Japan Economy Forum

[LeveragedBuyout]

I can't believe I actually agree with Krugtron the Invincible. Hell must have frozen over. Anyway, Japan should tackle its debt problem by cutting taxes and simultaneously cutting spending. The private sector always knows best how to spend its own money.

Krugman Warns Abe on Tax Increase - Japan Real Time - WSJ

• 

• September 19, 2014, 9:00 AM JST

Krugman Warns Abe on Tax Increase
ByJohn D'Amico

Paul Krugman, seen here in 2012, says Japan’s prime minister is listening to the wrong people.
Associated Press
Economist Paul Krugman thinks that if Japan’s sales tax reaches 10%, it could mean a disastrous return to deflation.

In an interview published this week in Shukan Gendai, a weekly Japanese magazine, Mr. Krugman, a Princeton University economist and New York Times columnist, weighed in on Prime Minister Shinzo Abe’s economic policy as Mr. Abe’s administration closes in on the two-year mark in December.

Saying that Mr. Abe has listened to the wrong people, Mr. Krugman argued that Japan’s economic recovery has been thrown into doubt by the April increase in the national sales tax to 8% from 5%, according to the Japanese-language article. The magazine didn’t make his comments available in English.

Mr. Abe is weighing whether to go ahead with plans for a further increase to 10% in October 2015. Mr. Krugman, a Nobel laureate in economics, said the prime minister should go in the opposite direction and cut the rate back to 5%, then work to raise inflation expectations.

This will come as no surprise to longtime readers of Mr. Krugman’s views on Japanese economic policy. Back in 1998 he argued, “Unless one can make a convincing case that structural reform or fiscal expansion will provide the necessary demand, the only way to expand the economy is to reduce the real interest rate; and the only way to do that is to create expectations of inflation.”

Economists are divided on the planned tax increase. Abe adviser Etsuro Honda said in a recent WSJ interview that it should be delayed for 18 months, while Adam Posen of the Peterson Institute for International Economics told the WSJ that people are overreacting to the current slowdown and a tax increase was needed to pay for future social-welfare costs.

Mr. Krugman also expressed anxiety about a possible bursting of what he described as China’s investment bubble. He said Chinese officials, needing to shore up their popular legitimacy, might end up going to war with Japan, resulting in severe economic damage on both sides.

 

[bolo]

Nikkei hits 8-month high above 16,000 - The Japan News

Jiji Press The benchmark Nikkei average rallied to an eight-month high above 16,000 on the Tokyo Stock Exchange on Thursday, driven by the yen’s rapid weakening against the dollar in the wake of a key U.S. Federal Reserve meeting.

The 225-issue Nikkei average ended up 178.9 points, or 1.13 percent, at 16,067.57, closing above the 16,000 line for the first time since Jan. 8. On Wednesday, the index lost 22.86 points.

The TOPIX index of all First-Section issues rose 12.95 points, or 0.99 percent, to close at 1,317.91, after slipping 5.9 points the previous day. The index closed at the highest level since July 24, 2008.

In index futures trading on the Osaka Exchange, the key December contract on the Nikkei average ended up 200 points at 16,000.

Dollar soars above ¥108.50

The dollar soared to a fresh six-year high near ¥108.90 in Tokyo trading on Thursday. At 5 p.m., the dollar stood at ¥108.54-55, up from ¥107.26-27 at the same time Wednesday.

The euro was at $1.2887-2887, down from $1.2959-2959, and at ¥139.87-90, up from ¥139.01-02.

The greenback shot up to levels around ¥108.40 in New York trading overnight following the Fed meeting.Speech



Let's celebrate!! Just need to go up 13,000 points before Nikkei index will be back to its 1989 high of 38,957!!

 

[Aepsilons]

Household financial assets hit record high at ¥1,645 tril.


Financial assets held by households in Japan as of June 30 rose 2.7 percent from a year before to a record high of ¥1,645 trillion, Bank of Japan data showed Thursday.
The previous record was ¥1,644 trillion marked at the end of December 2013.

The growth was led by a 1.6 percent rise to ¥874 trillion in cash and deposits, as well as by increased market values of stocks and investment trust funds in their holdings due to the yen’s falls and higher stock prices.

Financial assets held by Japanese nonfinancial businesses rose 8.8 percent to ¥943 trillion, the BOJ said. Cash and deposits increased 4.2 percent, reflecting a favorable earnings environment.

The BOJ also said the balance of Japanese government bonds held by the central bank hit a record high of ¥215 trillion, up 43.8 percent, as a result of continuous buying of large amounts of JGBs under its quantitative and qualitative monetary easing policy.

The BOJ’s holdings accounted for 21.2 percent of all outstanding JGBs including treasury bills, the biggest share among major holders including insurance companies and domestic banks.

The outstanding balance of JGBs increased 4.5 percent to ¥1,013 trillion, exceeding ¥1,000 trillion for the first time.Speech


Household financial assets hit record high at ¥1,645 tril. - The Japan News

 

[kawaraj]

This Nikkei market boom will help the consumption and will finally give a push on economy. My own stock portfolio is at record high.

 

[Aepsilons]

This Nikkei market boom will help the consumption and will finally give a push on economy. My own stock portfolio is at record high.

I am in agreement.

 

[LeveragedBuyout]

One of the characteristics of Japan that is both a strength and a weakness is to create these extremely niche products that rarely have appeal outside of Japan, but when they do, they are so unique that they quickly create a new market. @Nihonjin1051 , if you have a chance to sample one of these when you return to Japan, please let us know what you think.

---

Burger King Japan Introduces Black Burgers: Video Review - Japan Real Time - WSJ

• 

• September 24, 2014, 11:35 AM JST

Burger King Japan Introduces Black Burgers: Video Review
ByJohn D'Amico

[Click the article link to see the video review.]

In Japan’s cutthroat fast-food market, Burger King Japan says it needs products that “aren’t common sense.”

Thus its new line of black burgers, which went on sale Sept. 19.

The two burgers, the plain “Kuro Pearl” and the topping heavy “Kuro Diamond” both feature buns and cheese blackened by a bamboo wood fire. The sauce also includes a healthy dose of black squid ink. Kuro means black in Japanese.

The Wall Street Journal gave both burgers a taste test–see the video.

Burgers with black buns were first introduced for a limited time by the chain in 2012 and became a hit, outselling all other new products that Burger King offered during the year, according to the company. They were also available for a limited time in 2013.

The Pearl and Diamond are the first to include blackened cheese and sauce. They will be available until early November, according to the company.

Currently the burgers are only available in Japan, with the Pearl and Diamond priced at 480 yen ($4.41) and 690 yen ($6.34) respectively. A spokeswoman declined to release sales figures so far.

Fast food is a tough business in Japan. Burger King entered the country in the 1990s through a tie-up with Japan Tobacco Inc. and others but withdrew in 2001. More recently, McDonald’s Holdings Co. (Japan) Ltd. has faced troubles, including a scandal involving chicken nuggets imported from China.

 

[kawaraj]

One of the characteristics of Japan that is both a strength and a weakness is to create these extremely niche products that rarely have appeal outside of Japan, but when they do, they are so unique that they quickly create a new market. @Nihonjin1051 , if you have a chance to sample one of these when you return to Japan, please let us know what you think.

---

Burger King Japan Introduces Black Burgers: Video Review - Japan Real Time - WSJ

View attachment 80153

• View attachment 80154

• September 24, 2014, 11:35 AM JST

Burger King Japan Introduces Black Burgers: Video Review
ByJohn D'Amico

[Click the article link to see the video review.]

View attachment 80163

In Japan’s cutthroat fast-food market, Burger King Japan says it needs products that “aren’t common sense.”

Thus its new line of black burgers, which went on sale Sept. 19.

The two burgers, the plain “Kuro Pearl” and the topping heavy “Kuro Diamond” both feature buns and cheese blackened by a bamboo wood fire. The sauce also includes a healthy dose of black squid ink. Kuro means black in Japanese.

The Wall Street Journal gave both burgers a taste test–see the video.

Burgers with black buns were first introduced for a limited time by the chain in 2012 and became a hit, outselling all other new products that Burger King offered during the year, according to the company. They were also available for a limited time in 2013.

The Pearl and Diamond are the first to include blackened cheese and sauce. They will be available until early November, according to the company.

Currently the burgers are only available in Japan, with the Pearl and Diamond priced at 480 yen ($4.41) and 690 yen ($6.34) respectively. A spokeswoman declined to release sales figures so far.

Fast food is a tough business in Japan. Burger King entered the country in the 1990s through a tie-up with Japan Tobacco Inc. and others but withdrew in 2001. More recently, McDonald’s Holdings Co. (Japan) Ltd. has faced troubles, including a scandal involving chicken nuggets imported from China.

Did McDonald have these burgers a few years ago?

 

[LeveragedBuyout]

Did McDonald have these burgers a few years ago?

No idea, I don't prioritize McDonalds when I visit Japan, heh.

 

[kawaraj]

No idea, I don't prioritize McDonalds when I visit Japan, heh.

Japanese food is never out of amazing. Go go lunch.

 

[Aepsilons]

One of the characteristics of Japan that is both a strength and a weakness is to create these extremely niche products that rarely have appeal outside of Japan, but when they do, they are so unique that they quickly create a new market. @Nihonjin1051 , if you have a chance to sample one of these when you return to Japan, please let us know what you think.

---

Burger King Japan Introduces Black Burgers: Video Review - Japan Real Time - WSJ

View attachment 80153

• View attachment 80154

• September 24, 2014, 11:35 AM JST

Burger King Japan Introduces Black Burgers: Video Review
ByJohn D'Amico

[Click the article link to see the video review.]

View attachment 80163

In Japan’s cutthroat fast-food market, Burger King Japan says it needs products that “aren’t common sense.”

Thus its new line of black burgers, which went on sale Sept. 19.

The two burgers, the plain “Kuro Pearl” and the topping heavy “Kuro Diamond” both feature buns and cheese blackened by a bamboo wood fire. The sauce also includes a healthy dose of black squid ink. Kuro means black in Japanese.

The Wall Street Journal gave both burgers a taste test–see the video.

Burgers with black buns were first introduced for a limited time by the chain in 2012 and became a hit, outselling all other new products that Burger King offered during the year, according to the company. They were also available for a limited time in 2013.

The Pearl and Diamond are the first to include blackened cheese and sauce. They will be available until early November, according to the company.

Currently the burgers are only available in Japan, with the Pearl and Diamond priced at 480 yen ($4.41) and 690 yen ($6.34) respectively. A spokeswoman declined to release sales figures so far.

Fast food is a tough business in Japan. Burger King entered the country in the 1990s through a tie-up with Japan Tobacco Inc. and others but withdrew in 2001. More recently, McDonald’s Holdings Co. (Japan) Ltd. has faced troubles, including a scandal involving chicken nuggets imported from China.

I would love to! Thanks for posting this article @LeveragedBuyout !

 

[LeveragedBuyout]

Abenomics Better Than Reaganomics, Says Adviser to Japan’s Leader - Japan Real Time - WSJ

• 

• September 25, 2014, 3:26 PM JST

Abenomics Better Than Reaganomics, Says Adviser to Japan’s Leader
ByGeorge Nishiyama

Koichi Hamada, special adviser to Japan’s Prime Minister Shinzo Abe, says a weaker yen should be good for Japan’s economy.
Bloomberg News
Skeptics of Abenomics may be growing as the Japanese economy struggles to shake off the hit from an April sales tax increase, but an architect of Prime Minister Shinzo Abe’s economic policy says it has created jobs and raised wages for regular people.

Koichi Hamada, Mr. Abe’s special economic adviser and a Yale University professor emeritus, defended Abenomics by comparing it to the policies centering on tax cuts under the administration of President Ronald Reagan in the 1980s, which came under fire for allegedly catering to the wealthy.

“I think Abenomics worked much better than Reaganomics. Reagan gave just tax reductions, and benefited wealthier people and only had a limited impact on economic activity,” the 78-year-old academic told The Wall Street Journal this week.

“But in the case of Abenomics, labor market is improving very rapidly. … And finally, wage pressures are beginning to go up.”

Mr. Reagan’s defenders say his policies led to broad prosperity, as these opinion articles argue.

Mr. Hamada said the two initial measures of Abenomics—fiscal and monetary stimuli—brought about a weaker yen and higher stock prices. Although critics say those outcomes mainly benefit big exporting firms and wealthier individuals who own shares, the adviser said he believed they have had a “trickle-down” effect on rest of the economy.

“The total pie of the Japanese economy got bigger because of the first or second arrows of Abenomics,” he said.

While data show a tightening of the labor market in some sectors and an increase in nominal wages, the economy contracted an annualized 7.1% in the three months to June as the rise in the sales tax to 8% from 5% in April put the brakes on consumption.

That has triggered debate over whether Mr. Abe should postpone the government plan to increase the sales tax again to 10% in October 2015. The prime minister has said he’ll make a decision in December.

Mr. Hamada—who was opposed to the April tax raise—said its impact on spending has been substantial, a “body blow” to consumers. He repeated his view that if July-September economic data show a serious deterioration and put the credibility of Abenomics at risk, then he will argue for postponing or making gradual the next round of the tax increase.

But Mr. Hamada said the recent fall of the yen, and the Japanese authorities’ tolerance of it, would support the economy.

“The reason that I am not very pessimistic over the negative shock from the consumption tax increase is that the BOJ is now at least allowing the yen to weaken to around the ¥108 or ¥109 level” versus the dollar, he said, referring to BOJ Gov. Haruhiko Kuroda’s remarks that yen‘s depreciation was not bad for the economy.

Mr. Abe’s adviser also pinned hopes on the BOJ taking additional easing steps to mitigate the impact of the next tax rise. “Mr. Kuroda seems to want to support the economy through monetary policy to make possible the sales tax increase,” he said.

And in a change of tone from his clear opposition to the April tax increase, Mr. Hamada said the debate on taxes should move on to future cuts in corporate taxes, which would make up the “third arrow” of Abenomics, focusing on deregulation and other pro-growth measures.

“Focus should shift from debate over 1% or 2% increase in the consumption tax to a more drastic decrease in corporate taxes,” he said, adding that the current corporate tax rate of about 35%–higher than most European and Asian nations–should be slashed to 23% or 24%.

Mr. Hamada, who met Mr. Abe earlier this month, said the cut needed to be drastic to attract investment, rather than incremental as the finance ministry advocates.

“That is a very concrete way of promoting structural reform or strengthening growth potential by attracting both home and foreign investment to Japan,” Mr. Hamada said.

 

[kawaraj]

Mr. Hamada said the debate on taxes should move on to future cuts in corporate taxes, which would make up the “third arrow” of Abenomics, focusing on deregulation and other pro-growth measures.

That will boost NIKKEI up to 20000 mark. It takes long time to see such a figure.

 

[LeveragedBuyout]

That will boost NIKKEI up to 20000 mark. It takes long time to see such a figure.

It's critical for the Japanese economy to enact structural reforms if it hopes to start growing again. The economy has been weak for so long that Abe really has nothing to lose by forcing through these reforms, like Koizumi did before him.

Of course, the stock market should respond nicely, but the primary driver should be long-term solvency.

 

[LeveragedBuyout]

News In Charts: Japan's Hidden Unemployment Problem | Alpha Now | Thomson Reuters

NEWS IN CHARTS: JAPAN’S HIDDEN UNEMPLOYMENT PROBLEM
September 26th, 2014 by Fathom Consulting

The Bank of Japan believes that the labour market is tight enough to bring about a sustained increase in real wages. It is not in our view. Since the depths of Japan’s economic crisis in the late 1990s there has been a marked switch away from full-time into part-time work. The old ‘job-for-life’ culture is just that. The switch has been driven by employers, who have lacked confidence in Japan’s economic recovery. And it has occurred, by and large, against the wishes of Japan’s workforce. There are more people now working part-time in Japan who would rather work full-time than there are unemployed people. On that basis Japan has a much larger ‘underemployment’ problem than either the US or the UK. We are unlikely to see a meaningful pick-up in wage growth in Japan until employers have the confidence to take on more full-time workers, thereby reducing the pool of hidden unemployed.

Basic pay is at last rising in Japan, but only in cash terms. After adjusting for inflation, real wages are falling rapidly. If Abenomics is to succeed the household sector must play a part in the recovery. At a minimum, that requires that increases in wages more than keep pace with increases in prices. In Japan, the ratio of job openings to applicants now stands at 1.10. It is not only above its pre-crisis peak of 1.07, it is at its highest level in more than 20 years. The Bank of Japan hopes that a tighter labour market will put upward pressure on wages, encouraging more consumption.



Refresh Chart Edit Chart

In this week’s News in Charts we dig a little deeper into the Japanese labour market and find a considerable amount of hidden unemployment. Since the late 1990s, when it became clear that the Japanese economy was in crisis, the Japanese labour market has undergone a significant degree of structural change that is not readily apparent in headline indicators, such as the unemployment rate. Employers are increasingly looking to offer only part-time work, to a labour force that still yearns for the security and the income offered by a full-time job. That means that the jobs on offer are less well suited to those looking for work than they used to be. In the economics jargon, the degree of mismatch in the Japanese labour market has risen, and upward pressure on wages is less than indicators such as the ratio of job openings to applicants might suggest.

Japan’s ageing population means the supply of labour is falling …

Japan’s demographic problems are well recognised. From the mid-1990s the dependency ratio – the number of people under 15 or over 64 as a proportion of the number of people between 15 and 64 – has risen sharply. With older age groups less likely to look for work, the consequence is a dramatic fall in the participation rate – and by extension a dramatic fall in labour supply. As our chart shows, the bulk of the fall in participation since the mid-1990s is a consequence of the ageing population.



But Japan is not the only country that has an ageing population. US participation started to turn around 2000 as the post-war Baby Boomers began to move into retirement. Most of the decline in US participation in recent years is also a consequence of demographics. Looking across countries, Japan’s participation rate hardly looks extreme. Its participation rate is close to that of Germany, and higher than that of the euro area as a whole.



Refresh Chart Edit Chart

… but the demand for labour is falling faster

Average hours worked in Japan have been on a downward trend since at least the 1970s. This is a common feature of developed economies. As people become better off, they chose to work fewer hours. Nevertheless, there is a cyclical as well as a structural element to average hours, and the levelling off of average hours over the past two to three years hardly suggests a labour market that is in danger of overheating.



Refresh Chart Edit Chart

A shift towards part-time working accounts for a good part of the decline in average hours beyond the late 1990s. Contrary to common perception, nearly 40% of Japan’s workforce is now employed part-time. The protected ‘job-for-life’ culture, by which graduates used to enter companies and stay there for the rest of their careers, is not the current ethos. The chart below shows that the share of part-time workers in total workers has more than doubled over the past 30 years. And this is not purely a consequence of increased female participation. Women are more likely to work part-time, yes, but the proportion of males that are working part-time has more than doubled since the late 1990s.





According to an occasional survey undertaken by Japan’s Minstry of Health, Labour and Welfare, much of the rise in part-time employment has been involuntary. The survey finds that the proportion of part-time workers who would rather work full-time has more than doubled since the late 1990s, from around one in ten to almost one in five. As the chart below shows, the number of part-time workers in Japan who would rather work full-time – the so-called ‘underemployed’ – exceeds the number of unemployed people by almost 50%. In that regard, Japan’s underemployment problem might be considered larger than that of either the US or the UK.



A mismatched labour market

Japan’s rising underemployment problem is mirrored in an increase in labour market mismatch. Changes in the efficiency with which unemployed workers are able to match with vacancies is often assessed using a simple scatter plot of the unemployment rate against the unfilled vacancy rate – known as the ‘Beveridge Curve’. The sample in our chart is divided into two periods. The orange dots represent the period before the depths of Japan’s economic crisis in the late 1990s. The blue dots reflect the post-crisis period. Since the crisis hit, there has been a notable rightward shift in the Beveridge Curve. At any unemployment rate, the level of vacancies associated with a given degree of wage pressure will tend to be higher because the jobs on offer are less well suited to the pool of unemployed workers.





Refresh Chart Edit Chart

The degree of mismatch in the Japanese labour market, with an excess supply of part-time jobs, and an excess demand for full-time jobs, resulting in a significant degree of underemployment, is evident in wage rates. For the past 15 years, hourly wages offered for part-time work have been rising, while hourly wages offered for full-time work have been on a clear downward trend.

Conclusions

The BoJ believes that the labour market is tight enough to bring about a sustained increase in real wages. In our view it is not – at least not yet. The existence of a significant amount of underemployment means that Japan’s labour market is less tight than it might at first appear. Since the depths of Japan’s economic crisis back in the late 1990s, there has been a move away from the old ‘job-for-life’ culture, to one where the focus is on more part-time and temporary employment. A meaningful pick-up in wage growth is likely to be preceded by a switch from part-time into full-time employment. There are signs that this is happening in some industries, such as catering and construction, where there are severe labour shortages. But for now it is the exception, rather than the norm. The trend towards more part-time work that has been in place since the late 1990s remains. Real wages continue to fall sharply. And if next year’s planned increase in the rate of VAT from 8% to 10% goes ahead, this will only add to the woes of Japan’s struggling household sector.



This research note is provided by Fathom Consulting. All of the charts below and many many more, covering a range of topics and countries on both the macroeconomy and financial markets are available in the Chartbook to Datastream users at www.datastream.com. Alternatively you can access Fathom’s Chartbook at www.fathom-consulting.com/TR.

 

[Aepsilons]

News In Charts: Japan's Hidden Unemployment Problem | Alpha Now | Thomson Reuters

NEWS IN CHARTS: JAPAN’S HIDDEN UNEMPLOYMENT PROBLEM
September 26th, 2014 by Fathom Consulting

The Bank of Japan believes that the labour market is tight enough to bring about a sustained increase in real wages. It is not in our view. Since the depths of Japan’s economic crisis in the late 1990s there has been a marked switch away from full-time into part-time work. The old ‘job-for-life’ culture is just that. The switch has been driven by employers, who have lacked confidence in Japan’s economic recovery. And it has occurred, by and large, against the wishes of Japan’s workforce. There are more people now working part-time in Japan who would rather work full-time than there are unemployed people. On that basis Japan has a much larger ‘underemployment’ problem than either the US or the UK. We are unlikely to see a meaningful pick-up in wage growth in Japan until employers have the confidence to take on more full-time workers, thereby reducing the pool of hidden unemployed.

Basic pay is at last rising in Japan, but only in cash terms. After adjusting for inflation, real wages are falling rapidly. If Abenomics is to succeed the household sector must play a part in the recovery. At a minimum, that requires that increases in wages more than keep pace with increases in prices. In Japan, the ratio of job openings to applicants now stands at 1.10. It is not only above its pre-crisis peak of 1.07, it is at its highest level in more than 20 years. The Bank of Japan hopes that a tighter labour market will put upward pressure on wages, encouraging more consumption.

View attachment 87901

Refresh Chart Edit Chart

In this week’s News in Charts we dig a little deeper into the Japanese labour market and find a considerable amount of hidden unemployment. Since the late 1990s, when it became clear that the Japanese economy was in crisis, the Japanese labour market has undergone a significant degree of structural change that is not readily apparent in headline indicators, such as the unemployment rate. Employers are increasingly looking to offer only part-time work, to a labour force that still yearns for the security and the income offered by a full-time job. That means that the jobs on offer are less well suited to those looking for work than they used to be. In the economics jargon, the degree of mismatch in the Japanese labour market has risen, and upward pressure on wages is less than indicators such as the ratio of job openings to applicants might suggest.

Japan’s ageing population means the supply of labour is falling …

Japan’s demographic problems are well recognised. From the mid-1990s the dependency ratio – the number of people under 15 or over 64 as a proportion of the number of people between 15 and 64 – has risen sharply. With older age groups less likely to look for work, the consequence is a dramatic fall in the participation rate – and by extension a dramatic fall in labour supply. As our chart shows, the bulk of the fall in participation since the mid-1990s is a consequence of the ageing population.

View attachment 87902

But Japan is not the only country that has an ageing population. US participation started to turn around 2000 as the post-war Baby Boomers began to move into retirement. Most of the decline in US participation in recent years is also a consequence of demographics. Looking across countries, Japan’s participation rate hardly looks extreme. Its participation rate is close to that of Germany, and higher than that of the euro area as a whole.

View attachment 87903

Refresh Chart Edit Chart

… but the demand for labour is falling faster

Average hours worked in Japan have been on a downward trend since at least the 1970s. This is a common feature of developed economies. As people become better off, they chose to work fewer hours. Nevertheless, there is a cyclical as well as a structural element to average hours, and the levelling off of average hours over the past two to three years hardly suggests a labour market that is in danger of overheating.

View attachment 87904

Refresh Chart Edit Chart

A shift towards part-time working accounts for a good part of the decline in average hours beyond the late 1990s. Contrary to common perception, nearly 40% of Japan’s workforce is now employed part-time. The protected ‘job-for-life’ culture, by which graduates used to enter companies and stay there for the rest of their careers, is not the current ethos. The chart below shows that the share of part-time workers in total workers has more than doubled over the past 30 years. And this is not purely a consequence of increased female participation. Women are more likely to work part-time, yes, but the proportion of males that are working part-time has more than doubled since the late 1990s.

View attachment 87905

View attachment 87906

According to an occasional survey undertaken by Japan’s Minstry of Health, Labour and Welfare, much of the rise in part-time employment has been involuntary. The survey finds that the proportion of part-time workers who would rather work full-time has more than doubled since the late 1990s, from around one in ten to almost one in five. As the chart below shows, the number of part-time workers in Japan who would rather work full-time – the so-called ‘underemployed’ – exceeds the number of unemployed people by almost 50%. In that regard, Japan’s underemployment problem might be considered larger than that of either the US or the UK.

View attachment 87907

A mismatched labour market

Japan’s rising underemployment problem is mirrored in an increase in labour market mismatch. Changes in the efficiency with which unemployed workers are able to match with vacancies is often assessed using a simple scatter plot of the unemployment rate against the unfilled vacancy rate – known as the ‘Beveridge Curve’. The sample in our chart is divided into two periods. The orange dots represent the period before the depths of Japan’s economic crisis in the late 1990s. The blue dots reflect the post-crisis period. Since the crisis hit, there has been a notable rightward shift in the Beveridge Curve. At any unemployment rate, the level of vacancies associated with a given degree of wage pressure will tend to be higher because the jobs on offer are less well suited to the pool of unemployed workers.

View attachment 87908

View attachment 87909

Refresh Chart Edit Chart

The degree of mismatch in the Japanese labour market, with an excess supply of part-time jobs, and an excess demand for full-time jobs, resulting in a significant degree of underemployment, is evident in wage rates. For the past 15 years, hourly wages offered for part-time work have been rising, while hourly wages offered for full-time work have been on a clear downward trend.

Conclusions

The BoJ believes that the labour market is tight enough to bring about a sustained increase in real wages. In our view it is not – at least not yet. The existence of a significant amount of underemployment means that Japan’s labour market is less tight than it might at first appear. Since the depths of Japan’s economic crisis back in the late 1990s, there has been a move away from the old ‘job-for-life’ culture, to one where the focus is on more part-time and temporary employment. A meaningful pick-up in wage growth is likely to be preceded by a switch from part-time into full-time employment. There are signs that this is happening in some industries, such as catering and construction, where there are severe labour shortages. But for now it is the exception, rather than the norm. The trend towards more part-time work that has been in place since the late 1990s remains. Real wages continue to fall sharply. And if next year’s planned increase in the rate of VAT from 8% to 10% goes ahead, this will only add to the woes of Japan’s struggling household sector.

View attachment 87910

This research note is provided by Fathom Consulting. All of the charts below and many many more, covering a range of topics and countries on both the macroeconomy and financial markets are available in the Chartbook to Datastream users at www.datastream.com. Alternatively you can access Fathom’s Chartbook at www.fathom-consulting.com/TR.

I wonder what our anti abenomics colleagues have to say about such sobering news.