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I am a former oil stock analyst now living in Tokyo. I do not just look at net net Japanese stocks, but rather find companies that have recurring revenues and some kind of competitive advantage, as well as being extremely cheap.
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  • Deflation In Japan – Which Industry Has Been Deflating The Fastest? 0 comments
    Jun 11, 2012 2:36 AM

    The Japanese government, for all its inefficiency, does have fantastic data. You can find data on consumption by industry sector here: www.stat.go.jp/data/nenkan/pdf/yhyou03.pdf

    In this consumption data we can see that overall domestic final consumption by households was almost flat from 2005 to 2009 (there is no data yet available for 2010), while spending on utilities was flat, that on food was flat, that on alcohol was slightly down, and discretionary spending was slightly down.

    The interesting thing is that in general, depressions feature increasing alcohol consumption with lower discretionary spending. What we have in Japan is a decrease in alcohol consumption AND decreased discretionary spending.

    Salaries rose into the economic expansion prior to 2009, and then fell.

    Changes in Japanese consumer spending relative to 2005 for selected industries

    (click to enlarge)

    It is noteworthy that consumption fell less quickly than employee compensation.

    However, some more discretionary items, in particular recreation and furniture, got hammered during this period, and, interestingly, restaurants and hotels held up quite well:

    Changes in Japanese consumer spending relative to 2005 for discretionary industries

    (click to enlarge)

    Deflators

    It is also interesting to look at the actual deflators used in the data.

    That the deflators are relative to the year 2000, and tell us which industries did less bad than others in terms of prices:

    Deflators relative to the year 2000 in various industries

    (click to enlarge)

    It is not surprising that health, food, transport and tobacco have held up so well, but rather more surprising is the degree to which more discretionary items have collapsed in price:

    (click to enlarge)

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Themes: market-outlook
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