Is Abenomics working? For Japanese Prime Minister Shinzo Abe, there were early signs of success for his economic recovery plan: The yen started to fall, for instance, and the stock market started to rise. Economic growth for the second quarter came in at a very healthy 3.8 percent, and the trade ministry said today industrial production is likely to show month-on-month growth of 4.7 percent in October.
The key breakthrough in the long war against deflation, though, will come with growth in wages, as more income will translate into greater willingness of Japanese consumers to spend. The prime minister told lawmakers this month his goal is create a “virtuous circle” of rising wages and employment that leads to greater consumption and investment. As part of the campaign to lift wages, Abe’s government last month even started talks with business and union leaders. “The key for the success of Abenomics is whether companies will raise wages,” Norio Miyagawa, a senior economist at Mizuho Securities Research and Consulting in Tokyo, told Bloomberg News.
By that measure, today was a setback for Abe. Despite the his use of the bully pulpit, wages are still falling. According to the Japanese labor ministry, regular wages (excluding overtime and bonuses) fell yet again in September, dropping 0.3 percent. “Companies still aren’t confident enough that growth will be sustained and will probably hesitate to raise wages, especially base salaries, for the time being,” said Miyagawa.
The news wasn’t all bad. The housing market is rebounding as starts increased 19.4 percent year-on-year in September, the government announced today. That’s better than the median 12 percent expected by two dozen analysts surveyed by Bloomberg and is the 13th straight month of improvement.
The mixed picture—improvement here, disappointment there—isn’t limited to the economic data. Japan’s electronics sector is in flux, too, as seen by the contrasting fortunes of the two most important companies, Sony and Panasonic.
Sony today slashed its earnings forecast by 40 percent, as the Tokyo-based company continues to struggle in what seems to be a futile attempt to turn around its ailing television business. As recently as August, Sony was expecting profit of 50 billion yen for the fiscal year ending in March 2014 but today the company said in a statement that earnings would be just 30 billion.
The picture is much brighter at Sony’s biggest local rival. Panasonic, like Sony, hasn’t been able to keep up with Korean competitors Samsung and LG and low-cost Chinese producers. Unlike Sony, however, Panasonic has decided to cut its losses and shift away from its television business, focusing instead on newer sectors with more growth potential.
That’s paying off for Panasonic, with the company announcing yesterday it stood to make as much as $7 billion selling lithium batteries to Tesla, Elon Musk’s maker of high-end electric cars. Panasonic expects to earn 100 billion yen in the year ending in March, the company announced today, up from its previous estimate of 50 billion.
