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)

<p>Japan is suffering as much as anywhere from the current coronavirus crisis. At least until March, the biggest issue was the country’s huge reliance on China as a supply base for everything from car parts to baby supplies, but as the government gave up hopes of running Abe’s Olympics in 2020, there is now an even greater sense of concern as parts of Japan enters a state of emergency and likely into long or short-term lockdown.</p><p>This will continue to benefit retailers of FMCG and food, but it spells disaster for the travel and discretionary goods sectors.</p><p>Apparel/footwear retailers suffered in March, <a href="https://www.smartkarma.com/entities/united-arrows-ltd" target="_blank" data-smartkarma-citation="entities:4887:1" rel="noopener">United Arrows (7606 JP)</a> dropped 25%, <a href="https://www.smartkarma.com/entities/right-on-co-ltd" target="_blank" data-smartkarma-citation="entities:16044:1" rel="noopener">Right On Co Ltd (7445 JP)</a> 40%, <a href="https://www.smartkarma.com/entities/abc-mart-inc" target="_blank" data-smartkarma-citation="entities:3213:1" rel="noopener">Abc Mart Inc (2670 JP)</a> 31% and <a href="https://www.smartkarma.com/entities/adastria-co-ltd" target="_blank" data-smartkarma-citation="entities:11895:1" rel="noopener">Adastria Co Ltd (2685 JP)</a> 24% – <a href="https://www.smartkarma.com/entities/workman-co-ltd" target="_blank" data-smartkarma-citation="entities:8467:1" rel="noopener">Workman Co Ltd (7564 JP)</a>  though bucked the trend with a 23% rise.</p><p><a href="https://www.smartkarma.com/entities/isetan-mitsukoshi-holdings-l" target="_blank" data-smartkarma-citation="entities:18871:1" rel="noopener">Isetan Mitsukoshi Holdings L (3099 JP)</a> saw sales down 35% in February with falls in traffic at all its major stores. Apparel sales were particularly poor, although food sales remained flat. In March, sales fell another 39.8%, with Mitsukoshi Ginza down 55.1%. <a href="https://www.smartkarma.com/entities/j-front-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:8947:1" rel="noopener">J Front Retailing's (3086 JP)</a> Daimaru Matsuzakaya’s sales fell 43% in February (duty-free sales were down 97%) and then 40.9% in March, while <a href="https://www.smartkarma.com/entities/hankyu-hanshin-holdings-inc" target="_blank" data-smartkarma-citation="entities:13058:1" rel="noopener">Hankyu Hanshin Holdings (9042 JP)</a> was down 28.1% in February and 38.1% in March. <a href="https://www.smartkarma.com/entities/takashimaya-co-ltd" target="_blank" data-smartkarma-citation="entities:370:1" rel="noopener">Takashimaya's (8233 JP)</a> sales fell 35.1% and 36.2% and Sogo Seibu 32% in both months.</p><p>Japan’s government will certainly offer financial support, but this might not be enough for some long-ailing companies.</p>

Japan is suffering as much as anywhere from the current coronavirus crisis. At least until March, the biggest issue was the country’s huge reliance on China as a supply base for everything from car parts to baby supplies, but as the government gave up hopes of running Abe’s Olympics in 2020, there is now an even greater sense of concern as parts of Japan enters a state of emergency and likely into long or short-term lockdown.This will continue to benefit retailers of FMCG and food, but it spells disaster for the travel and discretionary goods sectors.Apparel/footwear retailers suffered in March, United Arrows (7606 JP) dropped 25%, Right On Co Ltd (7445 JP) 40%, Abc Mart Inc (2670 JP) 31% and Adastria Co Ltd (2685 JP) 24% – Workman Co Ltd (7564 JP)  though bucked the trend with a 23% rise.Isetan Mitsukoshi Holdings L (3099 JP) saw sales down 35% in February with falls in traffic at all its major stores. Apparel sales were particularly poor, although food sales remained flat. In March, sales fell another 39.8%, with Mitsukoshi Ginza down 55.1%. J Front Retailing's (3086 JP) Daimaru Matsuzakaya’s sales fell 43% in February (duty-free sales were down 97%) and then 40.9% in March, while Hankyu Hanshin Holdings (9042 JP) was down 28.1% in February and 38.1% in March. Takashimaya's (8233 JP) sales fell 35.1% and 36.2% and Sogo Seibu 32% in both months.Japan’s government will certainly offer financial support, but this might not be enough for some long-ailing companies.

JAPAN Retail & Covid-19: FMCG Gain Amid Nationwide Retail Pain

'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/000/126/362/original/File%202020-04-04%208%2045%2047.jpeg?1585957595" class="editor-image img-responsive" data-smartkarma-image-id="126362"></figure><div class="content-caption">Source • stopcovid19.jp</div><p><strong>OVERSHOOT</strong> - This Insight will be longer than usual with more above the paywall 'fold' as Friday saw several significant developments in Japan's response to COVID-19. The English-language word 'overshoot' is used widely in Japan to refer to the situation in which more than 100% of available intensive care hospital beds are in use. Although the occupancy rate for Japan is still only 48%, Kyoto and Kanagawa Prefectures are already in 'overshoot', and Tokyo is again close to being so even after increasing capacity by 50% this week. As can be seen above, the country has sufficient ventilator capacity to deal with ten times the current cases (28,197); the shortage is in hospital beds for infectious diseases (4,089). The Tokyo Metropolitan Government (TMG) is now aiming to secure over 4,000 beds for severe COVID-19 cases, including 3,300 with oxygen. Of the 635 patients currently hospitalised in the capital, 80% do not need intensive care. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/126/377/original/IMG_1102.jpg?1585958777" class="editor-image img-responsive" data-smartkarma-image-id="126377"></figure><div class="content-caption">Source • NHK</div><p><strong>REGIME CHANGE</strong> - As we have noted in an earlier <a href="https://www.smartkarma.com/insights/japan-market-update-hit-the-boj-bid-and-wait-for-the-absolute-value-opportunity" target="_blank" data-smartkarma-citation="insights:37670" rel="noopener">Insight</a>, Japan has been slow to increase testing for COVID-19 as there was a Health Ministry guideline that all positive cases were to be hospitalised however mild the symptoms. Large-scale testing would result in the healthcare system being overwhelmed by a large number of relatively-mild cases. Also, the social convention of avoiding '<em>meiwaku</em>' or trouble to others has resulted in many of those with symptoms avoiding seeking confirmation. The Ministry is also resisting the designation of deaths from pneumonia as related to COVID-19 and is refusing to release data on the number of pneumonia deaths which are rumoured to be 'significantly higher' than in previous years in Tokyo. Whether by design or neglect, Japan lulled itself into a false sense of 'corona-superiority' which has delayed many of the responses that other developed countries have been taking. In the face of increased pressure from the medical profession, the bureaucrats have now relented and, at least in Tokyo, less-severe cases will be able to stay at home or will be billeted in hotels. The rule that patients could only be released from the hospital after two negative tests is also to be 'relaxed'. The rule that new cases must be reported to the Ministry by fax still, however, remains in place.</p><p><strong>HOTELS &amp; HOMES</strong> - Given the size of most homes in the capital, isolation in homes with multiple residents will be hazardous, The TMG is, therefore, moving quickly to requisition or acquire the necessary hotel space.  The infamously-xenophobic APA Hotel chain has been quick to offer their services to lightly-symptomatic patients and is offering a 50% discount to health care workers.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/126/380/original/2020-04-04_10-51-38.png?1585965120" class="editor-image img-responsive" data-smartkarma-image-id="126380"></figure><div class="content-caption">Source outbreak.info</div><p><strong>ASIAN OUTLIER</strong> - Japan is now the outlier in Asia in seeing an increasing rate of daily new cases (353 on April 3rd),  including a six-month-old baby against whom medical staff did not think to take any precautions forcing 44 staff into two weeks of self-isolation. Using a simple measure proposed by Messrs <a href="https://medium.com/@ekohlberg_47501/a-simple-score-to-tell-if-we-are-beating-the-virus-49e74b707e35" target="_blank" rel="noopener">Kohlberg, Neyman, and Tepper</a>, Japan's R Score is 2.09. With both Singapore and Hong Kong introducing stricter social constraints over the last two days, Japan's Swedish-style response is facing increasing domestic criticism. Several LDP politicians and supporters have distanced themselves from PM Abe's two-masks policy. Although far from disinterested parties, <a href="https://www.smartkarma.com/entities/rakuten-inc" target="_blank" data-smartkarma-citation="entities:31:1" rel="noopener">Rakuten (4755 JP)</a>'s @hmikitani and <a href="https://www.smartkarma.com/entities/softbank-group-corp" target="_blank" data-smartkarma-citation="entities:315:1" rel="noopener">Softbank Group (9984 JP)</a>'s @masason have both taken to Twitter to urge for the declaration of a state of emergency. The former has however been slow to prevent price-gouging for masks sold on the Rakuten platform. Even the influential Keidanren business federation has now accepted that a state of emergency is 'acceptable' on condition that 'vital services' are not too severely disrupted.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/126/396/original/File%202020-04-03%2019%2016%2000.jpeg?1585974026" class="editor-image img-responsive" data-smartkarma-image-id="126396"></figure><div class="content-caption">Source • NHK</div><p><strong>TOKYO AT THE TIPPING POINT</strong> - Even the normally-quiescent NHK fired up their graphic team for last night's '7 NEWS'  to illustrate that Tokyo is 18 days away from an exponential explosion unless there is an 80% reduction in social activities. </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/126/386/original/File%202020-04-04%200%2030%2052.jpeg?1585968614" class="editor-image img-responsive" data-smartkarma-image-id="126386"></figure><div class="content-caption">Source • NHK</div><p><strong>GOVERNOR KOIKE -</strong> Although firmly stating that a full lockdown of Tokyo is legally 'impossible', Gov. Koike is gently prodding the national government towards stricter measures and continues to warn businesses to make the necessary preparations as only grocery stores, bank and medical facilities would remain open. She has requested residents to stay at home this weekend and is recommending avoiding the three "<strong>C'</strong>s" - <strong>C</strong>rowded, <strong>C</strong>onfined spaces where <strong>C</strong>onversations take place until further notice. Taking a leaf from Governor Cuomo's book, she is now giving daily updates on YouTube, including one in English. Having harboured ambitions for higher office in the past, the contrast she is drawing with the apparently-hapless Prime Minister is being made abundantly clear. Many LDP officials, however, remain wary of her 'un-Japanese' opportunism and her authoritarian and unpredictable nature. As in the United States, personal and political rivalries are obstructing to sensible policy-making.   </p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/126/387/original/2020-04-04_12-01-17.png?1585969302" class="editor-image img-responsive" data-smartkarma-image-id="126387"></figure><div class="content-caption">Source • Google</div><p><strong>PARTIAL LOCKDOWN</strong> - Many restaurant chains including <a href="https://www.smartkarma.com/entities/torikizoku-co-ltd" target="_blank" data-smartkarma-citation="entities:17718:1" rel="noopener">Torikizoku (3193 JP)</a>, <a href="https://www.smartkarma.com/entities/kushikatsu-tanaka-co" target="_blank" data-smartkarma-citation="entities:26733:1" rel="noopener">Kushikatsu Tanaka (3547 JP)</a>  and <a href="https://www.smartkarma.com/entities/hub-co-ltd" target="_blank" data-smartkarma-citation="entities:11892:1" rel="noopener">Hub (3030 JP)</a> and karaoke and entertainment facilities such as <a href="https://www.smartkarma.com/entities/daiichikosho-co-ltd" target="_blank" data-smartkarma-citation="entities:8629:1" rel="noopener">Daiichikosho (7458 JP)</a>, <a href="https://www.smartkarma.com/entities/koshidaka-holdings-co-ltd" target="_blank" data-smartkarma-citation="entities:14191:1" rel="noopener">Koshidaka (2157 JP)</a> and <a href="https://www.smartkarma.com/entities/round-one-corp" target="_blank" data-smartkarma-citation="entities:7057:1" rel="noopener">Round One (4680 JP)</a> have announced the closure of their facilities for several weeks and join the department stores and cinemas that closed last and will be so again this weekend. Even the Spring Sumo tournament has been delayed for at least two weeks. As confirmed by Google's excellent Community Mobility Reports above, Tokyo is gradually heeding the call. The March Services PMI for Japan suggests a year-on-year contraction of 8%. The onus will now pass to the national government to mitigate the losses.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/126/397/original/2020-04-04_13-51-59.png?1585975942" class="editor-image img-responsive" data-smartkarma-image-id="126397"></figure><div class="content-caption">Source • US Embassy, Tokyo</div><p><strong>'GET-OUT-OF-EDO-BABY-GO'</strong> - The US Embassy in Japan is recommending that any US citizens who are not prepared to stay in Japan for several months or who are concerned about not being able to receive appropriate medical care should leave immediately. Those who do will, however, not be allowed to return for an as-yet-unspecified period.  Even Japanese nationals are now required to spend fourteen days in quarantine. All residence visas that expire before the end of June be extended by three months. From April 3rd and until further notice, non-Japanese of any residence status, including permanent and spouses of Japanese nationals, are to be denied re-entry if they leave Japan. Welcome to the lock-in without a lockdown!</p><p><strong>RELIEF MEASURES</strong> - A potpourri of relief measures and new policies are doing the rounds in government circles including some or all of the following:- </p><ul>
<li>
<strong>¥300,000 </strong>- A one-time non-taxable payment will be made to qualified households that are suffering financially from a loss of income. About 10 million households are expected to qualify. It has already been necessary to make clear that the adult entertainment industry will not be eligible for public funds. ¥300,000 is equivalent to the annual amount spent on a pet dog in Japan.</li>
<li>
<strong>PREFERENCE SHARES</strong> - Large firms such as airlines, shippers and auto manufacturers may be eligible for rescue packages in the form of preference shares issued to the Development Bank of Japan of up to ¥400 billion each. The allocation of such funds will be a subject of much political jostling, while smaller businesses that lack the right connections may not be deemed eligible. We would now be wary of being aggressively 'short' these sectors.</li>
<li>
<strong>FIVE-YEAR INTEREST-FREE LOANS</strong> - While a welcome measure for some SMEs, this measure may not be sufficient for those already-indebted businesses with large numbers of regular employees operating out of rented accommodation, of which Japan's legion of wholesalers is a prime example.</li>
<li>
<strong>TAX MORATORIA</strong> - The government is to grant a moratorium on tax payments by companies that have seen their monthly revenues fall by more than 20% from the previous year due to COVID-19.</li>
<li>
<strong>WRITE-DOWNS</strong> - The Japanese ASB and the FSA have announced that companies will be allowed greater leniency regarding asset writedowns for idle plants and stores</li>
<li>
<strong>SUBSIDIES</strong> - The government will fully-subsidise the increase in production of <a href="https://www.smartkarma.com/entities/fujifilm-holdings-corp" target="_blank" data-smartkarma-citation="entities:16353:1" rel="noopener">Fujifilm (4901 JP)</a>'s Avigan drug and ventilators from a variety of manufacturers. Avigan will be offered for free to other countries.</li>
<li>
<strong>DE-GLOBALISATION</strong> - <a href="https://www.smartkarma.com/entities/toyota-motor-corp" target="_blank" data-smartkarma-citation="entities:73:1" rel="noopener">Toyota Motor (7203 JP)</a> and <a href="https://www.smartkarma.com/entities/honda-motor-co-ltd" target="_blank" data-smartkarma-citation="entities:154:1" rel="noopener">Honda Motor (7267 JP)</a> are in talks with the Ministry of Economy, Trade and Industry to move some or all of their supply chains our of China. <a href="https://www.smartkarma.com/entities/nissan-motor-co-ltd" target="_blank" data-smartkarma-citation="entities:72:1" rel="noopener">Nissan Motor (7201 JP)</a> is seemingly no longer considered relevant in this regard. Japanese corporates will also begin a process of unwinding unprofitable overseas operations to support their domestic activities, a move that will help keep the Yen relatively stable over the medium term.</li>
</ul><p>While large Japanse corporations are relatively well-placed to weather this storm, the Japanese government is fiscally constrained and grossly indebted relative to GDP. Given the now-inflationary global outlook, we would expect the Bank of Japan to be the least generous of the central banks in response to COVID-19, which will also be supportive of the Yen.</p><p>In the <strong>DETAIL</strong> section below, we shall review our targets for our Results and Revisions Scores, and the market overall, look at our updated trailing aggregate actual profits and multiples and review Fridays' Results and Revisions. Finally, we shall suggest that Japan is well-placed for the emergent post-COVID economic world order and conclude that we would be buyers of Japanse equities into the second wave of the COVID-19 downturn.</p>

Source • stopcovid19.jpOVERSHOOT - This Insight will be longer than usual with more above the paywall 'fold' as Friday saw several significant developments in Japan's response to COVID-19. The English-language word 'overshoot' is used widely in Japan to refer to the situation in which more than 100% of available intensive care hospital beds are in use. Although the occupancy rate for Japan is still only 48%, Kyoto and Kanagawa Prefectures are already in 'overshoot', and Tokyo is again close to being so even after increasing capacity by 50% this week. As can be seen above, the country has sufficient ventilator capacity to deal with ten times the current cases (28,197); the shortage is in hospital beds for infectious diseases (4,089). The Tokyo Metropolitan Government (TMG) is now aiming to secure over 4,000 beds for severe COVID-19 cases, including 3,300 with oxygen. Of the 635 patients currently hospitalised in the capital, 80% do not need intensive care. Source • NHKREGIME CHANGE - As we have noted in an earlier Insight, Japan has been slow to increase testing for COVID-19 as there was a Health Ministry guideline that all positive cases were to be hospitalised however mild the symptoms. Large-scale testing would result in the healthcare system being overwhelmed by a large number of relatively-mild cases. Also, the social convention of avoiding 'meiwaku' or trouble to others has resulted in many of those with symptoms avoiding seeking confirmation. The Ministry is also resisting the designation of deaths from pneumonia as related to COVID-19 and is refusing to release data on the number of pneumonia deaths which are rumoured to be 'significantly higher' than in previous years in Tokyo. Whether by design or neglect, Japan lulled itself into a false sense of 'corona-superiority' which has delayed many of the responses that other developed countries have been taking. In the face of increased pressure from the medical profession, the bureaucrats have now relented and, at least in Tokyo, less-severe cases will be able to stay at home or will be billeted in hotels. The rule that patients could only be released from the hospital after two negative tests is also to be 'relaxed'. The rule that new cases must be reported to the Ministry by fax still, however, remains in place.HOTELS &amp; HOMES - Given the size of most homes in the capital, isolation in homes with multiple residents will be hazardous, The TMG is, therefore, moving quickly to requisition or acquire the necessary hotel space.  The infamously-xenophobic APA Hotel chain has been quick to offer their services to lightly-symptomatic patients and is offering a 50% discount to health care workers.Source outbreak.infoASIAN OUTLIER - Japan is now the outlier in Asia in seeing an increasing rate of daily new cases (353 on April 3rd),  including a six-month-old baby against whom medical staff did not think to take any precautions forcing 44 staff into two weeks of self-isolation. Using a simple measure proposed by Messrs Kohlberg, Neyman, and Tepper, Japan's R Score is 2.09. With both Singapore and Hong Kong introducing stricter social constraints over the last two days, Japan's Swedish-style response is facing increasing domestic criticism. Several LDP politicians and supporters have distanced themselves from PM Abe's two-masks policy. Although far from disinterested parties, Rakuten (4755 JP)'s @hmikitani and Softbank Group (9984 JP)'s @masason have both taken to Twitter to urge for the declaration of a state of emergency. The former has however been slow to prevent price-gouging for masks sold on the Rakuten platform. Even the influential Keidanren business federation has now accepted that a state of emergency is 'acceptable' on condition that 'vital services' are not too severely disrupted.Source • NHKTOKYO AT THE TIPPING POINT - Even the normally-quiescent NHK fired up their graphic team for last night's '7 NEWS'  to illustrate that Tokyo is 18 days away from an exponential explosion unless there is an 80% reduction in social activities. Source • NHKGOVERNOR KOIKE - Although firmly stating that a full lockdown of Tokyo is legally 'impossible', Gov. Koike is gently prodding the national government towards stricter measures and continues to warn businesses to make the necessary preparations as only grocery stores, bank and medical facilities would remain open. She has requested residents to stay at home this weekend and is recommending avoiding the three "C's" - Crowded, Confined spaces where Conversations take place until further notice. Taking a leaf from Governor Cuomo's book, she is now giving daily updates on YouTube, including one in English. Having harboured ambitions for higher office in the past, the contrast she is drawing with the apparently-hapless Prime Minister is being made abundantly clear. Many LDP officials, however, remain wary of her 'un-Japanese' opportunism and her authoritarian and unpredictable nature. As in the United States, personal and political rivalries are obstructing to sensible policy-making.   Source • GooglePARTIAL LOCKDOWN - Many restaurant chains including Torikizoku (3193 JP), Kushikatsu Tanaka (3547 JP)  and Hub (3030 JP) and karaoke and entertainment facilities such as Daiichikosho (7458 JP), Koshidaka (2157 JP) and Round One (4680 JP) have announced the closure of their facilities for several weeks and join the department stores and cinemas that closed last and will be so again this weekend. Even the Spring Sumo tournament has been delayed for at least two weeks. As confirmed by Google's excellent Community Mobility Reports above, Tokyo is gradually heeding the call. The March Services PMI for Japan suggests a year-on-year contraction of 8%. The onus will now pass to the national government to mitigate the losses.Source • US Embassy, Tokyo'GET-OUT-OF-EDO-BABY-GO' - The US Embassy in Japan is recommending that any US citizens who are not prepared to stay in Japan for several months or who are concerned about not being able to receive appropriate medical care should leave immediately. Those who do will, however, not be allowed to return for an as-yet-unspecified period.  Even Japanese nationals are now required to spend fourteen days in quarantine. All residence visas that expire before the end of June be extended by three months. From April 3rd and until further notice, non-Japanese of any residence status, including permanent and spouses of Japanese nationals, are to be denied re-entry if they leave Japan. Welcome to the lock-in without a lockdown!RELIEF MEASURES - A potpourri of relief measures and new policies are doing the rounds in government circles including some or all of the following:- 

¥300,000 - A one-time non-taxable payment will be made to qualified households that are suffering financially from a loss of income. About 10 million households are expected to qualify. It has already been necessary to make clear that the adult entertainment industry will not be eligible for public funds. ¥300,000 is equivalent to the annual amount spent on a pet dog in Japan.

PREFERENCE SHARES - Large firms such as airlines, shippers and auto manufacturers may be eligible for rescue packages in the form of preference shares issued to the Development Bank of Japan of up to ¥400 billion each. The allocation of such funds will be a subject of much political jostling, while smaller businesses that lack the right connections may not be deemed eligible. We would now be wary of being aggressively 'short' these sectors.

FIVE-YEAR INTEREST-FREE LOANS - While a welcome measure for some SMEs, this measure may not be sufficient for those already-indebted businesses with large numbers of regular employees operating out of rented accommodation, of which Japan's legion of wholesalers is a prime example.

TAX MORATORIA - The government is to grant a moratorium on tax payments by companies that have seen their monthly revenues fall by more than 20% from the previous year due to COVID-19.

WRITE-DOWNS - The Japanese ASB and the FSA have announced that companies will be allowed greater leniency regarding asset writedowns for idle plants and stores

SUBSIDIES - The government will fully-subsidise the increase in production of Fujifilm (4901 JP)'s Avigan drug and ventilators from a variety of manufacturers. Avigan will be offered for free to other countries.

DE-GLOBALISATION - Toyota Motor (7203 JP) and Honda Motor (7267 JP) are in talks with the Ministry of Economy, Trade and Industry to move some or all of their supply chains our of China. Nissan Motor (7201 JP) is seemingly no longer considered relevant in this regard. Japanese corporates will also begin a process of unwinding unprofitable overseas operations to support their domestic activities, a move that will help keep the Yen relatively stable over the medium term.
While large Japanse corporations are relatively well-placed to weather this storm, the Japanese government is fiscally constrained and grossly indebted relative to GDP. Given the now-inflationary global outlook, we would expect the Bank of Japan to be the least generous of the central banks in response to COVID-19, which will also be supportive of the Yen.In the DETAIL section below, we shall review our targets for our Results and Revisions Scores, and the market overall, look at our updated trailing aggregate actual profits and multiples and review Fridays' Results and Revisions. Finally, we shall suggest that Japan is well-placed for the emergent post-COVID economic world order and conclude that we would be buyers of Japanse equities into the second wave of the COVID-19 downturn.

🇯🇵 JAPAN MARKET UPDATE 5th April 2020 • Overshoot

<p>The Japanese government and larger retailers are still gung-ho about cashless payment systems. Cash, which still makes up 60-70% of all transactions in Japan, is a major cost for larger retailers but cashless systems also come with a cost in terms of technology and fees, and smaller vendors are far less impressed so far despite government incentives.</p>

The Japanese government and larger retailers are still gung-ho about cashless payment systems. Cash, which still makes up 60-70% of all transactions in Japan, is a major cost for larger retailers but cashless systems also come with a cost in terms of technology and fees, and smaller vendors are far less impressed so far despite government incentives.

Some Resistance to Cashless Payments in Japan

Telco/Internet specialist

Kirk Boodry

Redex Research

<p><a href="https://www.smartkarma.com/entities/softbank-corp" target="_blank" data-smartkarma-citation="entities:27445:1" rel="noopener">Softbank Corp (9434 JP)</a> said today that it would launch commercial 5G services on 27 March with two handsets.  Nominally, 5G will cost an additional ¥1,000/month although the fee is being waived for the first two years and we expect that the operators will never collect 5G surcharges. Since 2011, Japanese mobile operators have traded higher speeds or larger bundles for revenue stability and there is no reason to think that changes as 5G proliferates.  For the incumbents, adding 5G to their already high-quality networks should help them compete with Rakuten, which despite an anticipated June 2020 5G launch, is really years away from matching incumbent quality. </p>

Softbank Corp (9434 JP) said today that it would launch commercial 5G services on 27 March with two handsets.  Nominally, 5G will cost an additional ¥1,000/month although the fee is being waived for the first two years and we expect that the operators will never collect 5G surcharges. Since 2011, Japanese mobile operators have traded higher speeds or larger bundles for revenue stability and there is no reason to think that changes as 5G proliferates.  For the incumbents, adding 5G to their already high-quality networks should help them compete with Rakuten, which despite an anticipated June 2020 5G launch, is really years away from matching incumbent quality. 

Softbank Corp: Commercial 5G in Japan Arrives Later This Month

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. 

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/117/963/original/2020-02-15_09-46-55.png?1581796265" class="editor-image img-responsive" data-smartkarma-image-id="117963"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>A YEAR TO FORGET</strong> - The aggregate earnings of Japanese listed companies peaked on December 26th 2018 and, over the last five quarters, have declined by ¥10.5 trillion or by 22%. Net margins have declined by 135 basis points over this period to 4.5%, 224 bps below the current operating margin. Whatever the uncertainties over the impact of Covid-19, the current quarter will see a further decline. A base-case outlook for aggregate Net Income is ¥30 trillion by May 2020, which, if the total market cap were to remain at current levels, would take the  PE to a ten-year high of 22.4 times. The decline in Operating Income has been more moderate at 11%, illustrating the still all-too-frequent write-offs that Japanse corporate routinely require as penance for their mostly-overseas capital misallocations.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/117/966/original/2020-02-16_05-32-51.png?1581798783" class="editor-image img-responsive" data-smartkarma-image-id="117966"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/117/967/original/2020-02-16_05-28-20.png?1581798803" class="editor-image img-responsive" data-smartkarma-image-id="117967"></figure><div class="content-caption">Source • Japan Analytics</div><p><strong>ACCELERATING DOWNTREND</strong> -  Trailing-twelve-month (TTM) Revenues are now declining quarter-on-quarter, and the pace of decline in Operating Income has accelerated for the fourth quarter in a row. The aggregate one year forward forecasts have seen falling QoQ revenues and OP since TTM-2. With only one month to go before the end of FY2020 for the majority of companies and with many December year-end companies looking forward ten months, a degree of optimism has slowed the pace of decline in the current quarter. We expect Covid-19 to result in many of these forecasts to be revised down at the interim results to be released in August. </p><p><strong>RECESSION</strong> - With GDP shrinking by an annualised 6.3% in the fourth quarter and Covid-19 having at least a similar impact in the current quarter, Japan will be in an, albeit 'technical', recession by the spring.</p><div class="content-highlight"><p>In the<strong> DETAIL</strong> below, we shall review the actual results and initial and revised forecasts by Sector and highlight the best and worst-performing companies by one-quarter revenue and margin changes. Part 2 will update our Results and Revision Scoring for the market, Sectors, Peer Groups and Companies.</p></div>

Source • Japan AnalyticsA YEAR TO FORGET - The aggregate earnings of Japanese listed companies peaked on December 26th 2018 and, over the last five quarters, have declined by ¥10.5 trillion or by 22%. Net margins have declined by 135 basis points over this period to 4.5%, 224 bps below the current operating margin. Whatever the uncertainties over the impact of Covid-19, the current quarter will see a further decline. A base-case outlook for aggregate Net Income is ¥30 trillion by May 2020, which, if the total market cap were to remain at current levels, would take the  PE to a ten-year high of 22.4 times. The decline in Operating Income has been more moderate at 11%, illustrating the still all-too-frequent write-offs that Japanse corporate routinely require as penance for their mostly-overseas capital misallocations.Source • Japan AnalyticsACCELERATING DOWNTREND -  Trailing-twelve-month (TTM) Revenues are now declining quarter-on-quarter, and the pace of decline in Operating Income has accelerated for the fourth quarter in a row. The aggregate one year forward forecasts have seen falling QoQ revenues and OP since TTM-2. With only one month to go before the end of FY2020 for the majority of companies and with many December year-end companies looking forward ten months, a degree of optimism has slowed the pace of decline in the current quarter. We expect Covid-19 to result in many of these forecasts to be revised down at the interim results to be released in August. RECESSION - With GDP shrinking by an annualised 6.3% in the fourth quarter and Covid-19 having at least a similar impact in the current quarter, Japan will be in an, albeit 'technical', recession by the spring.In the DETAIL below, we shall review the actual results and initial and revised forecasts by Sector and highlight the best and worst-performing companies by one-quarter revenue and margin changes. Part 2 will update our Results and Revision Scoring for the market, Sectors, Peer Groups and Companies.

🇯🇵 JAPAN • IT'S A WRAP! Part 1 - 2020-Q1 Earnings Results & Forecasts

Japan

Rakuten Group, Inc. provides Internet services. The Company offers Internet finance services which including "Rakuten Card" and "Rakuten Bank". Rakuten Group also provides digital content services including electronic book services.

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Rakuten (4755 JP)

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🇯🇵 JAPAN • IT'S A WRAP! Part 1 - 2020-Q1 Earnings Results & Forecasts

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Campbell Gunn

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