2014-01-24 22:48:45 - Fast Market Research recommends "Japan Shipping Report Q1 2014" from Business Monitor International, now available
Growth Still Expected To Slow In 2014
Despite some positive signs, BMI remains rather downbeat about Japan's economic prospects. Prime Minister Shinzo Abe's three policy 'arrows' raised expectations in 2013, but we do not think the initial impetus created is sustainable into 2014. The first two arrows - aggressive monetary and fiscal stimuli - played their part, but the third, a combination of industrial reform and revitalisation appears to be still tied up in legislative negotiation. Despite strong encouragement from the government, a recent Yomiuri survey found that only one third of companies were considering boosting wages, and those that were, were boosting one-off bonuses rather than base pay. After strong quarter-on-quarter (q-o-q) GDP growth of 3.7% in Q213, there was
a sharp slowdown to 1.9% in Q313. We have raised our estimate for GDP growth in 2013 to 2.4%, reflecting the slower-than-expected winding down from the initial boost from 'Abenomics'.
But given our expectation of slower private consumption growth, private sector investment caution, and sluggish net exports, all against a background of continuing fiscal and debt pressures, we are continuing to predict GDP expansion at a modest 1.3% in 2014. The fact that Tokyo has been selected for the 2020 summer Olympics provides some medium term upside, but even here we are cautious about the ability capital spending on the games to lift Japanese growth above trend.
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Headline Industry Data
* 2014 Port of Nagoya tonnage forecast to grow by 2.5% to reach 216.647mn tonnes, slower than the 4.3% growth rate achieved the preceding year. Box traffic at the same port will grow by 2.6% to 2.752mn twenty-foot equivalents (TEUs), up from 1% in the preceding year.
* The Port of Tokyo will remain Japan's largest container terminal, with box traffic gaining 4.0% to 5.197mn TEUs, marginally down from 4.3% growth in 2013.
* The Port of Yokohama will see a 1.2% tonnage growth to 117.934mn tonnes (up from 4.0% contraction in the preceding year), and 3.3% container growth to 2.994mn TEUs (up from 5.0% contraction in 2013).
* 2014 total trade growth forecast to expand by 3.5% in real terms, a slowdown on the 4.0% of 2013. Import growth at 4.0% will exceed exports at 3.0%.
Japanese Ships To Have Private Armed Guards
The Japanese government will implement the new anti-piracy law in the country it was reported in November 2013. Under the new law, private armed guards will be allowed to enter Japanese-registered oil tankers and cargo ships in waters offshore Somalia and elsewhere. Private armed guards will also be permitted to fire warning shots into the air or at the water and fire at pirates in self-defence. Shipping companies will have to get approval from the transport minister for their security plans, which mention security companies appointed by them for each vessel.
Tokyo Box Traffic Up; Yokohama Down
Japan's Port of Tokyo processed nearly 2.1mn TEUs in the first six months of 2013, an increase of 0.3% in comparison with a year earlier. Imports handled by the facility were up 1.2% in comparison with H112, while exports fell 0.7% in the period under consideration. The greatest volume of trade handled by the Port of Tokyo was attributed to the US and China in H113; trade through the port totalled 22,670mn tonnes in the six month period. In contrast, container trade through the Japanese Port of Yokohama fell to 1,284,352 twenty-foot equivalent units in H113, a decline of 6.7% year on year (y-o-y). Imports fell 7.5% in the period under consideration, while exports were down 6% in comparison to H112
Japan To Benefit From Lifting Of Iran Oil Embargo
In October 2013, US authorities temporarily lifted an oil trade sanction on Iran for Japan and 10 countries in Europe. The exemption will be valid for six months, and is expected to provide a significant boost to Iran's crude oil industry. In 2010, Iran exported 11.6mn tonnes of crude oil directly to five overseas markets. Trade sanctions were implemented on June 30 2012, and crude oil shipments for the year fell to around 2mn tonnes.
External Risks To Growth
In addition to the structural problems facing the Japanese economy, we highlight a number of regional political risk issues. An escalation of territorial disputes with China or attempts to revise sensitive historical statements (with regards to War World II atrocities) could once again lead to protests and boycotts by Chinese citizens, and adversely affect many of Japan's large exporters.
We also draw attention to the danger that the Abe administration may fail to implement significant structural reforms, preferring to rely on short-term monetary and fiscal stimuli. In our view this will only postpone a day of reckoning. Given the already forlorn state of the country's public finances, this suggests to us that a near-term sovereign debt crisis in Japan is a real possibility, eventually triggering a significant contraction in GDP.
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