Japanese ad market faces gloomy 2009

03 March 2009

TOKYO: Japanese adspend is set to see a substantial decline in 2009, with the combination of marketers slashing their budgets and a slowing economy amounting to "devastating news" for the ad industry, according to Dentsu's Yukihiro Oguchi.

WARC estimates that Japanese adspend will fall by 2.3% at current prices, with declining exports likely to hit the country's economy as a whole.

Dentsu says advertising revenues through traditional media fell 7.6% last year – with newspaper adspend down 12.5% – and the decline was thought to be accelerating at the end of last year.

The company forecasts its operating profits will fall 4% to $382 million (€303m; £272m) for the year to March, with Hakuhodo, Japan's second largest agency group, also predicting a slide of 18.2% to $144m.

While the troubles afflicting the automotive sector is one of the main causes of the slowdown, Oguchi warns that "everyone is cutting budgets, including insurance, services, real estate – everything."

Kevin Ramsey, the Asia Pacific regional director for McCann Worldgroup, agrees clients "across the board" are taking "very, very conservative positions."

Consumers are also said to be scaling down from luxury brands to "basic-level" brands according to McCann's David McCaughan.

Among the possible changes all this may induce is an end to the 15% commission normally received by agencies for media buys, and a move and towards the commission system used elsewhere.

Data sourced from AdAge.com; additional content by WARC staff