Nikkei : Foreign visitors bring cash and headaches in Japan’s tourism boom

Foreign visitors bring cash and headaches in Japan’s tourism boom
Locals bristle at higher prices, noise and garbage due to growing flood of tourists

TOKYO/SAPPORO, Japan -- Prime Minister Shinzo Abe has promised to bring 40 million overseas visitors to Japan by 2020. Now it's up to local communities to accommodate them.

More than 30 million visitors came to Japan in 2018, part of a prolonged tourism boom that has brought roughly 4.5 trillion yen ($41 billion) a year to communities across the country.

But residents are chafing at the rising prices, raucous behavior and other disturbances that come with more overseas visitors. Businesses and communities throughout Japan are taking measures to manage the influx in a safe and sustainable way ahead of the Tokyo Olympics in 2020.

In some places the revenue earned from tourism is critical. Some 40% of visitors go to the Kansai region in western Japan, netting the area more than 1 trillion yen a year in tourist spending.

Central Osaka’s uniquely designed Umeda Sky Building attracted about 1.5 million guests in fiscal 2017, three times more than in 2008 when it was named one of the top 20 buildings around the world by The Times newspaper of the U.K.

Foreigners make up 75% of the building’s visitors, and the admission fee more than doubled to 1,500 yen in March 2015 from 700 yen, in anticipation of more overseas visitors.

The increase elicited local complaints. Some Japanese say the price is too high and it keeps them from visiting the building. The number of Japanese patrons fell by more than 30% to 370,000 in fiscal 2017 compared with three years earlier.

Prices are also surging at Kuromon market, a food market renowned as the "kitchen of Osaka." High-end crab legs, for example, can cost as much as 2,000 yen a pop.

One German tourist said he did not want to spend thousands of yen on crab legs and high-end Kobe beef in the market and would rather go to a restaurant.


And while foreign visitors can bring in welcome revenue for local establishments, their behavior can pose challenges. Last autumn, Kyoto's Nishiki market started putting up signs in English, Chinese, Korean and Japanese, urging shoppers to refrain from eating while walking. The hope is to cut down on littering by the growing number of tourists.

The market’s promotion association is calling on its tenants to set up more garbage cans and dining spaces.

Hokkaido, Japan's northernmost island, is also under pressure. In 2017, tourists rented about 80,000 cars in the prefecture, a fivefold increase from five years earlier. The traffic fatality rate among foreigners driving rented cars is four times that of Japanese drivers.

Local police, in cooperation with the municipal government, set up about 400 English-language stop signs near New Chitose Airport and major tourist spots.

The growing number of foreign visitors staying in private homes is also causing trouble, with residents complaining about noise and other annoyances.

Rakuten Communications, a unit of online retail giant Rakuten, developed a system that displays “Please be quiet” in multiple languages on tablet computers in hotel rooms when noise is detected.

These challenges are not likely to disappear anytime soon. Japan needs to brace for a record number of foreign visitors as the Tokyo Olympics approach.

FT : The super-rich are an easy target for tax

The super-rich are an easy target for tax
Attempts to raise revenue must include the comfortably off as well as the ultra-wealthy

What should the top rate of income tax be? Should it be 70 per cent, as has been informally suggested by the young star of the US Democratic party, Congresswoman Alexandria Ocasio-Cortez? That instinctively feels too high to me. But, as an economist with sporadic hopes of making logical arguments based on evidence, I admit that “instinctively feels too high” is a weak response.

What about 50 per cent, the official policy of the UK’s opposition Labour party at the last general election? Or zero, the optimal top rate that emerged from a thought experiment posed by the late James Mirrlees, a Nobel laureate in economics?

An alternative is to tax wealth instead of income, as US Democratic Senator Elizabeth Warren has proposed. But — at least in principle — there is not much difference between a small annual tax on total wealth and a large tax on the nominal return generated by that wealth.

To make the case for a top rate of tax above 70 per cent, it helps to believe four things.

The first is that taxable income itself won’t evaporate in the face of a high rate, as it did in the UK when the top tax rate was briefly raised from 40 to 50 per cent in 2010, then cut to 45 per cent. Most high earners found it easy to realise income early, or late, and avoid the 50 per cent rate. A permanent increase is harder to avoid; so is an increase that is enforced with determined (or draconian) measures; as is an increase levied by a large economy with global legislative reach such as the US. In smaller economies such as the UK’s, the very rich are more likely to take themselves elsewhere for any given tax rate.

One academic paper produced by Emmanuel Saez (a star in the study of inequality) and Peter Diamond (a Nobel laureate and colleague of Mirrlees) estimated that the combined rate of tax on the income of high earners could be 73 per cent in the US without proving counter-productive. Another paper, published in the same journal, by Gregory Mankiw and co-authors, put the optimal top rate at just under 50 per cent instead. The difference lies in the assumptions.

The second thing one needs to believe is that the rich will barely miss any extra income if tax rates rise. The truth of this is unknowable, although another famous study from yet more Nobel laureates, Daniel Kahneman and Angus Deaton, suggests that money will not improve your everyday mood and wellbeing after an income of $75,000 a year or so. To reach their conclusions about the 73 per cent rate, Professors Diamond and Saez assume that a dollar is 25 times more valuable to a person on about $50,000 a year than to a person on $500,000. That is not an insane assumption, but it’s an assumption nonetheless.

If you accept these first two beliefs, the economic case for a high top rate of tax follows. A high rate maximises revenue if the tax base doesn’t shrink too much, and revenue maximisation is a reasonable goal if it’s true that the rich would barely notice the lost income.

But this argument ranges far beyond economics. If you like high tax rates, the third thing it helps to believe is that inequality is intrinsically corrosive. Perhaps it undermines democracy. Perhaps it causes stress, envy or resentment. The empirical evidence is not much help here; it is sketchy and often seems tendentious. Causal channels are unclear: does inequality lead to a hollowed-out state? Or does a hollowed-out state enable inequality?

Perhaps a thought-experiment is more helpful here: how would you feel about a policy that simply confiscated resources from the super-rich and destroyed them? Would such a policy be a criminal waste and a grotesque infringement of liberty, or a helpful rebalancing of the scales?

Then there’s a fourth, often unstated, belief: that the rich have so much money that a high rate of tax will raise serious revenue. That depends on who you regard as “rich”. Ms Ocasio-Cortez mentioned a threshold of $10m. Profs Diamond and Saez focused on the highest earning 1 per cent of taxpayers, implying that the band would apply above around $500,000 a year. The Labour party wanted its highest rates to apply on incomes over £100,000. These are very different definitions of “rich” and they have very different implications for revenue.

For example, Ms Ocasio-Cortez’s income threshold of $10m is higher than that required to get into the top 0.01 per cent of the US income distribution: about 16,000 families. This tiny slice of the US population receives a less-than-tiny 5 per cent of total US income — which nevertheless implies that 95 per cent of income is earned by those making less. The super-rich are a tempting target, but a serious attempt to raise revenue cannot stop with them.

Whether we are talking about income or wealth, the lion’s share lies not with the billionaires but with the comfortably off. It is nice to talk about taxing somebody else’s money, but in a world of chronic budget deficits and worsening demographics, the ethics and economics of higher tax rates are unlikely to remain someone else’s problem.

>>> Wartsila could look to sell non-core businesses

Wartsila could look to sell non-core businesses

Wartsila [HEL:WRT1V], the Finnish power engine group, could be looking to sell businesses that are not core, according to Kauppalehti.
The Finnish-language piece carried an unsourced commentary about the company’s savings programme. The piece said that it is likely that through recent acquisitions, the company has received businesses that are not core.
This implies that Wartsila could seek to sell these businesses. The company is likely to start selling business this spring.
Wartsila has a market cap of EUR 8.9bn.

>>> What to look at today - 1st of February 2019

Asian stocks were little changed on Friday following the best month for global equities in more than seven years, with U.S.-China trade talks set to continue later this month. The yuan gave up a sliver of its recent advance.
Washington trade negotiations that had been tipped as “determinative” in the end broke up with an agreement to keep talking, as a March 1 deadline for tariff hikes looms. News that China plans to buy substantially more American agricultural and energy goods failed to light much fire under Asian shares already heading for a fourth straight weekly advance. U.S. futures were little changed after rising overnight. Oil was around $54 a barrel in New York.
US After Hours SYMC +6%, OTEX / CY +5%, DECK / YUMC +4% are higher, while AMZN -4.5% is lower following earnings/guidance

Nikkei +0.07% Hang Seng -0.27% CSI +1.35% Shanghai +1.20% Shenzen +2.68%

Eur$ 1.1445 CNH 6.7491 CNY 6.7380 JPY 108.87 GBP 1.3107 CHF 0.9955 RUB 65.6375 TRY 5.2118 WTI$ 53.78 -0.02%

S&P +0.10% EuroStoxx +0.22% FTSE +0.10% Dax +0.08% SMI +0.45%

Macro :
- May Sets Out to Win Labour Rebels’ Support Over Brexit Deal
- Draghi Won’t Do a Powell With ECB Playbook If Slowdown Goes Sour

Keep an eye on :
- AIR FP : Airbus Confirms in Talks With Emirates Airline on A380 Pact
- AIR FP : German Decision on Tornado Fighter Between Airbus & Boeing: Rtrs
- AIRN SW : Airopack Still in Intensive Talks With Major Lenders
- AEIN GY : Allgeier SE Decides for IPO of Allgeier Experts for 2H 2019
- AMBUB DC : Ambu CEO Says He Can Do M&A for DKK10 Bln, Finans Reports
- AMP SM : Amper Says Final Price of Pacifico Sur Transaction Is $90.7m
- AGL IM : Benetton’s Edizione Proposes Zannoni as Autogrill Chairman
- BBVA SM : BBVA Sees 2019 Spain Margin Improvement, Solid Mexico Growth
- EN FP : Natixis IM’s Mirova Buying 49% of Bouygues’ Axione
- BOBNN SW : Bobst Full Year Sales CHF1.63 Bln
- CABK SM : CaixaBank Fourth Quarter Net Income Misses Lowest Estimate
- DAI GY : ‘Unloved’ and Cheap Daimler Upgraded at Morgan Stanley
- DBK GY : Deutsche Bank 4Q Net Revenue 2.6% Below Est, Affirms ROTE Target
- DBK GY : Eight Banks Targeted in EU Cartel Probe of Euro-Bond Trading
- DBK GY : Altmaier Wants to Help Deutsche Bank and Siemens: Welt
- DBK GY : Deutsche Bank CFO Says Still Working on Stabilizing Revenue
- DNA FH : DNA 4Q Ebitda Misses Lowest Estimate, Proposes Extra Dividend
- DWNI GY : Deutsche Wohnen Holder Vonovia to Offer 16.8m Shares, Prices 16.8m Shrs EU41.50/Shr
- DPEU LN : DP Eurasia Holders FIDES FOOD to Offer 14.5m Shrs
- DWS GY : DWS Fourth-Quarter Outflows of EU7b Worse Than Expected
- EDP PL : EDP Says Electricity Generation Rose 3% in 2018
- ELUXB SS : Electrolux Sees ~SEK1B 1Q Charges on Manufacturing Restructure
- ELUXB SS : Investor AB Supports Electrolux Proposal to Split Group
- ELUXB SS : Electrolux to Shutter Memphis Plant Hit by Sears Bankruptcy
- FORTUM FH : Fortum Full Year Dividend Per Share Matches Estimates
- GEN DC : Genmab, Janssen, Morphosys Agreed to End Patent Lawsuit
- HMB SS : H&M Has Considered Issuing New Shares, Dagens Industri Reports
- DEC FP : JCDecaux Full Year Adjusted Revenue Meets Estimates
- DEC FP : JCDecaux 4Q Organic Revenue Grows 5.4%, Beating Company Guidance
- LHN SW : LafargeHolcim Sees Lower Net Debt to Recurring Ebitda Ratio
- MMB FP : M6 in Talks to Buy Lagardere TV Unit Excluding Mezzo
- LEHN SW : LEM Lowers Sales Outlook to CHF315m-320m; 9M Sales CHF245.1m
- B4B GY : Wholesaler Metro Is Said to Weigh Selling Majority of China Unit
- MMT FP : M6 in Talks to Buy Lagardere TV Unit Excluding Mezzo
- CLS1 GY : McKesson Sees Fiscal 2019 Revenue up Low Single Digits
- NAS NO : Norwegian Air Could Face Strikes in Spain Over Base Closures
- NOVOB DC : Novo Nordisk Full Year Ebit Misses Lowest Estimate
- ORA FP : French Telecom Regulator Arcep Vows ‘Big Ambitions’ for 5G
- UG FP : French Jan. New Car Registrations Fall 1.1%: CCFA
- RPC L N : RPC Third Quarter Revenue From Continuing Operations GBP894 Mln
- SAB SM : Sabadell Sees Pro-Forma Capital Remaining at 11% in Coming Qtrs
- SAS SS : SAS Plans to Climate Compensate All Eurobonus Members: DI
- SIE GY : Altmaier Wants to Help Deutsche Bank and Siemens: Welt
- LIGHT NA : Signify 2019 Adjusted Ebita Margin Forecast Beats Estimates
- GLE FP : No Merger With Societe Generale, UniCredit Chief Tells Echos
- SEV FP : Suez Should Have a Better 2019, But Challenges Ahead: Jefferies
- SY1 GY : Symrise to Buy International Dehydrated Foods
- TALK LN : TalkTalk Sees FY Adjusted Ebitda GBP245 Mln To GBP250 Mln
- TEF SM : Telekom, Telefonica Said To Prepare For Possible Huawei Ban: HB
- UBSG SW : UBS Hires New Head of EMEA Real Estate in Private Funds Group
- UCG IM : No Merger With Societe Generale, UniCredit Chief Tells Echos
- UNA NA : Unilever Hires Extra Warehouses for Brexit Stockpile:Telegraph
- VIV FP : Vivendi to Use UMG Proceeds for Buybacks, M&A: CEO to Figaro
- WDP BB : WDP 2019 Adjusted EPS Forecast Misses Estimates

>>> Europe : Brokers Upgrades & Downgrades - 1st of February 201

>>> Up
* Daimler Upgraded to Overweight at Morgan Stanley; PT 60 Euros
* Europris Upgraded to Buy at SEB Equities; PT 30 Kroner
* H&M Upgraded to Reduce at Handelsbanken; PT 125 Kronor
* Maisons du Monde Upgraded to Buy at Goldman; PT 29 Euros
* Plus500 Upgraded to Add at Peel Hunt
* Rentokil Upgraded to Buy at Citi
* Rio Tinto Upgraded to Add at AlphaValue
* SES GDRs Upgraded to Overweight at Barclays; PT 21.60 Euros
* Siemens Gamesa Upgraded to Buy at HSBC; PT 15.20 Euros
* SIF Upgraded to Buy at HSBC; Price Target 14 Euros
* Symrise Upgraded to Neutral at Goldman; PT 73.50 Euros
* Tecnicas Reunidas Upgraded to Buy at Oddo BHF; PT 29 Euros
* Vonovia Upgraded to Outperform at Credit Suisse; PT 53.60 Euros

>>> Down
* Adidas Downgraded to Neutral at UBS
* ADO Properties Cut to Neutral at Credit Suisse; PT 57 Euros
* Close Brothers Downgraded to Sell at Citi
* Deutsche Wohnen Cut to Neutral at Credit Suisse; PT 47.20 Euros
* DSM Upgraded to Buy at Goldman; PT 101.50 Euros
* Elisa Downgraded to Neutral at JPMorgan; PT 38 Euros
* Essity Downgraded to Reduce at Handelsbanken; PT 245 Kronor
* Intertek Downgraded to Hold at Jefferies
* Logista Downgraded to Hold at SocGen; PT 23.50 Euros
* Mediaset Downgraded to Underweight at Barclays; PT 2.50 Euros
* Siltronic Downgraded to Hold at Kepler Cheuvreux; PT 92 Euros
* Suez Downgraded to Hold at Jefferies

>>> Initiation
* AB InBev Rated New Hold at SocGen; PT 66 Euros
* Carlsberg Rated New Buy at SocGen; PT 850 Kroner
* Ferrovial Rated New Outperform at MainFirst; PT 22.60 Euros
* Heineken Rated New Buy at SocGen; PT 95 Euros
* Oxurion Rated New Buy at Kepler Cheuvreux; PT 5.50 Euros

>>> Call

>>> US After Hours Summary: SYMC +6%, OTEX / CY +5%, DECK / YUMC +4% a


After Hours Summary: SYMC +6%, OTEX / CY +5%, DECK / YUMC +4% are higher, while AMZN -4.5% is lower following earnings/guidance

After Hours Gainers:

Companies trading higher in after hours in reaction to earnings/guidance: DGII +7.5%,  SYMC +5.9%, OTEX +5.4%, CY +4.6%, DECK +4.4%, FMC +4%, YUMC +3.8%, SKYW +1.8%, PFPT +1.1%

Companies trading higher in after hours in reaction to news: BRX +3.4% (to join S&P MidCap 400), GERN +2.6% (appoints Aleksandra Rizo, M.D., Ph.D. as Chief Medical Officer ), SKX +2.2% (after seeing late spike / halt before the close; company announced that it will release financial results after market close on February 7), BHC +1.8% (still looking)

After Hours Losers:

Companies trading lower in after hours in reaction to earnings/guidance: KLIC -7.2%, EPAY -6.3%, AMZN -4.5%, CORT -4.3%, FBHS -4%, MCK -2.5%

Companies trading lower in after hours in reaction to news: ABC -3.3% (light volume; pulling back from today's earnings move higher and following peer MCK results), CI -3% / CVS -2.7% (following HHS drug price proposal news), ABBV -2.9% (still checking), GPMT -2.3% (announces underwritten public offering of 6.0 mln shares of common stock), HPE -1.3% (Jean Hobby to be appointed to Board, Meg Whitman will not stand for re-election), GOOGL -0.7% (Apple blocks Google from running its internal iOS apps - CNBC)

>>> US Close Dow -0.06% S&P +0.86% Nasdaq +1,37% Russell +0.84% VIX -6.17%

Closing Stock Market Summary

The S&P 500 gained 0.9% on Thursday, as another batch of better-than-feared earnings added to the optimism surrounding U.S.-China trade relations and a dovish-minded Federal Reserve. The Nasdaq Composite gained 1.4%, and the Russell 2000 gained 0.8%. 

The Dow Jones Industrial Average, however, lost 0.1% due in large part to negative price action in Microsoft (MSFT 104.43, -1.95, -1.8%), Visa (V 134.96, -2.64, -1.9%), and DowDuPont (DWDP 53.81, -5.47, -9.2%) following their earnings reports.

The S&P 500 communication services sector was easily the best-performing group on Thursday, rising 3.7% on the strength of Facebook (FB 166.69, +16.27, +10.8%) and Charter Communications (CHTR 331.05, +41.14, +14.2%). The utilities (+2.1%) and consumer staples (+1.8%) sectors also outperformed the broader market.

Facebook delivered fourth quarter results that were both better than expected and better than feared in light of the negative publicity surrounding Facebook's shortcomings in protecting users' data privacy. Charter Communications for its part reported year-over-year revenue growth that was above expectations.

General Electric (GE 10.16, +1.06) was another story stock, climbing 11.7%, after the company beat revenue expectations and pleased investors with a $4.9 billion free cash flow figure and a lower-than-expected $1.5 billion settlement with the Department of Justice.

On the other hand, the underperformance from the heavily-weighted information technology (-0.1%) and financial (-0.3%) sectors weighed on the broader market. Also, the lightly-weighted materials sector (-1.5%) was the worst-performing group.

Financial stocks, in particular, fell in part for the same reason the broader market rallied: an expectation that the Fed will not be raising interest rates soon and that it is discussing an earlier end than expected to its balance sheet normalization effort.

The Treasury market seems to be pricing in a softer economic outlook, which has been reflected in the sharp drop in yields following Wednesday's FOMC decision and Fed Chair Powell's press conference.

After both the 2-yr yield and the 10-yr yield decreased four basis points Wednesday, the 2-yr yield fell seven basis points to 2.46% today while the 10-yr yield fell six basis points to 2.64%. The U.S. Dollar Index increased 0.2% to 95.57.

Separately, WTI crude lost 1.0% to $53.77/bbl, although it finished the month up 18.4%.

Reviewing Thursday's economic data, which included New Home Sales for November, the fourth quarter Employment Cost Index, the Chicago PMI for January, and the weekly Initial and Continuing Claims report:

  • New home sales, which are counted when a contract is signed, jumped 16.9% month-over-month in November to a seasonally adjusted annual rate of 657,000 (consensus 555,000).
    • The key takeaway from the report is that the surge in new home sales, which are counted when a contract is signed, coincided with a noticeable drop in both median and average selling prices.
  • The Employment Cost Index showed compensation costs for civilian workers increased 0.7% (consensus +0.8%), seasonally adjusted, in the fourth quarter, down from 0.8% in the third quarter. Wages and salaries, which comprise about 70% of compensation costs, increased 0.6%, while benefit costs jumped 0.7%.
    • The key takeaway from the report is that it showed an acceleration in the growth of wages and salaries for civilian workers, which increased 3.1% for the 12 months ending in December 2018, versus 2.5% for the 12-month period ending in December 2017.
  • The MNI Chicago Business Barometer, also known as the Chicago PMI, dropped to 56.7 in January (consensus 58.0) from a downwardly revised 63.8 (from 65.4) in December. The dividing line between expansion and contraction is 50.0, so the January reading is to be interpreted as a deceleration in growth and not an actual decline in growth.
    • The key takeaway from the report was the indication that the New Orders Index fell to a two-year low of 53.2 and that manufacturers' inability to absorb cost pressures was a reason customers were deterred from placing orders in January.
  • Initial claims for the week ending January 26 increased by 53,000 to 253,000 (consensus 220,000). Continuing claims for the week ending January 19 increased by 69,000 to 1.782 million.
    • The headline increase is notable, yet the key takeaway is that the large increase in initial claims is apt to be dismissed at this juncture as some typical volatility in a series that saw initial claims hit their lowest level last week in nearly 50 years.

Looking ahead, investors will receive a big batch of economic data on Friday: the Employment Situation Report for January, the ISM Manufacturing Index for January, the final reading of the University of Michigan Index of Consumer Sentiment for January, Construction Spending for November, and Wholesale Inventories for November.

  • Russell 2000 +11.2% YTD
  • Nasdaq Composite +9.7% YTD
  • S&P 500 +7.9% YTD
  • Dow Jones Industrial Average +7.2% YTD

>>> US Gapping down

Gapping down
In reaction to disappointing earnings/guidance:

  • DWDP -10.2%, MUSA -9.9%, X -4.1%, CRUS -3.7%, RTN -3.2%, NOK -2.7%, UN -2.6%, BT -1.5%, NOC -1.4%, FLWS -1.4%, CACC -1%, BX -1%, MTH -0.9%, SHW -0.8%, APTV -0.7%, WCC -0.6%, FCFS -0.6%

Other news:

  • TVPT -2.3% (Travelport Worldwide confirms expiration of 45-day "go-shop" period pursuant to the terms of the Merger Agreement and establishes meeting date of March 15, 2019)

Analyst comments:

  • HRB -4.1% (downgraded to Sell from Neutral at Goldman)
  • IVZ -1% (downgraded to Equal Weight from Overweight at Barclays)
  • USCR -1% (downgraded to Hold from Buy at SunTrust)