It is only in the last week that the enormity of the fourth quarter decimation of the Japanese economy became clear and sent economic prognosticators running to their computer terminals to revise their 2009 forecasts downward; the Japanese economy is now going to fall three percent instead of two—if the average crystal ball is any indication. Of course most households, companies, governments can individually absorb a three-percent hit on their incomes with ease; the catch is that the blows will fall unevenly, with some folks going into negative-income territory, especially in the case of businesses. Thus, the stimulus bill/bills and the FY2009 budget will be at best a most clumsy means of easing the collective pain. And I don’t think we’re getting out of this until global consumption patterns re-coalesce.
Beyond that, I have little or nothing to say about the big picture; I’m not even an economist. However…
A look at the details will show us that some are less worse off than others, in fact, may be doing just fine. Take death. We all know that death can bring relief to the most miserable of lives, but did you know that it is uplifting an entire industry? In fact, the funeral industry was one of the few bright spots on Japan’s 2008 economic scene.
More broadly, during downturns, services as a whole tend to hold up better in Japan and it’s no different this time around according to METI statistics . Of the six business services for which 2008 data is available on a year-on-year basis, four actually increased sales in 2008. (Up: rentals; information services; credit card services; engineering. Down: leasing; advertising.) Of the thirteen personal services with year-on-year data, seven increased sales (Up: theaters, performances and theatrical companies; golf driving ranges; amusement and theme parks; funeral services; wedding ceremony halls; fitness clubs; supplementary tutorial schools. Down: movie theaters; golf courses; bowling alleys; pachinko parlors; foreign language schools; culture centers.), with funeral services among the winners. After all, if there’s one purchase that’s hard to put off until better times…. And more people are dying anyway, as Japanese society ages and the baby boomers begin taking leave. In fact, this is one industry where they can predict the size of your long-term, year-to-year market within a fairly narrow margin of error.
Looking beyond the funerals industry, there are several interesting inverse symmetries. One is between the decline in golf club revenue and the rise in driving range revenues. Japanese golfers are plaything less, but practicing more. It’s not hard to connect the dots here; I don’t think that Ryo Ishikawa has touched off a desire among golf dads to raise their own versions of the next Tiger Woods (or the less fortunate next Michelle Wie).
Another requires a look into the fine print. The METI table shows that the “credit card industry” as whole increased year-on-year business volume in 2008. However, most of this came in the dominant “sales credit” sector, while the “consumer credit” business (read: reformed loan sharks) continued a year-on-year decline. Cash-strapped consumers in Japan must be stretching out payments, instead of paying cash on the barrel as is the Japanese custom. Meanwhile, the shakeout appears to be continuing in the consumer credit business in the wake of the long-running judicial and legislative crackdown on usury.
Finally, rentals increased, but that did little to offset the much larger drop in leasing. It’s no surprise that businesses are more reluctant to take on long-term financial obligations.
On a different note, movies, bowling alleys and pachinko parlors continued their downward trend. I wonder if this noticeable drop in the cheaper amusement categories is an indication of the hit that the lower-income brackets are taking, or merely a point in the long-term timelines of entertainment industries whose best days are behind them.