Archive for January, 2014

Special K: Mini-cars come of age in a maxi-world

Sunday, January 26th, 2014

Thinking inside the box: Honda's N-WGN

Thinking inside the box: Honda’s N-WGN

The nationwide used car dealer, Gulliver, recently set up a new venture called Gulliver Minicle, which deals only in kei-jidosha, often referred to as minicars in English, though here we like to call them K-cars, which make up a separate class of automobile. The engine displacement can’t be more than 660cc, and they were developed in the ’60s and ’70s for people with limited incomes.

When K-cars first appeared the engines were as small as 360cc, and have always been a point of contention for the U.S. automobile industry, which describes them as a “non-tariff trade barrier” because taxes for K-cars have been much less than they are for regular cars and thus are deemed as being unfair competition for infamously larger American cars — though it should be noted that U.S. automakers have tried to sell compacts in Japan.

K-cars have always had one glaring drawback. Because the engine is so small, they have to be light, and that means they are less safe. Consequently, families don’t buy them; or, at least, they didn’t until recently.

Gulliver’s launch of a retail entity that only sells used K-cars shows that there must be a viable market, since K-cars are already cheap and Japanese people aren’t big used car buyers. So far there is only one Minicle, in Morioka, and it has about 50 cars on display divided into three sizes: S, M and L, like apparel.

According to an article about the store in the Asahi Shimbun, there really isn’t much difference in the sizes, but the designations appeal to women, who are now the main target demographic for K-cars. There is even a play space in the store where kids can relax while mom is shopping for new wheels.

Gulliver is already planning Minicle stores in Hokkaido, Tohoku, Kyushu and the San’in region, and by 2018 expects to have about a dozen throughout Japan, mainly in the vicinity of regional capitals and not so much in the big three metropolitan areas.

In December, the Japan Light Motor Vehicle and Motorcycle Association estimated that 2.1 million K-cars would be sold in Japan during 2013, a new record. In contrast, sales of all other cars amounted to about 3 million. So while sales of minicars increased by 4.8 percent over 2012, sales of other cars decreased by 5.3 percent.

As a portion of all car sales, Ks increased by 2.4 points to 39.3 percent. The only other automotive sector that showed more growth was foreign (read: German) cars, whose sales increased by 9 percent, also a record. And in terms of production by Japanese automakers, 40 percent are now K-cars.

The obvious reason for the popularity of minicars is their price, but they’ve always been cheap. It’s their reason for existing in the first place. Some say that people bought them last year because the K-car tax is set to be eliminated sometime this year, but a more likely reason is increased safety and functionality.

More than a year ago, Daihatsu started selling a new version of its Move model that uses sensors to automatically reduce speed when it gets too close to the car in front of it. Though it’s offered as an option at ¥50,000, more than 80 percent of the buyers order it. In succession, similar options were added by Suzuki to its popular Wagon R model, for ¥42,000, and by Honda to its N-WGN model.

A Honda representative told Asahi that since 64 percent of K-car drivers are women, this option was incorporated specifically to attract them. A good portion of K-cars are bought as second cars, for shopping and shlepping the kids around. In the past, these women bought compact cars, but they’re switching over to Ks.

Nissan and Daihatsu have upped the ante by also offering windshields that cut ultraviolet rays, something else women demand. In addition, K-cars now have much roomier interiors than in the past and larger cargo areas. In truth, there isn’t much difference, performance-wise, between a K and a standard compact.

Which is why the U.S. is even angrier than before, because that makes the so-called trade barrier even higher to scale. Due to regulations and consumer sentiment, K cars aren’t marketable in America, and the Big 3 automakers aren’t going to manufacture them only for one market, but that could be changing. India seems ravenous for K-cars and Suzuki is quickly setting up factories and joint ventures on the sub-continent.

Some experts say that the U.S. Trade Representative’s gripe about Ks is actually a means of keeping pressure on other sectors, generating leverage to open Japan’s agriculture and insurance markets more, for example. Also, it gives the American government an excuse to maintain its own tariff to protect the U.S. truck market from low-priced Japanese imports.

Use it or lose it: Workers want companies to pay for paid vacations

Monday, January 20th, 2014

No rest for the weary

No rest for the weary

Last fall, the labor ministry inspected 5,111 companies they suspected might be burakku kigyo, or “black companies,” meaning enterprises that violate labor standards, usually with regard to working hours. The ministry found that more than 80 percent were, in fact, guilty of some kind of misdemeanor in their treatment of employees, with 44 percent violating overtime rules and 24 percent not paying extra wages for overtime work at all. All the major media reported the investigation but, as is always the case with such revelations, no companies were identified.

Tokyo Shimbun, however, did interpolate the findings in an interesting way by offering a useful tip to young job-seekers: A good criterion for determining whether or not a company treated its employees fairly was the way it handled paid vacations. As it stands, Japan, among all the major industrial economies in the world, has the lowest rate of workers taking paid vacations — on average only 47 percent of full-time regular employees.

In France, Germany and the U.K., almost 100 percent of full-time workers take paid leave, probably because it is legally mandated. In the U.S., where there is no law guaranteeing paid vacations, the rate is between 70 and 80 percent. The usual reason for Japan’s low showing in this regard is the structure of the workplace, where employees are expected to take full responsibility for their positions, meaning that when they take time off they have to ask other employees to cover their tasks, thus giving those employees extra work.

This can cause bad feelings among co-workers, which is why in Japan everybody takes vacations at the same time. In other countries, tasks tend to be shared within departments or sections, so if one person takes off his job can be covered by several people.

Nevertheless, Japan does have rules governing vacation time. After six months on the job, a new employee, whether full-time or part-time, must be allowed 10 days of paid vacation if he or she has worked at least 80 percent of all his employer’s business days during those six months. Then, for every subsequent year the employee remains at the company, he or she gains one extra paid day off. The labor ministry survey found that the average white collar worker takes 8.6 days of paid leave a year. In addition, a survey by Rengo, the Japan Trade Union Federation, found that 23 percent of workers took no vacation at all, while another 24 percent took up to only 2 days.

According to an article published last November by the weekly magazine Shukan Post, with pressure mounting from the government to increase salaries in line with the Liberal Democratic Party’s economic recovery plan, some companies are looking at paid vacations as a means of meeting these goals, by paying employees extra for the time they don’t take off.

At present, this is against the law. In 1955, the practice of “buying” paid vacations was outlawed because, according to a professor interviewed by Post, Japan was just entering its high-growth period and there were labor shortages, so businesses could afford to buy workers’ vacations since consumer demand was so high. The government realized that workers could easily be exploited.

The Post suggests the government legally allow companies to buy vacation time since workers themselves have said they are willing to sell such time if they receive “the proper compensation.” Companies now can legally compensate for unused vacation time when an employee quits or retires, so changing the law wouldn’t be that difficult.

In any event, the magazine reports that many companies already buy vacation time under the table, though they often pay only the equivalent of the minimum wage. The magazine figures that since a 45-year-old university graduate makes on average ¥18,500 a day, he could demand ¥185,000 extra for not taking his mandatory 10-day vacation. That extra money would add about ¥15,000 more to his monthly pay, which by itself isn’t going to boost his pay enough to provide the stimulus the government wants, but it’s something.

Deflation Watch: New Year’s scorecard

Sunday, January 12th, 2014

Bottomless: Bargain bulk sale on diapers at discount store

Bottomless: Bargain bulk sale on diapers at discount store

In a chat with Nobel Prize-winning economist and New York Times columnist Paul Krugman, the weekly magazine Aera asked him about the prospects of “Abenomics,” which Krugman has supported. He still supports it, but thinks that the consumption tax hike to 8 percent next April was a “bad decision” that may ruin all the good things that Abenomics could achieve. He recommends that Prime Minister Shinzo Abe either cancel the increase or postpone it.

It’s probably too late for that, which explains Abe’s recent desperate attempts to get Japan’s businesses to promise to boost salaries, none of which seem to be working. In a recent Kyodo News survey of 104 “key” companies, only 17 percent say they plan to increase pay in 2014, but none will carry out basic salary increases across the board, what’s known in Japanese business parlance as “base up.” The feeling is that they’ll increase wages for some workers, maybe through bigger bonuses, but such schemes don’t instill confidence in workers, and unless workers think they will be paid more in the future than they are now, they aren’t going to spend as freely, behavior that’s central to the success of Abenomics.

In the Kyodo survey 71 percent of businesses polled believe they will see growth in 2014, but if that growth isn’t translated into higher salaries, the game is off. Moreover, the good performance of the economy in 2013 was misleading. As web magazine Diamond Online points out, it was a minority of well-to-do Japanese who benefited from the stock market boom in the past year. Also, because people have anticipated the consumption tax hike next year, they rushed to buy houses. These two factors boost numbers, at least temporarily, but they don’t solve the underlying problem of deflation and lack of consumer sentiment in the population at large.

Much was made of the big profits enjoyed by large companies this year, but they represent a fairly small portion of the Japanese business community, only 0.3 percent of all registered companies. They made money through exports, meaning they benefited from the higher dollar. That’s all. Diamond says that 70 percent of the Japanese workforce is employed by small or medium-sized companies, who depend mainly on domestic consumption.

Diamond surveyed 200 workers about their winter bonuses. Seventy-eight said they received no bonus at all, while 98 said their bonus was less than ¥500,000. Only 38 replied that their bonus was larger than last year’s, while 40 said it was less. The remainder said there was no change. This contrasts greatly with the widely reported news that the average winter bonus of an employee of a large company was ¥806,000.

More significantly, when Diamond asked the people who did receive a bonus what they used it for, 61 percent said it went into their savings, while 24 percent said it would go for “necessary expenses” and 19 percent used it to help pay off loans. In other words, only 6 percent, at most, bought something with it.

The Mizuho Research Institute found that the average household, which earns ¥4 million-¥5 million a year, will spend ¥78,869 more in taxes in 2014 thanks to the consumption tax increase. The Cocomane website, which helps consumers save money with tips on reducing expenditures, did its own survey of 1,127 people, 80 percent of whom said they “economize” on a regular basis. Why are they always looking to save money? The number one reason is to “prepare” for future expenditures. The second most common reason was “loss of income,” and the third reason “not enough money saved.” As to the question “How do you save money?” the most frequent answer was the simplest: Just try not to spend it, followed by “not eating out” and “cutting back on utilities.”

But the most interesting responses were in relation to the consumption tax hike. Fifty-four percent of respondents said they have not made nor do they intend to make any “big purchases” before the increase goes into effect, and 62 percent of the people who are making big purchases say it has nothing to do with the increase. Essentially, most consumers either aren’t changing their already careful consumption habits in face of the tax increase, or they will try to spend less. Almost no one expects to spend more.

Part-timers skewing employment statistics

Thursday, January 2nd, 2014

Take this job and...: Want ads targeting part-timers for specific shifts at a Chiba Prefecture supermarket

Take this job and…: Want ads targeting part-timers for specific shifts at a Chiba Prefecture supermarket

When the government determines the success of Abenomics it has to take into consideration wage inflation, not just price inflation, since real growth can’t be sustained without both. Nevertheless, all wage inflation isn’t created equal.

A recent article in the Asahi Shimbun cited results of a regular survey conducted by Recruit Jobs, an employment-related research institute. In the major metropolitan areas of Japan the average wage offered to part-time food service workers in want ads in November was ¥930, which is 1.3 percent higher than the average amount offered in November 2012. More significantly, this year-on-year increase has been continuing for 25 consecutive months, the longest stretch of increases since the institute started tracking such numbers in 2007.

The standard wage in the restaurant industry is relatively low to begin with, and right now there is a shortage of help nationwide, so Recruit says employers are being forced to offer more money. One example cited by Asahi is a new mall that just opened in Makuhari, Chiba Prefecture, which contains a number of eating establishments, most of which belong to chain operations. Starting wages at these restaurants is between ¥1,200 and ¥1,300 an hour, which is even higher than they are in Tokyo. According to an official at Four Seeds, a company that owns several restaurant chains, more large retail facilities, such as shopping malls, are being built in an around major metropolitan areas, so there is greater demand for food service workers.

However, these numbers are misleading in terms of indicating whether or not the economy as a whole is on the mend. For one thing, the labor ministry says that just because part-time wages in major cities are going up, it doesn’t mean they’re rising for the rest of Japan.

The ministry found that in October, the average monthly take-home for “short-hour part-timers” was ¥94,634, which is 0.4 percent lower than it was in October 2012, and marked five straight months of year-on-year declines. And if the average pay for a part-timer in this industry in 2010 was set at 100, then the salary this year is 98.7.

Despite the fact that the national minimum wage was raised recently, average part-time income is dropping, mainly because companies are hiring more people to work short hours. For instance, the coffee shop chain Pronto targets housewives (which they call “mistresses”) in their 30s and 40s with the promise that they don’t have to work weekends and holidays. In addition, they can take off up to nine full weeks, without pay, of course, in a given six-month period. These women don’t work more than 20 hours a week, and the company likes it because under these conditions they can easily find women willing to work for low pay at short notice.

This trend is also prevalent in the supermarket industry, where employers pay housewives slightly more to work in the morning and the evenings since most housewives prefer only working in the afternoon when they don’t have household responsibilities.

In Tokyo, many food service companies offer higher wages only for peak demand periods to fill short-term staffing shortages. Other times they offer less money. The turnover is high, but this strategy allows the companies more options in controlling personnel costs on a month-to-month basis.

The point is that these workers supposedly want to work shorter hours, and the more people there are working shorter hours for slightly more pay, the more the statistics will reflect higher wages overall, but in truth the pay is just being distributed among more people, meaning per capita wages aren’t going up at all.

Of course, food services is traditionally considered an entry-level or temporary job, not a career track job, but as manufacturing continues to shift overseas, it is an industry that will become more vital as an employer. It’s not quite at the stage that it is in the U.S., where many fast food workers have to support families on what they make, but it might be getting there.

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