Tourism and Investment in Japan

Electricity network in Tokyo was on the brink of a large-scale power outage in late March. The power supply is being imminent challenges for Japan’s economy. In late March, the Japanese government issued the first-ever warning over electricity availability for the first time in history, asking households and companies to cooperate in saving electricity, saying that the tight power supply and strong demand in Tokyo and the Tohoku region could lead to a large-scale power outage as some power plants remain offline following an earthquake that occurred in the Tohoku region on March 16. Larger than usual electricity consumption due to cold weather in late March also reduced spare capacity of power supply in the region. The supply capacity of Japanese electric power companies has been lacking for several years since many of Japan's nuclear reactors have been offline under stricter regulations introduced after the Great East Japan Earthquake in 2011 leaving the country dependent on ther...

High street price rises as wholesale inflation accelerates at record rates Japanese consumers are facing challenges as a wave of price hikes will hit essential items such as food and daily goods in the new fiscal year beginning on April 1 due to the rising cost of raw materials.  Higher material costs are also squeezing corporate earnings in Japan. For example, Aeon Co., Ltd., the biggest operator of general merchandise stores in Japan announced that its operating profit for the fiscal year ending February 2022 decreased from 200 billion yen to 173 billion yen, and its final profit fell to 6 billion yen from 20 billion yen.  On the other hand, Aeon’s sales have increased from 8.62 trillion yen to 8.71 trillion yen, indicating that Aeon's profit margin is declining. Japanese companies have been gradually passing on surging costs to consumers by raising retail prices, a change from their cautious stance on price hikes for fear of hurting demand, however the pass-through seems ...

A major earthquake in Japan forces Toyota to suspend production causing another dent on its profit bases significantly Toyota Motor was obliged to shut down its factories after the earthquake that hit the Tohoku region, northern part of Japan, on the night of March 16 made it difficult to procure parts in addition to the global shortage of semiconductors and the spread of the new coronavirus infection.  The earthquake is causing additional problems for the already constrained global automotive supply chain straggling to cope with problems caused by the coronavirus pandemic and Russia’s ongoing invasion of Ukraine.  The impact of the disruption in the distribution network caused by Russia's invasion against Ukraine is another concern for Toyota Motor being exposed to a severe business environment for the time being.  Toyota Motor Corporation announced on March 18 that it will reduce production by about 20,000 units due to the suspension of operations at 11 domestic plant...

Foreign visitors to Japan plunged to record low harming tourism in Japan Japan confirmed 102,333 new COVID-19 cases on February 5, for the highest daily count although the speed of infections is gradually slowing down and some researchers think it is peaking out.  The spread of coronavirus infection is affecting the tourism industry again. Travel restrictions to prevent the spread of COVID-19 have throttled Japan's tourism industry with the estimated number of foreign visitors plummeting to an all-time low of 245,900 in 2021.  The number of guests who stayed at hotels and other accommodation facilities in Japan hit a record low last year for the second straight year because of prolonged border controls and a slowdown in the recovery of domestic travel demand. The cumulative total of guests at hotels and inns was 315.75 million in 2021, down 4.8 percent from 2020 and 47.0 percent from 2019, according to preliminary data recently announced by the Japanese government.  The...

IBIDEN builds a new factory to increase production capacity for high-end IC substrates Economic activity of semiconductor-related industries in the Chubu region is booming thanks to the growing global demand for semiconductor chips. One of those company is IBIDEN, a major semiconductor packaging provider located in Gifu Prefecture which posted a significant increase in sales and profits in the interim results for the first half of FY 2021.  Ibiden forecasts its sales for FY 2021 will increase about 24% year-on-year. Its electronic sector earned 60% of the company’s profit. To take advantage of the tailwind for semiconductor market, IBIDEN will invest 180 billion yen to build a new factory and increase production capacity for high-end IC substrates for applications such as servers and image processing units.  IBIDEN schedules to start full production at the new plant in the fiscal year ending March 2024. A package board is a product that connects an IC chip and a printed wir...

Toyota has demonstrated greater flexibility in adapting to supply chain disruptions Toyota Motor Corporation is a Japanese automaker which investors around the world admire its strong business profile, the highest margin in its peer group and resilient credit metrics that provide significant downside resiliency.  Even Toyota is facing difficult business conditions this year such as a shortage of semiconductors forcing Toyota to reduce its production and rising raw material prices, the new coronavirus infection’s lingering effects.  However, Toyota has managed to revise its earnings forecast for FY 2021 upward by securing higher than expected profits through strengthening sales of profitable SUVs, efforts in rationalization and the tailwind of the depreciation of the yen. Toyota has demonstrated greater flexibility in adapting to supply-chain disruptions since the beginning of the Covid-19 pandemic, which resulted in a continuing advantage for Toyota when supply normalizes. ...

Japan’s tourism industry hopes visitors come back as more than 70% of population get the second dose The number of new infections of COVID-19 in Japan continues to decline in many prefectures and total newly infected cases in Japan hit the lowest level this year. The cases have been declining since the end of August while the number of newly infected people at the beginning of November dropped sharply to about 200.  The number of newly infected people in Tokyo decreased to around 20, which is the lowest level this year. The similar downward trend has been seen in Osaka Prefecture with the number declining to below 40.  The fact that more than 70% of the people have been vaccinated for the second jab in Japan has people in the tourism industry hope for the improvement in the industry’s revenue due to the resumption of economic activities. Countries around the world with improved vaccination rates have begun to relax restrictions on those who enter their countries.  Japan...