ECON RALLY: Rising Income, Securer Jobs Aid Growth
TOKYO (Nikkei)--Consumers appear to be more willing to loosen their purse strings. At Hoshinoya Karuizawa, a deluxe hotel in Nagano Prefecture operated by Hoshino Resort Corp., the occupancy rate stood at a high 90% in September and about 80% of its rooms have already been booked for New Year's Eve and New Year's Day.
This is despite the fact that it costs about 200,000 yen for a family of four to stay there two nights.
At the Teikoku Hotel in central Tokyo, a lodging plan featuring a "junior suite" and 90-minute beauty treatment has been popular since it was introduced in July.
One factor apparently fueling the trend is a recent rally in stock prices, a boon particularly to wealthy people who have a substantial portion of their assets in stocks. But they are not the only ones willing to spend more lavishly than before.
Coach Japan Inc., a company importing Coach brand goods from the U.S., saw sales swell 28% year on year in the April-June quarter, largely on strong demand for "accessible luxuries" such as women's bags priced at 40,000 yen to 50,000 yen each.
Isetan Co. (8238) has been enjoying nearly a 20% year-on-year rise in sales of men's accessories like perfume and bracelets in recent months at its flagship department store in Shinjuku, Tokyo.
None of these items are daily necessities, an indication that consumers are gradually finding themselves able to spend more on things they see as cool, observers say.
In the April-June, spending by middle-income people with an annual income of 5.88 million yen to 7.36 million yen showed the steepest year-to-year growth of all income categories at 4.5%. "Middle-income consumers were an engine of the recovery in the first half of this year," said Makoto Ishikawa, a senior researcher at Japan Research Institute Ltd.
A recovery in consumption is also noticeable at more familiar places, such as Watami Co. (7522), a major operator of izakaya Japanese-style bars, and Kahma Co. (9951), a home center operator.
Behind these developments are the stabilizing employment situation and growing personal income, analysts say.
The ratio of job offers to seekers stood at 0.97 in July, far better than the 0.46 recorded in the middle of 1999. Real wages have been on an uptrend since the middle of last year.
One women in her 20s, who works at an IT-oriented company in Tokyo, recently took a trip to an onsen spa resort after her job status was upgraded to that of a contract worker from temporary staff. "I made the trip because my employment has become more secure," she said.
Nonetheless, spending is not recovering in every domestic industry. "We've not yet felt an upturn in consumer spending," said Koji Sasaki, president of Uny Co. (8270), a supermarket store operator suffering back-to-back, year-on-year sales drops in recent months.
Some are concerned about a cut in the fixed-rate income tax reduction due to be implemented from January 2006. "That may throw cold water on the budding economic recovery," said Nobukazu Muto, president of Isetan.
But personal income is still on the rise, with labor's share of corporate added value stabilizing after a long period of decline.
People's desire to spend more lavishly, backed by their growing income, is not likely to subside easily, analysts say.
(The Nihon Keizai Shimbun Wednesday morning edition