continue, providing a boost to major retailers strong in this category like Nitori (9843 JP) and Muji (Ryohin Keikaku (7453 JP)), and potentially Yamada Denki (9831 JP) .
Prices of fresh foods have shot up in recent years, boosting turnover for supermarkets, but pressuring mainstream households. There is no sign of softening in food prices, and we are bullish about any retailer offering discount options. Most of the discounters are still unlisted but some are worth considering such as  Kobe Bussan (3038 JP), Cosmos Pharmaceutical (3349 JP) and Kusuri No Aoki (3549 JP). A possible move into food discount retailing by Don Quijote (7532 JP) in the next year as it absorbs Uny is worth watching and also note that Aeon (8267 JP) has some discount formats.
Spending on communications – phones and networks – continues to rise, up nearly 14% in five years, and this looks set to continue, benefitting the main networks, NTT Docomo (9437 JP), KDDI (9433 JP) and Softbank (9984 JP), and potentially Rakuten's (4755 JP) new mobile service.
While incomes are rising slightly now, working households are not spending all of the increase but putting more income into savings instead.
At the same time, income sources are changing and becoming less stable, further encouraging savings, benefiting the financial sector major like Japan Post Bank (7182 JP) .
As a result, averages savings increased 7% in 2017 to ¥17.29 million (US$156,000). The median number was ¥10 million.
Although PM Abe is finally convincing companies to raise wages, if this propensity to save continues, the impact on expenditure will be a lot less than he hopes.


Consumption Trends in Japan: Rising Incomes Boosting Retailers but a Lot Going Into Savings Too

Japan

Kusuri no Aoki Holdings Co., Ltd. operates as a holding company. The Company, through its subsidiaries, provides medicines, cosmetics, health foods, beauty care, and household products. Kusuri no Aoki Holdings serves customers in Japan.

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Kusuri no Aoki Holdings (3549 JP)

Consumption Trends in Japan: Rising Incomes Boosting Retailers but a Lot Going Into Savings Too

Much has been made of gradually rising wages in Japan, and this is indeed good news after 20 years of stagnation and negative growth. But while...

Michael Causton

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52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)