Archive for the ‘Economy’ Category

Employment counselors forced to sit on the other side of the window

Wednesday, April 10th, 2013

The rise of non-regular employment has received a lot of coverage because of its effect on job security in the general work force. A seldom discussed side effect is the acute anxiety experienced by non-regulars as their contracts approach their expiration dates. Will mine be picked up for another year? Will I have to go out and look for a new job next month?

Hello Work website

Hello Work website

For public non-regular employees this emotional roller coaster starts right after Jan. 1, since most contracts end with the fiscal year in March. And for those who have been working in the same position for an extended length of time, there is no solace in the new law that goes into effect this year and which says an employer must hire a contract worker as a regular full-time employee, complete with benefits, if the worker has been in the same position for five years.

Though it’s assumed that many employers will work the loophole by not renewing a contract just before the five-year period is reached and then hiring the person back after a six month “cooling off” period with an open-ended contract, non-regulars who work in the public sector aren’t covered by the new law in the first place. They can be retained as non-regulars indefinitely.

This exception was highlighted when the labor ministry announced that 2,200 non-regular members of its unemployment advisory staff had not had their contracts renewed for fiscal 2013. That represents 10 percent of all the non-regulars employed at Hello Work counseling centers nationwide, and presents an interesting scenario: Former employment counselors who themselves must seek employment advice.

In fact, a Tokyo Shimbun article described one woman in her 50s who received her notice in early March while she still had several weeks on her contract. Though she knew there was always the possibility her yearly contract would not be renewed the lateness of the notice (the media reported the announcement as being “sudden”) caught her off-guard.

In the last weeks of March she was looking for a new job at Hello Work on Saturdays while still working Monday through Friday at the same facility counseling people who themselves were looking for jobs.

One part of the new law that was already in effect before April 1 is to make the practice called yatoidome illegal. “Yatoidome” means nonrenewal of an employment contract for “no good reason,” but, of course, “good reason” constitutes a gray area that the Japanese legal system isn’t equipped to address. It is this part of the law that doesn’t apply to public workers, supposedly because non-regular government employees are only hired as stopgap workers, meaning people employed to fill certain positions on a temporary basis. They do not have to pass a test the way full-time regular civil servants do. However, in many cases, these workers become as indispensable as regular employees. In 2012, 63 percent of all Hello Work employees were non-regulars.

As for why the labor ministry decided to effectively lay off so many employment center staff at one time, a representative told the media that the ministry hired extra contract workers when the recession worsened in 2008 and again after the disaster of 2011, but now the job situation “is stabilizing” so the ministry doesn’t need as many counselors. Some laid-off employees counter this explanation by claiming that their workloads have been heavier in recent months, not lighter, especially in areas most affected by the disaster. What may have sparked the layoffs was the finance ministry, which has been auditing budgets across all government agencies and ministries and demanding cuts.

The yatoidome exception doesn’t just apply to national public workers. One-third of all local government employees, or about 700,000 people, are also non-regulars. That’s an increase of about 100,000 since 2008, according to a labor ministry survey. Of these, 60 percent work more hours than regular employees. More than half of these non-regulars make less than ¥160,000 a month or ¥2 million a year. And because they are technically part-timers, they are not up for promotions or salary increases. The most prevalent jobs in this category of public worker is day care attendant and librarian, but it also includes policemen, firemen and school teachers.

Court says railway can make patrons pay through the nose

Friday, March 29th, 2013

Inzai Makinohara Station

Inzai Makinohara Station

We live on the Hokuso Line, which connects Takasago in eastern Tokyo to the Nihon University Medical Center in northern Chiba, a distance of 32.3 kilometers. The Hokuso Line has been called the most expensive train line in Japan. From one end to the other it costs ¥780, and for us to get from our station, Inzai Makinohara, to its neighbor to the west, Chiba New Town Chuo, it costs ¥290. Many people who live on the line and use it have complained to the relevant authorities and demanded that fares be reduced. In fact, five local residents sued the central government, demanding that the court rescind the state’s approval of the Hokuso Railway’s plan to lease its tracks to another railway company and claiming that the plan did not benefit users. On Mar. 26 the Tokyo District Court rejected the suit, saying that the government authorization did not damage the welfare of the railway’s users in any way.

The plaintiffs said they didn’t understand the judge’s reasoning. One, a 19-year-old man, told an Asahi Shimbun reporter that when he was a high school student he spent ¥90,000 on a six-month pass, which, on average, is about four times what it costs for a comparable student pass on any other line. Now that he’s graduated and going to a prep school he no longer qualifies for the student discount, and has to pay ¥170,000 for half-a-year. Single-station fares on the Hokuso are about twice as much as they are on other lines. The Hokuso Line is part of the Keisei Dentetsu Group, whose average fare for 32 kilometers is about ¥470, so the Hokuso fares are 70 percent higher than fares on other lines even within the same railway group. The reason for the high fares has been explained in this blog before, but in a nutshell, the line was designed to serve the Chiba New Town development project, which began in 1969. Planners envisioned 340,000 people eventually moving into the New Town area, which encompasses portions of three cities, but in the end only about 93,000 actually did. The main problem for the Hokuso Railway Co. was the cost of construction, in particular the cost of land. Purchases were made at the height of the bubble era, when land prices were sky high and so were interest rates. The debt currently stands at ¥90 billion, and the railway pays ¥5 billion on the note every year. But the Chiba New Town authority, which the railway belongs to, also has to pay shareholders, many of whom are farmers who sold it the land in the first place. You can see their huge houses, built with the money they made and are still making, all over the region that lies alongside the Hokuso Line. Since opening for business in 1991, the railway has raised its fares nine times, though it also cut a few, but only by ¥10.

The kernel of the court case is a leasing deal that the Hokuso Line made with Keisei Dentetsu, which wanted to use the Hokuso tracks for its Skyliner and Sky Access express trains to Narita Airport. Regular users of the Hokuso Line were under the impression that (more…)

Convenience store companies boost employee income, engage in one-upmanship

Thursday, March 14th, 2013

No raises here: Recently shuttered convenience store

No raises here: Recently shuttered convenience store

If Prime Minister Shinzo Abe’s plan to boost inflation and the economy along with it is to succeed, companies will have to raise employee salaries and wages, otherwise there will be no increase in consumer spending. Earlier this week, a number of automotive companies and electronics makers said they would go along with this plan and announced bigger bonuses, seemingly as a gesture of support for Abe’s scheme. However, one company got the jump on all of them, the #2 convenience store chain Lawson. The company’s president, Takeshi Ninami, who happens to also serve on the government’s Advisory Panel on Industrial Competitiveness, said earlier this month that employees “in their 20s to their 40s” would be eligible for a pay hike of 3 percent, or one percentage point higher than Abe’s inflation target.

Ninami told Nihon Keizai Shimbun that Lawson employees in this age group account for 70 percent of the company’s workforce. It should be noted that the vast majority of Lawson employees who interface with the public, meaning clerks at Lawson’s stores, are not eligible, since they are either hired by the franchise owners or, if the store is company-owned, employed as part-time help (arubaito). Ninami admitted this to Nikkei, but said that Lawson would try to “secure higher incomes” for these workers by implementing “activities to increase profits for our franchisees, starting in March.”

In response, Seven and i Holdings, which runs the No. 1 convenience store chain 7-11, and Family Mart, which operates the No. 3 chain, will also boost pay to stay competitive, since there’s a danger some of their regular employees might bolt to Lawson if they don’t. Ostensibly, however, or at least according to Tokyo Shimbun, the convenience store industry believes it needs to support the Abe plan because retail “is very close to the consumer” and thus must provide an example that could help open tightly closed wallets. Because convenience stores have continued to do well even during the recession, and retail workers tend to be paid less per hour than workers in other industries, CS companies need to take the lead in the hope that other distribution-related firms will also increase wages and, as a result, boost consumption in general.

Domestic consumption accounts for 60 percent of Japan’s GDP. That’s why Abe stood in front of the Japan Business Federation (Keidanren) and two other business associations in February and bowed deeply, asking them to increase salaries. They reacted “cautiously,” saying that the business situation is “still difficult,” but Abe probably expected that. He made sure cameras were there to record it so that the public would know that he was trying and other business leaders might be shamed into going along. Then Ninami, who is basically part of the Abe team, announced Lawson’s wage plan. In addition, Family Mart announced its wage hike right after economic reconstruction minister, Akira Amari, told reporters that he hoped the company would do exactly that.

Specifically, Lawson will increase bonuses for 3,300 of its 3,500 regular employees for an overall 3 percent boost in employee income. The 54 group companies of Seven & i Holdings comprise 53,500 regular employees, who will receive a “base up” — meaning all affected receive a uniform raise — in addition to regularly scheduled individual salary increases (teikishoku) based on position, age and number of years at the company. Family Mart will give 2,700 of its 3,100 regular employees a 1.5 percent raise in teikishoku and a 0.7 percent bonus increase.

As Tokyo Shimbun points out these measures are mostly cosmetic. Since more and more workers are non-regular employees of the people they work for, there is no chance for a boost in inflation unless they get wage increases as well, and except for Ninami’s vague promise to “increase profits for franchises,” no one has said anything about non-regular and part-time workers, including major media. To give some idea of the scale involved, there are more than 13,000 7-11 franchises and 400 company-owned stores; the respective breakdown for Lawson is about 9,300 to 1,000; and for Family Mart its 7,500 to 450. Franchise employees are paid by the franchise owner, not the company whose name is on the store.

Deflation watch: Retort curry

Thursday, January 24th, 2013

Just add rice.

The newly elected Liberal Democratic Party government and the Bank of Japan have set an inflation target of 2 percent as a means of reviving the economy. It’s a plan that has been met with as much skepticism as approval, but what sort of impact will it have on the average person? According to an analysis in the Asahi Shimbun, inflation has only exceeded 2 percent several times in the last 25 years. In 1989, when the consumption tax went into effect, and 1997, when the tax was raised, consumer prices spiked for obvious reasons. In the early 90s, after the bubble burst, it went up due to an increase in the global price of oil, but during that period wages also went up by 4.8 percent, so the increase wasn’t that noticeable. In the summer of 2008, just before the subprime crisis, consumer prices went up by 2.4 percent, also due to a rise in energy costs, but wages actually decreased by 0.3 percent. It’s this dynamic between consumer prices and wages that determines how the public “feels” inflation. According to Japan’s Tax Bureau, the average income of salaried workers in 1997 was ¥4.67 million, and in 2011 it was ¥4.09 million. In terms of total money, Japanese salaried employees earn ¥25 trillion less than they did at the peak of the bubble era. Some of this loss in buying power has been offset by the attendant decrease in retail prices. Anyone who lived in Japan during the bubble will tell you that consumer prices were very high, especially when compared to those in other countries, so the subsequent drop doesn’t seem unnatural.

All of which is to say that we plan to post occasional observations about price changes over time as a means of putting Abenomics — whose core strategy is to boost inflation — in perspective. First up: retort curry, meaning prepared curry topping in a pouch that is heated in a pan of boiling water. Except for noodles, it’s the most common instant meal in Japan and there are dozens of retort curry product lines. The volume of a single serving package is usually 200-210 grams, with higher end products topping out at ¥300 retail per piece. However, above the ¥100 price line, there really isn’t that much difference from one brand to another except maybe in terms of meat volume.

Below ¥100 is where the competition lies, and in that price range the most representative brand is House’s Kariya. Though the recommended retail price is ¥120, after the turn of the millennium Kariya usually retailed for about ¥98 in line with the “one coin” marketing strategy that said people tended to resist a product once its price floated above ¥100. Following deflationary patterns over the course of the decade, Kariya’s price actually dropped, first to ¥88 and then to ¥78, in discount and drug stores that specialized in bulk sales. The spread of such stores put pressure on regular supermarket chains to also reduce the price of Kariya, since it was so popular. Last weekend, we found it on sale at our local discount drug store for ¥68. That’s even cheaper than generic brands, which usually go for ¥296 for a set of four pouches. More significantly, the price of other brands of retort curry has also come down, and while none are as low as ¥68, more have drifted below the ¥100 line. This means a curry meal can actually cost less than two convenience store onigiri (¥200), the standard model for a cheap lunch, since a microwave package of prepared white rice is ¥80-¥90. Of course, non-instant curry, made from packaged roux, costs less per serving, but retort curry will likely become even more in demand with the projected increase in single-person households, and so we predict it will resist any inflationary pressure.

In Japan it’s never too late to get in on the ground floor with stocks

Thursday, December 27th, 2012

Stock up: Mizuho’s board in Yaesu

New prime minister Shinzo Abe would like you to believe that the recent rise in prices on the Tokyo Stock Exchange are his doing, and the start of the rise did coincide with his election as president of the resurgent Liberal Democratic Party. Some economists have dismissed this theory, saying the stock market was due for a cyclical upturn anyway, but we’re willing to give Abe the benefit of the doubt if only because stock markets are so fickle and sensitive that the TSE would probably change if Bank of Japan governor Masaaki Shirakawa announced he was only going to wear green ties from now on.

Media focus on stock prices has revived the call to get the average person involved in the game. Everyone agrees that if the market improves steadily the general economy will, too. Since the crash of 2008, sparked by the failure of the Lehman Brothers investment house, all the world’s stock markets have gradually regained their footing except for Tokyo’s, which is dominated by foreign investors. The TSE has improved but at a much slower rate, and experts agree it has a lot to do with the fact that the vast majority of Japanese are still wary of stocks as a personal investment. One of the primary reasons for Japan’s long-standing deflationary trend is the huge personal savings stash of ¥1,400 trillion, half of which is estimated to be “dead,” meaning it isn’t even in a bank account. If only 1 percent of this money were invested in stocks, Japan’s fiscal problems would be solved. There would be more money in general circulation, and banks would then relax their loan criteria, allowing more companies to borrow money in response to perceived demand. Atsuto Sawakami of Sawakami Fund, one of Japan’s leading mutual funds, has been traveling the country encouraging retirees to buy stock by pointing out that traditionally company stocks in Japan have been owned by other companies, which are always under pressure to sell, thus stifling the market as a whole. If more individuals bought stocks and kept those stocks for the long-term, prices would automatically go up. The response, according to the Asahi Shimbun, has been positive. Business magazine Diamond Online reports that only 6.6 percent of individual financial assets in Japan are invested in stocks, while in the U.S. the equivalent portion is 30.6 percent. More individuals are gravitating toward mutual funds, but the portion of assets invested in them in Japan is only 3.4 percent, while in the U.S. it’s 11.8 percent. Meanwhile, 55.8 percent of individual assets in Japan are in non-performing bank accounts. The equivalent in the U.S. is 14.7 percent. Continue reading about rising stock prices in Japan →

Tax auditors running out of cheaters, ponder purpose in life

Friday, October 12th, 2012

Pandora’s box

You know that the recession is getting serious when even the National Tax Agency is reduced to twiddling its thumbs. The amount of unclaimed income that tax investigators discovered last year was ¥19.2 billion, comprising a measly 189 cases, the lowest since 1978. Moreover, of all the cases they investigated, only 61.9 percent were prosecuted, the lowest rate since 1973.

It should be noted that these numbers actually apply to tax returns or lack of reporting that occurred in 2008, since it takes about three years for the agency to complete an investigation before deciding on whether to pursue prosecution. So these numbers could simply be a temporary dip owing to the fact that 2008 was the year of the Lehman Brothers failure that jump started the whole economic crisis. However, there are other factors at play.

A tax agency official recently told Tokyo Shimbun that “prosecutors’ attitudes” changed after several recent scandals in which the legality of their methods were questioned, in particular that case in Osaka where a prosecutor cooked up evidence to nail a health ministry bureaucrat. Consequently, prosecutors are a bit gunshy about borderline cases that they would have pursued more aggressively in the past. In addition, over the years tax evaders have become more skillful at hiding income thanks to advances in information technology and the globalization of finances.

But a former tax official told Tokyo Shimbun that he thinks the quality of the auditing has also gone down. When he was an investigator, new recruits were trained under the strictest, most punishing circumstances. Veteran auditors put the screws to their underlings to make sure they were tough and relentless in getting as much evidence against tax scofflaws as they could.

Continue reading about a change in tax audits →

New stats about old folks

Wednesday, September 19th, 2012

With the rapid aging of society it pays to pay attention to all the latest economic statistics regarding old people, and lately we’ve come across quite a few. Here are some new numbers about households in which the designated head-of-household is 65 or older, carried in the Asahi and Tokyo Shimbuns.

Keep on pushin’

  • The average monthly income in 2011 was ¥185,000, which is about ¥3,000 less than the average in 2010.
  • About 90% of total income is in the form of government and company pensions.
  • Average spending is ¥221,000 month, meaning that the average household is ¥36,000 in the hole.
  • However, in 2011 average savings for households when there are at least two people stood at ¥22.57 million. Savings among seniors has been increasing gradually since 2008, but the statistic may be misleading since it is heavily weighted toward upper income households newly entering the senior demographic. Median savings is ¥14.6 million.
  • 5.44 million people over the age of 64 worked in 2011, which represents 27.6 percent of the nation’s population over that age; 46 percent of men and 26 percent of women between the ages of 65 and 69 worked.
  • Total number of people over 64 exceeded 30 million in 2011, with 50,000 over the age of 100.
  • As reference, in 2005, when the number of elderly was slightly over 26 million, about 2.2 percent were collecting welfare. The average monthly welfare payment for two-person elderly households in Tokyo was ¥122,000 and for outside of Tokyo ¥94,500. About 47 percent of elderly who received welfare also received some sort of government pension, at an average of ¥46,000 a month.
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