Friday it was inflation hitting a high of 1.9%; last Wednesday it was June exports falling 1.7%, the first such decline for five years; yesterday it was news that Japan’s unemployment rate had hit a two year high.
More and more evidence is emerging that the world’s second largest economy is in contraction mode, and it is going to get worse before it gets better.
Figures were also released yesterday showing that Japanese household spending fell last month. Economists say the signs are getting stronger that the country has slowed to what’s called a ‘growth recession ‘ at best, and at worst, is contracting.
The fact that inflation and employment, two economic indicators with the longest lag effects, are now rising in a markedly pessimistic direction, bodes ill for the next set of official estimates about growth.
Some economists in Tokyo are speculating that the economy contracted at an annual rate of half a per cent, or more in the June quarter.
The Bank of Japan has cut its outlook for the economy twice in four months, the most recent around 10 days ago.
It said then the economy was slowing "further” because of weak business investment and consumer spending. Growth is now estimated at around 1.2% for the year to next March from the April estimate of 1.5%.
The unemployment rate hit 4.1% last month, from 4% in May, according to the Japanese Government statistics bureau.
The total number of unemployed in June was 2.65 million, up 240,000 from a year ago, and the third consecutive year-on-year increase.
Household spending fell 1.8% in June from June in 2007, the fourth monthly drop and follows the surge in oil and food costs that pushed core inflation to 1.9% last month, a decide high, the bureau said.
The marked downturn in corporate confidence shown in the June quarter’s Tankan survey from the Bank of Japan has been confirmed by the flood of figures.
Car sales are falling and car exports are falling. Toyota and Honda have both warned that it will be tough in coming months: Toyota Monday cut its output estimate for global sales, and especially sales in Japan and the US.
June’s jobless rate was the highest since September 2006 and the number of vacancies fell to their lowest ratio since the start of 2005.
Retail sales rose 0.3% in June from June last year, but that was more due to the soaring cost of petrol and food than higher actual demand.
The car companies are the best barometer at how the country’s domestic and export economies are travelling, and there’s no better individual litmus test than what Toyota sees. It’s gloomy.
On Monday it cut its 2008 global sales forecast by 350,000 vehicles to 9.5 million and blamed sluggish North American sales, especially in the US.
Even with the new, lower estimate, Toyota plans to sell more vehicles than it did last year: a mere 1% more though, compared to the 5% rise in worldwide sales in 2007.
The pace of Toyota’s growth has been slowing. Under the new target it would inch up 1% this year, in contrast to a 6% climb in 2007, when it sold 9.37 million vehicles. It originally planned to sell 5% more vehicles in the year at 9.85 million units.
Besides the slowing US and other markets in Europe and Japan, rising steel and other raw material costs (plastics) is hitting the company’s profit margins.
Toyota said sales were still solid to China, the Middle East and these other markets will be enough to maintain worldwide growth this year, albeit at a much smaller rate.
Toyota now plans to sell 2.44 million vehicles in the US, less than its December ambition to sell 2.64 million vehicles. Overall sales to North America were also cut to 2.67 million vehicles from 2.84 million.
The new estimate is around 5%-7% lower than its 2007 sales result of 2.62 million vehicles for the US and elsewhere in North America.
Other car news Monday from the US showed that General Motors had cut its 2008 production by another 117,000 vehicles, all gas guzzlers like pick ups and SUVs. Toyota is slashing its production of these vehicle types and switching one of its SUV plants to produce the hybrid Prius within two years.
Brokers in Tokyo reckon Toyota’s first quarter earnings might be down 30%-40% when the company reports them on August 7. For that you can blame the US and the sluggish Japanese market.
In another sign of the problems the economy and exporters are having, the mighty Sony consumer electronics business saw a sharp drop in earnings in the latest period.
Sony is the world’s second-biggest consumer-electronics group and it said the June quarter profit dropped for the first time in five quarters because the stronger yen eroded earnings and competition forced the company to cut the prices of its new Bravia range of TV products.
The company said net profit fell 47% to 35 billion yen (or $US326 million) from 66.5 billion yen in the June quarter of 2007.
The company cut its full-year profit forecast by 17% to 240 billion yen.
Sony shares dropped 3.2% yesterday ahead of the announcement: they are off 32% this year on fears the stronger yen and sluggish Japanese and US economies would hit earnings, which they have.
Sony’s mobile phone joint venture with Ericsson is also doing poorly. That hurt earnings in the quarter.
