Cherry Blossom Time for Japanese Commerce?

24 December 2003

The world's second largest advertising economy may be heading out of the woods as business activity in October showed an increase for the third consecutive month.

Particularly robust were the telecommunications, finance and real-estate sectors, complementing recent increases in manufacturing performance.

According to data released Tuesday by Japan's Ministry of Economy, Trade and Industry, pan-industry activity in October increased 0.8% on the preceding month, building on gains of 2.1% during September and 0.3% in August.

And, highlighting the economy's broadening strength, the ministry's tertiary industry index exceeded expectations by rising 1.1% from a month earlier -- well above the twelve-economist consensus of + 0.1% (in pan-industry) activity and a slight fall in tertiary enterprise.

Beamed Mamoru Yamazaki, chief Japan economist at Barclays Capital: "So far, the manufacturing sector has led the recovery, but today's figures suggest the non-manufacturing sector is catching up. It's a good sign for the Japanese economy."

But less benevolent omens continue to emerge from the nation's export sector, where October's outbound effort fell by 2% -- the eleventh consecutive month of decline. The situation was exacerbated by a 21% nosedive in exports to the USA, the sharpest plunge since January 1979.

However, the latter figure may not be as ominous as it seems. More than a third of the overall value of exports is attributable to cars and auto parts, a sector where Japanese companies such as Toyota have set-up indigenous US manufacturing plants.

Such local operations are not classified as export activity, but contribute handsomely to the nation's balance of payments and company earnings. They also help compensate for the continuing decline in the value of the yen.

Data sourced from: The Wall Street Journal Online; additional content by WARC staff