Industry
Update

Japan’s debt reached a record 1,286.45 trillion yen ($8.6 trillion) at the end of 2023, government data showed Friday, reflecting its heavy reliance on borrowing to meet spending needs to fight the COVID-19 pandemic and rising prices.

The debt, more than twice the size of the Japanese economy, increased 29.45 trillion yen from December 2022. The world’s third-largest economy continues to face an urgent need to restore its fiscal health, the worst among developed countries.

The debt includes government bonds, borrowing and financing bills.

Japan has seen growth in tax revenue in recent years, but it has been far exceeded by spending.

The government aims to reduce fiscal expenditures, which increased significantly during the pandemic and ongoing cost-of-living crisis, to pre-emergency levels. However, the state budget for fiscal 2024, starting from April, remains the second-largest on record at 112.57 trillion yen.

After years of keeping borrowing costs at rock-bottom levels to support households and businesses, the Bank of Japan is seen as gradually moving away from its ultraloose monetary policy. The shift would increase debt-servicing costs for Japan.

As of Dec. 31, the total debt consisted of 1,146.06 trillion yen in government bonds, 48.09 trillion yen in borrowing, and 92.30 trillion yen in financing bills, the Finance Ministry data showed.

Japan’s gross domestic product was roughly 600 trillion yen in nominal terms, according to the government’s data currently available for the July-September quarter.

Japan’s new car sales in January fell 12.4 percent from a year earlier to 334,838 units, industry data showed Thursday, marking the first drop in 17 months as Daihatsu Motor Co.’s shipment halt following a safety test rigging scandal brought small car sales to a record low.

Mini-vehicle sales, where the small-car unit of Toyota Motor Corp. holds a large share, fell 22.9 percent to 117,912 units, the lowest figure for the month since comparable data became available in 1999, according to the Japan Light Motor Vehicle and Motorcycle Association.

Sales of such cars at Daihatsu plunged 62.2 percent to 19,346 units. Toyota and Subaru Corp. also saw their numbers plunged 51.2 percent and 64.3 percent, respectively, as some of their models were made by Daihatsu and subjected to the shipment halt.

The current standard for mini-vehicles was established in October 1998, and the January sales figure was the lowest for the month since then, the association said.

New car sales, excluding mini-vehicles, fell 5.5 percent to 216,926 units. Daihatsu logged a 69.5 percent drop to 897 vehicles, with Toyota seeing a decrease of 14.4 percent to 103,975 cars, according to the Japan Automobile Dealers Association.

The latest data was released as Daihatsu, one of the biggest mini-vehicle makers in Japan, was unable to ship its cars domestically during the entire duration of the month.

Daihatsu stopped all shipments at home and abroad in December, saying that a third-party investigation found that most of its cars were affected by data rigging in safety tests.

The automaker said Wednesday it will partly resume domestic production on Feb. 12 and domestic shipments from Monday, as Japan’s transport ministry lifted a shipment ban on some of the vehicles affected by the scandal.

The company has already restarted operations in Indonesia and Malaysia in December after obtaining approval from local authorities.

The average price of new condominiums released last year in central Tokyo topped 100 million yen ($677,000) for the first time, driven by luxury properties and soaring construction material prices, real estate research firm data showed.

The price shot up 39.4 percent from the previous year to 114.83 million yen per unit in the capital’s 23 wards, the Real Estate Economic Institute said Thursday.

The average price of new condos in the capital and the three surrounding prefectures of Chiba, Kanagawa and Saitama also climbed sharply, rising 28.8 percent to 81.01 million yen for the fifth straight year of increase.

”There was an explosive rise of dwelling units exceeding 100 million yen in 2023,” an official of the research firm said.

The trend of increasing prices comes on the back of low-interest housing loans after the Bank of Japan launched large-scale monetary easing in 2013, while the supply of condominiums has fallen as suitable land to build condominiums decreases.

One notable trend last year was purchases by buyers from double-income households with high earnings, according to the institute.

By area, the average price rose 3.7 percent to 54.27 million yen in Tokyo outside the 23 wards, 4.0 percent to 47.86 million yen in Chiba Prefecture, and 12.2 percent to 60.69 million yen in Kanagawa Prefecture.

In Saitama Prefecture, however, prices sank 7.5 percent to 48.70 million yen.

The number of new condominiums going on sale last year in the capital and the surrounding three prefectures dropped 9.1 percent from the year before to 26,886 units, the lowest level in about three decades, the institute said.

About 31,000 units are expected to be released this year in the region, mainly in the suburbs, it said.

The Nikkei stock index soared Wednesday, ending at a nearly 34-year high for a second consecutive day, as the yen’s weakness against the U.S. dollar sparked aggressive buying of exporters.

The 225-issue Nikkei Stock Average finished up 678.54 points, or 2.01 percent, from Tuesday at 34,441.72, marking its highest close since February 1990 when Japan was experiencing an asset price bubble. It was the largest point gain since Nov. 15.

The broader Topix index finished up 31.39 points, or 1.30 percent, at 2,444.48, its highest close since March 1990.

On the top-tier Prime Market, gainers were led by precision instrument, pharmaceutical and electric appliance issues.

The dollar briefly rose above the 145 yen line in Tokyo trading on receding expectations that Federal Reserve rate cuts could come as soon as March, narrowing the interest rate differential between Japan and the United States.

At 5 p.m., the dollar fetched 144.93-95 yen compared with 144.42-52 yen in New York and 144.06-07 yen in Tokyo at 5 p.m. Tuesday.

The euro was quoted at $1.0926-0927 and 158.36-40 yen against $1.0926-0936 and 157.88-98 yen in New York and $1.0956-0957 and 157.84-88 yen in Tokyo late Tuesday afternoon.

The yield on the benchmark 10-year Japanese government bond ended at 0.585 percent, up 0.005 percentage point from Tuesday, as investors sold the debt after a 10-year bond auction by the Finance Ministry met with tepid demand. Bond yields move inversely to prices.

The stock market surged from the start of regular trading as recent movements in the yen have strengthened investor confidence, alleviating concerns from late last year that the Japanese currency might significantly impact exporters’ profits.

A weaker yen boosts profits earned overseas when repatriated and strengthens the price competitiveness of Japan-made products abroad.

Active buying back of autos, electronics and other exporters followed strong gains in the technology sector on Tuesday when the Nikkei gained more than 1 percent.

”With the yen showing a weakening trend now and the sense that the Nikkei was behind (other markets), we’re seeing a response to that today with equities,” said Toshikazu Horiuchi, equity strategist at IwaiCosmo Securities Co.

The Tokyo stock market failed to keep pace with the strong gains in the U.S. market late last year.

In addition to gains from exporters, modest rises in U.S. tech shares overnight supported their Japanese counterparts.

Among exporters, Toyota Motor advanced 51.0 yen, or 1.9 percent, to 2,745.0 yen, and construction machinery manufacturer Komatsu climbed 71 yen, or 1.9 percent, to 3,850 yen.

Tech and precision instrument shares were higher, with Olympus gaining 117.0 yen, or 5.7 percent, to 2,176.0 yen and Tokyo Electron rising 475 yen, or 1.9 percent, to 25,385 yen.

Elsewhere, pharmaceutical firm Eisai finished up 309 yen, or 4.3 percent, at 7,574 yen, following news Tuesday its Alzheimer’s disease treatment was approved in China, with preparations for a launch between July and September now underway.

The Bank of Japan’s latest ”Tankan” survey shows that business sentiment among the country’s major manufacturers has improved for the third-straight quarter.

Large non-manufacturers are even more upbeat, with the sector’s index at its highest level in over 32 years.

The closely watched gauge measuring the mood of large manufacturers stands at plus 12. That’s up 3 points from the previous survey in September.

A positive number indicates that more companies are optimistic about business conditions than those taking a negative view.

A recovery in automobile production was the main driver behind the improvement. Another positive trend was an increase in the number of businesses raising prices to pass on their higher raw-material costs.

Large non-manufacturers continued to edge higher. Their index rose 3 points to 30. That reading is the highest since November 1991 and marks the seventh straight quarter of improvement.

An increase in foreign tourists and a recovery in the accommodation and restaurant sectors were the major factors.

Looking three months ahead, large manufacturers see a downtick of 4 points. Non-manufacturers see a 6-point drop.

The BOJ polled over 9,000 companies from early November to early December.