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Financial research report / economic analysis
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Summary
This document is page 6 of a 'Japan Economics Viewpoint' report produced by Bank of America Merrill Lynch on November 18, 2016. It analyzes the Japanese economy, specifically focusing on a 'Capex revival,' labor shortages, and capacity utilization in manufacturing versus non-manufacturing sectors. While the document bears a 'HOUSE_OVERSIGHT_014415' Bates stamp, typical of documents subpoenaed in investigations involving major banks and their clients (such as the Epstein investigations into Deutsche Bank or JPMorgan), the content of this specific page is purely macroeconomic analysis with no direct mention of Jeffrey Epstein or his associates.
Organizations (5)
| Name | Type | Context |
|---|---|---|
| Bank of America Merrill Lynch |
Financial institution that produced the report.
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| BofA Merrill Lynch Global Research |
Research division providing data for charts.
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| BoJ (Bank of Japan) |
Source for Tankan survey data referenced in Charts 15 and 16.
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| MoF (Ministry of Finance) |
Source for corporate survey data mentioned in the text regarding personnel costs.
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| House Oversight Committee |
Implied by the Bates stamp 'HOUSE_OVERSIGHT_014415'.
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Locations (1)
| Location | Context |
|---|---|
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The subject of the economic analysis (Japan Inc., Japanese economy).
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Key Quotes (4)
"We also see a fundamental case for higher capital spending."Source
HOUSE_OVERSIGHT_014415.jpg
Quote #1
"And deepening supply-side constraints offer a strong incentive for Japan Inc. to accelerate productivity-enhancing capex, ensuring that this expansion is durable."Source
HOUSE_OVERSIGHT_014415.jpg
Quote #2
"Chart 17 shows the ratio of personnel costs to sales, using MoF corporate survey data."Source
HOUSE_OVERSIGHT_014415.jpg
Quote #3
"Given the rapid growth in part-timers' wages, such cost savings is likely to become increasingly difficult to maintain."Source
HOUSE_OVERSIGHT_014415.jpg
Quote #4
Full Extracted Text
Complete text extracted from the document (2,405 characters)
Chart 13: Real labor income and private consumption
[Chart showing line graph with Y-axis left 245-270 and Y-axis right 280-330, X-axis 2005-2016]
Real employee compensation, JPY trn saar (LHS)
Private consumption, JPY trn saar (RHS)
Source: BofA Merrill Lynch Global Research, CAO
[Chart showing line graph with Y-axis left 245-270 and Y-axis right 280-330, X-axis 2005-2016]
Real employee compensation, JPY trn saar (LHS)
Private consumption, JPY trn saar (RHS)
Source: BofA Merrill Lynch Global Research, CAO
Chart 14: Workers' saving rate at all-time high
[Chart showing line graph with Y-axis 10-22, X-axis 1970-2015]
Saving rate of workers' households, % 4qtr ma
Source: BofA Merrill Lynch Global Research, MIA
[Chart showing line graph with Y-axis 10-22, X-axis 1970-2015]
Saving rate of workers' households, % 4qtr ma
Source: BofA Merrill Lynch Global Research, MIA
2. Capex revival
We also see a fundamental case for higher capital spending. Borrowing rates are very low and will fall further in real terms as inflation rises. Stronger growth and improved confidence should also encourage higher capex. And deepening supply-side constraints offer a strong incentive for Japan Inc. to accelerate productivity-enhancing capex, ensuring that this expansion is durable.
We also see a fundamental case for higher capital spending. Borrowing rates are very low and will fall further in real terms as inflation rises. Stronger growth and improved confidence should also encourage higher capex. And deepening supply-side constraints offer a strong incentive for Japan Inc. to accelerate productivity-enhancing capex, ensuring that this expansion is durable.
For these reasons, we think that the impulse of capital expenditures will likely be higher in the non-manufacturing sector, where capacity utilization rates are higher, and labor shortages (and hence wage pressures) are more acute (Chart 15 and Chart 16).
Chart 15: Capacity utilization rates by sector
[Chart showing line graph with Y-axis -10 to 40, Arrows indicating Insufficient/Excess, X-axis 2003-2016]
BoJ Tankan production capacity - manufacturing, DI
BoJ Tankan production capacity - non-manufacturing, DI
Source: BofA Merrill Lynch Global Research, BoJ
[Chart showing line graph with Y-axis -10 to 40, Arrows indicating Insufficient/Excess, X-axis 2003-2016]
BoJ Tankan production capacity - manufacturing, DI
BoJ Tankan production capacity - non-manufacturing, DI
Source: BofA Merrill Lynch Global Research, BoJ
Chart 16: Labor shortages by sector
[Chart showing line graph with Y-axis -40 to 60, Arrows indicating Insufficient/Excess, X-axis 2003-2016]
BoJ Tankan employment conditions - manufacturing, DI
BoJ Tankan employment conditions - non-manufacturing, DI
Source: BofA Merrill Lynch Global Research, BoJ
[Chart showing line graph with Y-axis -40 to 60, Arrows indicating Insufficient/Excess, X-axis 2003-2016]
BoJ Tankan employment conditions - manufacturing, DI
BoJ Tankan employment conditions - non-manufacturing, DI
Source: BofA Merrill Lynch Global Research, BoJ
Chart 17 shows the ratio of personnel costs to sales, using MoF corporate survey data. The ratio is particularly high for lodging & accommodations (23%), eating & drinking services (27%), medical, healthcare & welfare (37%) and education & learning support (37%). Somewhat surprisingly, personnel expenses are fairly restrained in retail. But this is partly due to the relatively heavy reliance on lower-cost part-time workers. Given the rapid growth in part-timers' wages, such cost savings is likely to become increasingly difficult to maintain.
6 Japan Economics Viewpoint | 18 November 2016
Bank of America Merrill Lynch
HOUSE_OVERSIGHT_014415
Bank of America Merrill Lynch
HOUSE_OVERSIGHT_014415
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