Sales of new condominiums plunged 32% during April-September 2014.
The number of new condominiums put up for sale in the greater Tokyo area fell 32.1% during 6 months to September 2014, according to the Real Estate Economic Institute. The supply for the fiscal first-half period dropped for the first time in three years since April-September 2011, after the East Japan Earthquake March 2011. The plunge came after real estate firms sharply increased condominium supply in the first half of fiscal 2013 in anticipation of a surge in demand ahead of the consumption tax rate hike to 8% from 5% on April 2014. （5% tax rate was applied to condominiums for which sales contracts were concluded by September-end 2013.) The condominium price has actually been rising, reflecting a land price hike in the area plus materials and labor cost hikes. (Average condominium price in the greater Tokyo area stands at JPY 50.1 million, up from JPY 47.36 million in the last year.) Condominium sales may continue to decline under this situation.
Why does weak yen have a minor impact on exportation ?
The weak yen should be a favorable factor for Japanese exporters, while Japan’s export value in 8 months to August 2014 stood at JPY46.9 trillion, or less than 90% of the value recorded before the financial crisis in 2008. Why can’t we see a dramatic increase in exportation? There must be two major factors: i) structural change of the industries that lead exportation；automakers and electronics manufacturers. Automakers increased overseas production after the crisis under the strong yen, and since then their exported amount declined nearly 30%, and it remains up to now. Low-end cars tend to be produced overseas and high-end cars are exported, and prices of high-end cars cannot be lowered easily, resulting in a decline in the number of cars sold. Export value of electronics such as TV and mobile phones declined 30% also during 6 years to 2013, due to a loss of competitiveness of Japanese electronics manufacturers in the global market. Unlike automakers, the proportion of overseas production of electronics manufacturers remains unchanged. ii) weak global demand: According to IMF, world economy’s growth rate is estimated at 3.4% in 2014 (vs. 5.3% in 2007). Importation by US seems to remain flat since manufacturers are back along with the start of shale gas production, which makes Japanese exporters more difficult to expand
Large bank stocks weighed down in Tokyo.
Japan’s top bank stocks fell on Tuesday amid the report that capital will be raised further. Big banks with international operations will be required to have minimum capital ratios of 16~20% probably from 2019. Sumitomo Mitsui Financial Group, Mitsubishi UFJ Financial Group and Mizuho Financial Group have already secured relatively high capital ratio of 14~16%, while the stocks of three banks all dropped from the last week, reflecting the investors’ concern that costs of subordinated bond issues, restrictive lending policy, slowed recovery of Japan’s economy will weigh down earnings. Since the end of last year, Sumitomo Mitsui stock has fallen by 19.5%, Mizuho’s by 11.7% and Mitsubishi UFJ’s by 11.4%. Their price-earnings ratios stand around 9, compared with 16 average for the first section of the Tokyo Stock Exchange.
Yen hits 6-year low against dollar.
The yen hit its lowest level in nearly six years against the US dollar on September 5 in Tokyo (high-105 yen to the dollar), a level last seen in October 2008. The market anticipates the end of quantitative easing policies in the US and stronger dollar towards the end of the year (107-109) with a US interest rate hike. The weak yen against the dollar is a positive factor for Japan’s stock price and exporters, while no longer for the manufacturers which increased overseas production (automobiles, etc.), and a negative factor for the companies which import raw materials. The effect of the weak yen may be limited.
Sales at department stores down 2.5% in July.
Japan’s department store sales in July fell 2.5% from the same month of the previous year, down for the fourth consecutive month after consumption tax hike (from 5% to 8%) on April 1st, 2014. Sales at 241 stores of 84 companies stood at JPY 544.8 billion (-2.5%), according to the Japan Department Stores Association, against positive turnaround estimation. Sales of summer clothing were stagnant amid unfavorable weather conditions (a long rainy season and typhoons). The pace of the decline, however, slowed from a 4.6% in June, suggesting that adverse impact of consumption tax hike is easing.