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>As expected, e-commerce continues to grow strongly in Japan even if penetration rates are lower than the US and China.</p>
<p>Already close to 40% of all e-commerce transactions take place through smartphones and continued growth of this one touchpoint will spur faster growth in the online channel as a whole.</p>
<p>Penetration remains low in food but 2018 saw large jumps in EC share for media, office supplies and consumer electronics.</p>

As expected, e-commerce continues to grow strongly in Japan even if penetration rates are lower than the US and China.
Already close to 40% of all e-commerce transactions take place through smartphones and continued growth of this one touchpoint will spur faster growth in the online channel as a whole.
Penetration remains low in food but 2018 saw large jumps in EC share for media, office supplies and consumer electronics.

Japan's E-Commerce Sector Increases Retail Share in 2018-19

<p>The average growth among the top 100 shopping centres (SCs) in Japan in 2017-18 was 2.6% compared to 2.3% for the shopping centre market overall.</p>
<p>The top 100 SCs had average sales densities of ¥86,230 per sqm per month, compared to ¥50,833 per sqm per month for the sector overall, showing the stark contrast in performance between the best SCs (and the better developers) and the rest.</p>
<p>The improvement in sales by outlet malls after a retreat in 2016-17 was the big story in SC retailing last year – among the top 30 SCs by sales growth, 10 were outlet malls and all posted growth of more than 5% compared to just a single SC in 2016.</p>
<p>A number of developers look set to continue to perform better compared to the SC sector overall, at least in terms of tenant revenues and shopping centre operating profits: <a href="https://www.smartkarma.com/entities/3" target="_blank" data-smartkarma-citation="entities:3:1">Aeon (8267 JP)</a>, <a href="https://www.smartkarma.com/entities/5262" target="_blank" data-smartkarma-citation="entities:5262:1">Aeon Mall (8905 JP)</a>, <a href="https://www.smartkarma.com/entities/565" target="_blank" data-smartkarma-citation="entities:565:1">Mitsui Fudosan (8801 JP)</a>, and <a href="https://www.smartkarma.com/entities/566" target="_blank" data-smartkarma-citation="entities:566:1">Mitsubishi Estate (8802 JP)</a> as well as <a href="https://www.smartkarma.com/entities/14271" target="_blank" data-smartkarma-citation="entities:14271:1">East Japan Railway (9020 JP)</a> – <strong>12 of the top 30 most efficient SCs in the country are operated by <a href="https://www.smartkarma.com/entities/14271" target="_blank" data-smartkarma-citation="entities:14271:1">East Japan Railway</a>.</strong></p>

The average growth among the top 100 shopping centres (SCs) in Japan in 2017-18 was 2.6% compared to 2.3% for the shopping centre market overall.
The top 100 SCs had average sales densities of ¥86,230 per sqm per month, compared to ¥50,833 per sqm per month for the sector overall, showing the stark contrast in performance between the best SCs (and the better developers) and the rest.
The improvement in sales by outlet malls after a retreat in 2016-17 was the big story in SC retailing last year – among the top 30 SCs by sales growth, 10 were outlet malls and all posted growth of more than 5% compared to just a single SC in 2016.
A number of developers look set to continue to perform better compared to the SC sector overall, at least in terms of tenant revenues and shopping centre operating profits: Aeon (8267 JP), Aeon Mall (8905 JP), Mitsui Fudosan (8801 JP), and Mitsubishi Estate (8802 JP) as well as East Japan Railway (9020 JP) – 12 of the top 30 most efficient SCs in the country are operated by East Japan Railway.

Japan's Top 100 Shopping Centres Outperforming: Who Owns What

<p>The shopping centre market expanded in FY2017-18, increasing sales by 2.3% despite jittery consumers. More investment in upgrading malls (both better tenant mix and new entertainment facilities), the boost from inbound tourists, and higher food prices all helped. 2017-18 was the year of the outlet mall,<span class="Apple-converted-space"> </span>the source of most of the growth among top shopping centres.</p>
<p>While sales rose, benefiting both tenants and developers, investment has fallen sharply recently, and 2018 saw the lowest number of new malls in years, and the number will continue to fall.</p>
<p>Depopulation, lower sales densities, retailers’ reluctance to open more stores, and the high cost of construction are all giving developers cold feet, as is the quandary of e-commerce competition.</p>
<p>These trends are impacting some retailers, particularly the more traditional wholesaler-dependent retailers such as <a href="https://www.smartkarma.com/entities/16044" target="_blank" data-smartkarma-citation="entities:16044:1">Right On (7445 JP)</a>, <a href="https://www.smartkarma.com/entities/15421" target="_blank" data-smartkarma-citation="entities:15421:1">Mac House (7603 JP)</a>, <a href="https://www.smartkarma.com/entities/13375" target="_blank" data-smartkarma-citation="entities:13375:1">Nishimatsuya Chain (7545 JP)</a>, and, more recently, even <a href="https://www.smartkarma.com/entities/15213" target="_blank" data-smartkarma-citation="entities:15213:1">Shimamura (8227 JP)</a>.</p>
<p>Nevertheless, the outlook for shopping centres (SCs) in Japan is rosier than for the US in some respects. While analysts have suggested a 25% cull of SCs stateside, Japan has one SC per 390,000 people compared to one per 70,000 in the US. Japan may have witnessed an expansion of SC sales space of 1.64 times since 2000 but it remains significantly less developed suggesting that, despite depopulation, the better malls and developers will continue to trade strongly for as long as visiting the mall remains a staple Japanese leisure activity.</p>

The shopping centre market expanded in FY2017-18, increasing sales by 2.3% despite jittery consumers. More investment in upgrading malls (both better tenant mix and new entertainment facilities), the boost from inbound tourists, and higher food prices all helped. 2017-18 was the year of the outlet mall, the source of most of the growth among top shopping centres.
While sales rose, benefiting both tenants and developers, investment has fallen sharply recently, and 2018 saw the lowest number of new malls in years, and the number will continue to fall.
Depopulation, lower sales densities, retailers’ reluctance to open more stores, and the high cost of construction are all giving developers cold feet, as is the quandary of e-commerce competition.
These trends are impacting some retailers, particularly the more traditional wholesaler-dependent retailers such as Right On (7445 JP), Mac House (7603 JP), Nishimatsuya Chain (7545 JP), and, more recently, even Shimamura (8227 JP).
Nevertheless, the outlook for shopping centres (SCs) in Japan is rosier than for the US in some respects. While analysts have suggested a 25% cull of SCs stateside, Japan has one SC per 390,000 people compared to one per 70,000 in the US. Japan may have witnessed an expansion of SC sales space of 1.64 times since 2000 but it remains significantly less developed suggesting that, despite depopulation, the better malls and developers will continue to trade strongly for as long as visiting the mall remains a staple Japanese leisure activity.

Japan Shopping Centres 2017-18: Sales Rise as Mall Development Slows Sharply

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

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. 

Quantitative Analysis

<div class="content-caption">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/075/363/original/2019-01-11_14-16-49.png?1547292773" class="editor-image img-responsive" data-smartkarma-image-id="75363"></figure>
<p></p>
Source: Japan Analytics</div>
<p style="text-align: left;"><strong>CURRENCY DRIVER</strong> - The ¥/US$ cross rate has strengthened by 5.3% since the recent US$ peak of ¥114.20 on November 12th 2018, which has led some FX and technical specialists (including <a href="https://www.smartkarma.com/profiles/381" target="_blank" data-smartkarma-citation="accounts:381">Thomas Schroeder </a> <a href="https://www.smartkarma.com/insights/dollar-yen-big-short-phase-ii" target="_blank" data-smartkarma-citation="insights:27163">here</a> on Smartkarma) to call for a more sustained bout of US$ weakness. A period of Yen strength is far from a consensus forecast for most Japanese equity investors, and historically a stronger Yen has resulted in a weaker Japanese equity market. The three Yen 'peaks' highlighted by the vertical lines in the chart above all coincided with medium-term lows in TOPIX.  </p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/075/287/original/2019-01-11_14-44-07.png?1547185462" class="editor-image img-responsive" data-smartkarma-image-id="75287"></figure>
<div class="content-caption">Source: Japan Analytics</div>
<p><strong>¥ &lt; 100</strong> - If we isolate only the 1,484 days in the last forty years when the USDJPY cross has traded above ¥100, the average TOPIX index is 975, which would imply 36% downside for Japanese equities were the Yen to rise above ¥90. Nevertheless, the three Yen peaks we have isolated have proved to be excellent entry points with the subsequent trough-to-peak performance being 28% in 1995~1996, 108% in 2011~2015 and 48% in 2016~2018. Long-term Japan 'bulls' should welcome the coming US dollar bear market. </p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/075/313/original/2019-01-12_10-50-14.png?1547257825" class="editor-image img-responsive" data-smartkarma-image-id="75313"></figure>
<div class="content-caption">Source: Japan Analytics</div>
<p><strong>EARNINGS DRIVER</strong> - The USDJPY cross remains an important driver of earnings and earnings momentum in Japan. As measured by our Results and Revision Scores, there is a good correlation between the trends in both scores and the year-on-year change in USDJPY lagged by six months, especially around significant turning points for the cross rate (marked by the vertical lines). The Results and Revision Scores have declined since January 2018 in line with the stronger Yen. A move up to above the ¥90 level would, without doubt, take both scores into negative territory again- the only question being, are we replaying 2009/10 or 2016/17? </p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/075/319/original/2019-01-12_13-40-19.png?1547268030" class="editor-image img-responsive" data-smartkarma-image-id="75319"></figure>
<div class="content-caption">Source: Japan Analytics</div>
<p><strong>CURRENCY CORRELATIONS</strong> - In the <strong>DETAIL</strong> below, we list the larger capitalisation companies whose share price performance most closely correlated with the dollar-yen cross rate. As a preview, the most correlated larger capitalisation company that has been listed since 2006 is, unsurprisingly, <a href="https://www.smartkarma.com/entities/73" target="_blank" data-smartkarma-citation="entities:73:1">Toyota Motor (7203 JP)</a>.</p>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/075/318/original/2019-01-12_13-15-40.png?1547266553" class="editor-image img-responsive" data-smartkarma-image-id="75318"></figure>
<div class="content-caption">Source: Japan Analytics</div>
<p><strong>THE FOREIGN CURRENCY TRANSLATION ADJUSTMENT </strong>- We also go one step further and use the 'Foreign Currency Translation Adjustment' that forms part of Other Comprehensive Income (which has been disclosed in corporate balance sheets and income statements since 2001 and 2011, respectively) to measure the extent of each company's global business and the embedded currency risk. The correlation of the aggregate FCTA for all non-financial companies is, as would be expected, reasonably tight after adding two-month lag for the reporting cycle. As these amounts are directly deducted from Net Assets for companies adopting JGAAP and from Shareholders' Equity for those companies reporting under SEC or IFRS standards, the impact on valuations cannot be ignored.</p>




Source: Japan Analytics
CURRENCY DRIVER - The ¥/US$ cross rate has strengthened by 5.3% since the recent US$ peak of ¥114.20 on November 12th 2018, which has led some FX and technical specialists (including Thomas Schroeder  here on Smartkarma) to call for a more sustained bout of US$ weakness. A period of Yen strength is far from a consensus forecast for most Japanese equity investors, and historically a stronger Yen has resulted in a weaker Japanese equity market. The three Yen 'peaks' highlighted by the vertical lines in the chart above all coincided with medium-term lows in TOPIX.  

Source: Japan Analytics
¥ &lt; 100 - If we isolate only the 1,484 days in the last forty years when the USDJPY cross has traded above ¥100, the average TOPIX index is 975, which would imply 36% downside for Japanese equities were the Yen to rise above ¥90. Nevertheless, the three Yen peaks we have isolated have proved to be excellent entry points with the subsequent trough-to-peak performance being 28% in 1995~1996, 108% in 2011~2015 and 48% in 2016~2018. Long-term Japan 'bulls' should welcome the coming US dollar bear market. 

Source: Japan Analytics
EARNINGS DRIVER - The USDJPY cross remains an important driver of earnings and earnings momentum in Japan. As measured by our Results and Revision Scores, there is a good correlation between the trends in both scores and the year-on-year change in USDJPY lagged by six months, especially around significant turning points for the cross rate (marked by the vertical lines). The Results and Revision Scores have declined since January 2018 in line with the stronger Yen. A move up to above the ¥90 level would, without doubt, take both scores into negative territory again- the only question being, are we replaying 2009/10 or 2016/17? 

Source: Japan Analytics
CURRENCY CORRELATIONS - In the DETAIL below, we list the larger capitalisation companies whose share price performance most closely correlated with the dollar-yen cross rate. As a preview, the most correlated larger capitalisation company that has been listed since 2006 is, unsurprisingly, Toyota Motor (7203 JP).

Source: Japan Analytics
THE FOREIGN CURRENCY TRANSLATION ADJUSTMENT - We also go one step further and use the 'Foreign Currency Translation Adjustment' that forms part of Other Comprehensive Income (which has been disclosed in corporate balance sheets and income statements since 2001 and 2011, respectively) to measure the extent of each company's global business and the embedded currency risk. The correlation of the aggregate FCTA for all non-financial companies is, as would be expected, reasonably tight after adding two-month lag for the reporting cycle. As these amounts are directly deducted from Net Assets for companies adopting JGAAP and from Shareholders' Equity for those companies reporting under SEC or IFRS standards, the impact on valuations cannot be ignored.

Japan: What to Buy & Sell if the ¥ Rises to 90

Doing bespoke work since 2002....., Custom Products Group

Patrick Hansen

Doing bespoke work since 2002.....

Custom Products Group

Custom Products was started 14 years ago at Lehman Brothers by current co-founder Patrick Hansen, CFA. After 3 years at Lehman, Patrick moved the team to Macquarie Securities where Simon Rigney (co-founder) joined. 3 years ago we took Custom Products independent. 

Our core strength can be summed up three words. 1- Customization - we have very little off the shelf products and most work is done on a one on one bespoke basis. 2- Speed - We pride ourselves in our ability to get requests back to the client very quickly. 3- Confidentiality - We do not redistribute. There is no grace period where we wait a week and then mass blast. Any request stops with that client.

<p>We have decided to split our coverage of Analyst Upgrades and Downgrades into Japan only and Asia -ex Japan. We track changes in recommendations for the overall market to identify which sectors and companies are currently trending up in popularity and which are trending down.</p><h2>Positive Side</h2><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/023/022/original/2.png?1490213989" class="editor-image img-responsive" data-smartkarma-image-id="23022"></figure><div class="content-caption">Source: Custom Products</div><p>As you can see from the chart above the Energy Minerals (Only 7 names in sector), Finance and Consumer Durables Sectors had the highest % of upgrades relative to total recommendations over…</p>

We have decided to split our coverage of Analyst Upgrades and Downgrades into Japan only and Asia -ex Japan. We track changes in recommendations for the overall market to identify which sectors and companies are currently trending up in popularity and which are trending down.Positive SideSource: Custom ProductsAs you can see from the chart above the Energy Minerals (Only 7 names in sector), Finance and Consumer Durables Sectors had the highest % of upgrades relative to total recommendations over…

Most Popular and Unpopular Japanese Sectors over Last 2 Weeks....

Japan

TOKYU CORPORATION provides passenger rail transportation, bus transportation, truckload services, and air transportation serving the Tokyo and its surrounding areas.  The Company operates department stores, real estate leasing, and hotel businesses.  Through its subsidiaries, Tokyu offers leisure-related services such as travel agents, theaters. golf, and rent car agents.

Price Gauge
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Tokyu Corp (9005 JP)

Japan's Top 100 Shopping Centres Outperforming: Who Owns What

The average growth among the top 100 shopping centres (SCs) in Japan in 2017-18 was 2.6% compared to 2.3% for the shopping centre market...

Michael Causton

Japan Shopping Centres 2017-18: Sales Rise as Mall Development Slows Sharply

The shopping centre market expanded in FY2017-18, increasing sales by 2.3% despite jittery consumers. More investment in upgrading malls (both...

Michael Causton

Japan: What to Buy & Sell if the ¥ Rises to 90

CURRENCY DRIVER - The ¥/US$ cross rate has strengthened by 5.3% since the recent US$ peak of ¥114.20 on November 12th 2018, which has led some FX...

Campbell Gunn

Most Popular and Unpopular Japanese Sectors over Last 2 Weeks....

We have decided to split our coverage of Analyst Upgrades and Downgrades into Japan only and Asia -ex Japan. We track changes in recommendations...

Custom Products Group

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Japan's E-Commerce Sector Increases Retail Share in 2018-19

As expected, e-commerce continues to grow strongly in Japan even if penetration rates are lower than the US and China. Already close to 40% of all...

Michael Causton

Japan's Top 100 Shopping Centres Outperforming: Who Owns What

The average growth among the top 100 shopping centres (SCs) in Japan in 2017-18 was 2.6% compared to 2.3% for the shopping centre market...

Michael Causton

Japan Shopping Centres 2017-18: Sales Rise as Mall Development Slows Sharply

The shopping centre market expanded in FY2017-18, increasing sales by 2.3% despite jittery consumers. More investment in upgrading malls (both...

Michael Causton

Japan: What to Buy & Sell if the ¥ Rises to 90

CURRENCY DRIVER - The ¥/US$ cross rate has strengthened by 5.3% since the recent US$ peak of ¥114.20 on November 12th 2018, which has led some FX...

Campbell Gunn

Most Popular and Unpopular Japanese Sectors over Last 2 Weeks....

We have decided to split our coverage of Analyst Upgrades and Downgrades into Japan only and Asia -ex Japan. We track changes in recommendations...

Custom Products Group