Abenomics – One year on and opportunities in Japan

Japan Market Update
Abenomics 1 year on
Opportunities in Tourism
Sean Ong
Senior Manager,
North Asia & Pacific Group
18 March 2014
Agenda
• Abenomics and Japan’s economic outlook
• Opportunities in Japan’s Tourism sector
• Conclusion
Japan and the two lost decades
• Japan has been in
prolonged recession
since its economic
bubble burst in
1990s.
•
Moving average data discounts
effects of Yen appreciation.
Stagnant Economy :two lost decades
Source: Chart from the Economist
From 1992-2013,
Japan’s average
growth rate of 0.9%
and inflation rate of
0.4% --the lowest of
major advanced
countries.
Political Stability with LDP Abe back in power.
Approval Ratings
Koizumi
Abe
Aso
Fukuda
Kan
Abe
Hatoyama Noda
Comparison of approval ratings of G7
leaders (as at Dec 2013)
Country
Leader
Ratings
Japan
Abe
55%
Italy
Letta
45%
US
Obama
43%
Germany
Merkel
42%
Canada
Harper
40%
UK
Cameron
39%
France
Hollande
21%
Source: Report on Abenomics from Mizuho
Source: Report on Abenomics from Mizuho, data from NHK
• Previously, political instability impeded economic policy.
• PM Abe has unprecedented high approval ratings (60%); only G7 leader to have more than
50% support, and will stay in power until 2016.
• PM Abe “eradicated” various vested interests and political groups and pushed for tough reforms
such as: Joining TPP Negotiations and Agricultural reforms.
Economic measures introduced: “Abenomics”
Source: Diagram by Ritchie King
from Quartz, qz.com
Abenomics 1 year on.
1st Arrow Bold
Monetary Policy
2nd Arrow
Fiscal Policy
3rd Arrow
Growth Strategy
Overall Target
2% Real Growth (3% nominal growth)
JPY 1.5 million increase in nominal national income per person
Individual Targets/
Action Plans
2% Inflation target
within 2 years
Eliminate budget
deficit by FY2020
Achievements
• Mar 13. Kuroda takes
over as BOJ Governor.
• Jan 13. JPY 5.6 tril • June 13. Growth strategy
economic stimulus announced.
package .
• July 13. Started negotiations
• Dec 13. JPY 5 tril
for TPP.
stimulus package to
offset GST increase. • Dec 13. Passed bill on
Industry revitalization and
Special Economic Zones.
• Apr 13. BOJ commits
to double monetary
base and achieve 2%
inflation within 2 years.
• CPI rises 0.4% y-o-y in
2013, first time in 5 yr.
1. Industry Revitalization
2. Strategic Market Creation
3. Strategy of global outreach
Performance of Financial Markets
Source: Compiled by BOJ, data from Bloomberg
In 2013, Nikkei 225 Stock Average had its biggest yearly gain since 1972
Increase in commercial lending.
Source: BOJ
Improved business sentiment across Japan
Improved corporate earnings and profit
Abenomics
Source: Chart from Nikkei
Improved Consumer Confidence
Abenomics
Source: Chart by Mitsubishi UFJ Research & Consulting, data from Cabinet Office,
Survey of Consumer Behavior
Improved labour market
Abenomics
Source: Compiled by BOJ, data from MHLW and MIAC
Tokyo is again top investment destination in Asia
Pacific for Real Estate in 2014
• Property market in Japan is
steadily improving, riding on
Abeonomics and Tokyo winning bid
to host 2020 Olympics.
• Land prices in major cities on
rising trend on back on increasing
office investment and housing
demands.
• TSE J-REIT posted net gains of
36% appreciation in 2013.
Source: Emerging Trends in Real
Estate Asia Pacific 2007- 2014 survey
Japan’s GDP Forecast
Effect of Abenomics
Source: Compiled by NLI Research Institute, data from Cabinet Office,
Quarterly Estimate of GDP
Outlook for Japan becoming more positive
Japan’s economy is on the rebound but some uncertainties remain
– Will Japan Inc transfer increased earnings to employees? (Big
companies such as Toyota, Honda, Hitachi have announced base
salary increases. But smaller companies have not.)
– Slow down in economy due to increase in GST (from 5% to 8% in
April 2014).
– Successful implementation of Abe’s third arrow, and contents of 2nd
package of growth strategy (eg. reduction of corporate taxes,
liberalization of labour laws) due June 2014.
Opportunities for companies to invest in Japan
1. Eldercare and medical related
2. Renewable energy
3. Logistics
4. Tourism related
•
Under Abenomics Growth Strategy, Japan targets to attract 20 million foreign
tourists by 2020 and 30 million by 2030.
Overview of Japan Tourism market
2011 Breakdown of Japan Tourism market
No of foreign visitors to Japan (in millions)
12
10
8
6
4
2
0
2001
2003
2005
2007
2009
2011
2013
Source: Data from JNTO
Source: Chart and data from JTA
Number of foreign tourist to Japan has been steadily
increasing
Factors driving increase of foreign tourists to Japan
Govt
Targets
2030 Target of 30 million
2020 Target of 20 million (Tokyo Olympics)
• Depreciation of JPY (20% decrease)
Factors
Driving
Growth
• Increase in availability of LCC flights to Japan (15 companies
now)
• Aggressive visa relaxation for SEA countries
• Improved image of Japan after 3/11
(Mt Fuji UNESCO World Heritage Site, Washoku UNESCO Cultural
Heritage, Tokyo winning 2020 Olympics)
Composition of Foreign Visitors to Japan
No in 10,000
Y-o-Y % change
2013 No of Foreign Visitors by Country
300
90
250
70
53
50
highest increase
200
51
150
100
75 Visitors from Thailand posted
34
Korea (25%)
21
15
50
0
-9
China (25%)
37
36
30
9
11
12
9
10
-10
Source: JNTO
•
Visitors from Korea, Taiwan and China make up for about 60% of all foreign visitors.
•
Visitors from US/ Europe while recovered to pre-Lehman levels, are below historical highs.
•
Moving forward, visitors from SEA are expected to grow rapidly.
Relaxation of visa requirement for SEA nations
Visa Relaxation
From
2013
Tourist No
Y-o-Y
increase
Indonesia
Extension of short term
visa stay period
July 2013
137K
+35%
Thailand
Visa waiver
July 2013
454K
+74%
Malaysia
Visa waiver
July 2013
177K
+36%
Philippines
Multi visit visa
July 2013
108K
+27%
Vietnam
Multi visit visa
July 2013
75K
+9%
Laos
Multi visit visa
Nov 2013
-
-
Cambodia
Multi visit visa
Nov 2013
-
-
Myanmar
Multi visit visa
Jan 2014
-
-
Source: JNTO website
Growth potential of Japanese tourism market
Source: JNTO and estimates by Japan Tourism Bureau Federation
Japan Hotel investment market picking up
Number of Hotels sold in Japan
Foreign hotel chains opening across Japan…
Jun 2013
Intercontinental Osaka
Nov 2013
Ibis Styles Kyoto Station
Dec 2013
Marriot Tokyo
Feb 2014
The Ritz Carlton Kyoto
Courtyard by Marriot Tokyo Station
Andaz Tokyo (by Hyatt)
Courtyard by Marriot Osaka Station
Aman Tokyo
Hilton Okinawa Chatan
2015
Four Seasons Kyoto
Previously foreign hotels concentrated in Tokyo. Investments by foreign
capital now spreading across Japan.
Number of Hotels on the upward trend
Trend in number of Hotels and Ryokan room supply
Source: Compiled by JLL, data from MHLW
Source: Compiled by NLI Research Institute, data
from Ohta Publications “Weekly Hoteliers”
Hotel performance: occupancy rates on the rise
Occupancy rates at 19 major Tokyo hotels grew 4.9 points on the year to an average
84.8% in 2013, surpassing previous record of 82.5% in 1991.
Hotel performance: Average Daily Rates on the rise
Opportunities to invest in hotels at popular tourist
destinations
Source: 2013 Survey by JTA
Opportunities targeting Muslim inbound tourist
(No of
Muslims)
Visa
Relaxation
From
2013 Y-o-Y
Touris increa
t No
se
Indonesia
(200 mil)
Extension of
short term
visa stay
period
July
2013
137K
Malaysia
(16 mil)
Visa waiver
July
2013
177K
+36%
Thailand
(8.2 mil)
Visa waiver
July
2013
454K
+74%
Philippines
(6 mil)
Multi visit visa
July
2013
108K
The Japanese government are
actively attracting Muslim tourist
from Indonesia and Malaysia
because of the rising middle class.
+35%
This opens up various business
opportunities to:
+27%
•Provide consultancy services to
hotels etc to help them become
Muslim-ready
•Export of Muslim-friendly F&B
services and set up Muslimfriendly restaurants in Japan.
Opportunities targeting business travelers to Japan
No of MICE events by country
400
350
#1 Japan
300
250
• 30 % of Travelers to Japan are
business travelers.
• While Japan’s share of MICE in
Asia Pacific has been dropping,
Japan
Australia • Japan is retains #1 position
with 341 events in 2012 –
Singapore
double that of Singapore and
Korea
about 1.5x Korea.
China
200
150
100
50
0
2001
2003
2005
2007
2009
2011
Source: ICCA
• Japan MICE industry face challenges such as shortage of large scale MICE
cum hotel facilities and lack of “after conference” attractions and entertainment.
• Companies can target Japan’s MICE industry to provide consultancy services
and business tie-ups.
Conclusion
• Economic outlook for Japan is growing more positive with
Abenomics opening up investment and partnership
opportunities.
• Tourism is a growing industry in Japan. No of tourist is expected
to double to 20 million by 2020. Companies can explore
opportunities to
• Invest in and/or operate hotels in cities such as Tokyo, Osaka
• Provide services targeting Muslim travelers to Japan and set up
Muslim friendly restaurants.
• Provide services riding on growth tourism (eg. Consultancy for
MICE etc)
Thank You
www.iesingapore.com

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