One-half year since the start of the Abe administration

March 16, 2021 (Tuesday) Clear

・Changes in work styles due to the novel coronavirus are supporting corporate earnings.
For the Tokyo Stock Exchange-listed companies for the fiscal year ending March 2021, in-person sales, meetings, and events decreased, and related expenses such as travel and entertainment expenses are expected to fall by about 7 trillion yen year-on-year.
Working from home and other arrangements are expected to continue after the pandemic.
Some companies are reallocating funds previously used for expenses toward digitalization and decarbonization and other management challenges.

・Komatsu <6301> [Close 3,470.0 yen] By shifting conferences that gathered senior managers of overseas subsidiaries to online, travel is reduced, and fixed costs will decrease by 25.2 billion yen this term.
Itochu Corporation <8001> [Close 3,510.0 yen] This term, overseas business travel is generally prohibited, so travel expenses will decrease.
Panasonic <6752> [Close 1,348.5 yen] Fixed-cost reduction for this term will reach 60 billion yen.
Mazda <7261> [Close 914 yen] January’s online unveiling of a new electric vehicle (EV) and 70 billion yen in advertising costs will be cut this term.
Asahi Group Holdings <2502> [Close 4,892 yen] Will divert funds raised from more than 50 billion yen in cost reductions from warehouse automation and other measures to investments that reduce carbon dioxide (CO2) emissions.
to.

・Dentsu <4324> [Close 4,065 yen] reports domestic advertising expenditures by companies fell more than 10% year on year in 2020.
In particular, event and exhibition costs dropped by about 40%.

・NTT <9432> [Close 2,846.0 yen] President Jun Sawada testified as a witness at the House of Councillors Budget Committee on the 15th, admitting to meetings and meals with lawmakers and related ministers.

(Nikkei, front page)

・China’s National Bureau of Statistics on the 15th released January-February statistics showing industrial production up 35% year-on-year, and retail sales, a proxy for consumption, up 34%.
This is considered a rebound from the previous year when factory stoppages and mobility restrictions were widespread due to COVID-19.
Production remained solid, but consumption declined, showing a mixed picture.

・The government will forgive repayments on up to 2 million yen in loans provided to households whose income fell due to the COVID-19 pandemic.
For single-parent households, new housing funds will be lent with no repayment required if employment continues for one year.
Low-income households with children, including two-parent households, will receive a uniform grant of 50,000 yen per child.

・Markets are closely watching whether capital regulation relaxations for major US banks will be extended.
As a response to COVID-19, the Federal Reserve’s special facilities that make it easier for US banks to extend loans and purchase government bonds expire at the end of March.
If not extended, government bond purchases could decline and interest rates may rise.

・The Suga administration marks six months since it took office on the 16th.
Initially, cabinet approval rating was over 70%, but it sharply fell as the number of new COVID-19 infections rose in contrast.
The success or failure of vaccination, positioned as the key to infection measures, will determine the administration’s fortunes.

・Minister Kono Taro, the Regulatory Reform Minister, on the 15th indicated plans to issue a COVID-19 vaccination certificate when overseas travel becomes necessary.
He stated at the House of Representatives Budget Committee that “if globally necessary situations arise, we must consider it.”

・NXC Nowcast (Tokyo, Chiyoda) and JCB’s analysis of late February consumer spending data shows that,
dining out fell 39% year on year, travel 40%, and accommodations nearly halved at 47% decline.
There are signs of mild improvement in late January to early February as the number of COVID-19 infections decreases.

・In the United States, online life insurance sales are rising.
In the US, which has the world’s highest number of infections and deaths, people are signing up new policies to secure family living costs.
Contracts by people up to their 40s are rising. Online life insurance is gaining prominence.

・In Japan, by contrast, new life insurance contracts decreased by more than 20% year over year in 2020 from April to December.Sales of “inpatient lump-sum” products that pay out insurance benefits for medical hospitalization are rising, indicating a large latent demand driven by COVID-19 concerns.
A key difference between Japan and the US is that in Japan, big life insurers have lagged in digital sales channels.

・Myanmar’s military, which staged a coup, on the 14th fired on protestors in various locations, with at least 38 dead.
Since the coup, the death toll has surpassed 120.

・China’s central government plans to extend total mileage of state-controlled expressways by 47% by 2035 from the end of 2019.
Aimed at boosting regional economies, but related debt already nears 100 trillion yuan, potentially straining future finances.

・German Chancellor Angela Merkel’s CDU suffered a major defeat in the Western two states’ regional elections on the 14th, signaling troubles for the next federal elections in September.
The setback raises concerns about maintaining the current administration.

・Spain’s government will implement additional support totaling 11 billion euros (about 1.43 trillion yen) for small and medium-sized enterprises hit by COVID-19.
Tourism accounts for about 12% of GDP in Spain, which is suffering large losses from mobility restrictions due to COVID-19.

・China’s National Bureau of Statistics on the 15th reported that in February 2021, among 70 major cities, the number of cities where new home prices rose compared to January increased to 56, up 3 from January.
For three consecutive months, prices rose from the previous month. The number of cities with price declines shrank to 12 from 14 in January, and 2 cities were flat.

・Global COVID-19 infection numbers (daily new deaths) as of 4 p.m. March 15, summarized by Johns Hopkins University: World total 119.875 million cases (5,509 new deaths)
United States 29,438,775 (597) Brazil 11,483,370 (1,127) India 11,385,339 (118) Russia 4,341,381 (389) United Kingdom 4,271,710 (52) France 4,131,874 (207)
Italy 3,223,142 (+264) Spain 3,183,704 (0) Turkey 2,879,390 (68) Germany 2,578,842 (94) Colombia 2,303,144 (97) Argentina 2,195,722 (24)

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・China’s car market is rapidly recovering. The China Association of Automobile Manufacturers compiled that in January-February new vehicle sales rose 76.2% year-on-year to 3,958,000 units.
This is a rebound from the severe impact of COVID-19 in the same period last year.
Commercial vehicles are solid, but passenger cars are down compared with the same period in 2019; the association says the recovery in consumption is still in its early stages.

・Korea online giant Naver and retailer E-Mart are negotiating a capital alliance.
They are finalizing plans for mutual investment totaling hundreds of billions of yen, potentially agreeing within the week.
The two companies aim to counter growing competition from Coupang.

・Zenkoku Daia, Zenrin, <9474> [Close 1,330 yen] In January, started a subscription service for small and medium-sized enterprises.
Using precise residential maps created by field surveyors to support food delivery and real estate sales.
They aim to shift from a map wholesale-centered revenue model to “information retail” by combining data.

・Oncori BioPharma <4588> [Close 1,092 yen] Development-stage pancreatic cancer treatment will begin clinical trials (Phase 1) in 2022.
Using a genetically modified virus to attack cancer cells, it is expected to be over 10 times more potent than the company’s previous drugs.

・In the silicon wafer market for semiconductors, dominated by Korea and the US,
Ferrotec <6890> [Close 2,141 yen] and other advanced products are the mainstay of Japan’s latecomers investing in China.
In markets with growth potential, leading firms take on a challenge to maintain an edge.
“I want to catch up with the top group in five years,” says Ferrotec’s President Jyun Kan Han.
RS Technologies <3445> [Close 6,180 yen] President Yi Fong says, “By 2025, we want to surpass SUMCO <3436> [Close 2,508 yen].”
What Ferrotec and RS Tech expect are subsidies and investment money backed by national policy.
“By bringing in local capital, we can obtain subsidies equivalent to state-owned enterprises” (RS Tech).
Both companies plan to list local manufacturing subsidiaries on Shanghai Stock Exchange’s STAR Market or similar high-tech boards.

・The Japanese government targets supplying 50-60% of electricity from renewable energy by 2050.
To use weather-dependent renewables as a main power source, energy storage batteries are essential for storage and regulation,
and estimates suggest Japan would need output equivalent to 10 nuclear reactors.
Japanese firms have strengths in “stationary” storage and next-generation batteries known as “all-solid-state.”

“In this field, we are world’s top runners. We have demonstrated this for decades.” Sumitomo Electric Industries, Ltd. <5802> [Close 2,493 yen] Senior Manager Masanobu Kokanai boasts,
about the rising domestic and Western demand for redox flow batteries.
Using vanadium and other ions’ redox reactions to charge and discharge, the more electrolyte you add, the larger the capacity becomes.
They can store large amounts of electricity for long periods, which is attractive.
Today’s mainstream lithium-ion batteries excel at short-term grid balancing, from minutes to hours, but
“Redox flow batteries can store electricity for half a day and smooth daily power usage.” (Kokanai)

・Deloitte Tohmatsu’s estimates indicate that in Japan alone about 10 million kW of storage capacity will be needed by 2050.
Calculated from government renewable energy targets; influenced by grid expansion decisions, but equivalent to output of 10 nuclear reactors.
Currently lithium-ion batteries dominate for consumer and automotive use, but the era of large-scale electrification centered on renewables may place large-capacity batteries at the forefront.
Alongside redox flow batteries, another large-scale practical option is Nas sodium-sulfur (NAS) batteries from Nippon Electric Glass <5333> [Close 2,090 yen].
Sodium on the anode, sulfur on the cathode, separated by ceramic solid electrolyte,
charging and discharging through chemical reactions between sulfur and sodium ions.
Worldwide, NAS batteries have about 600,000 kilowatts of installed capacity for back-up power and grid optimization.
Each standard container provides 200 kW output. They can be stacked or arranged to create large-scale installations in a compact space.
Moreover, concerns about resource shortages common with lithium-ion batteries are not an issue here.
The stated 15-year life span is said to be feasible to 20 years based on disassembly analyses of earlier commercial products (Executive Officer Tachimi I.)

・The challenge for stationary storage is cost. Currently, many installations rely on government subsidies and demonstration projects.
In an MITI-initiated panel on stationary storage battery adoption this year, the price of “industrial and commercial storage systems” was about 242,000 yen per kW-hour.
If this falls to 60,000 yen, stationary batteries for factories and emergency power would enter the adoption phase, with a target set for 30 years.
Sumitomo Electric Industries <5802> [Close 2,493 yen] aims for this price through improvements in battery performance and mass production.

・All-solid-state batteries are less prone to fire and offer higher energy efficiency than lithium-ion batteries.
Hitachi Zosen <7004> [Close 869 yen] is developing one of the world’s largest-capacity all-solid-state batteries.
They have increased capacity to around 1000 milliampere-hours, about seven times that of their previous products.
These batteries operate well in high-temperature or other extreme environments, broadening their potential use in satellites and industrial machinery.
Japan’s delay in decarbonization and lag in environmental technologies like solar panels put it behind, but in the battery field there is still potential.
Whether firms can create new markets by leveraging “stationary” and “all-solid-state” technologies will determine Japan’s success.

・In the New York Mercantile Exchange (COMEX), funds and speculative players are continuing to reduce their long positions in gold.
According to the CFTC’s as of the 9th position report, net long positions (non-commercial) decreased 7.6% week-on-week to 175,163 contracts.
This level is the lowest since June 2019, about a year and nine months ago.

・More stocks have reached all-time highs on the Tokyo Stock Exchange this year.
On the 15th, 214 first-section stocks posted new highs, the highest number since September 28, 2020, and the widest spread in six months.

・Domestic COVID-19 cases: 448,535 confirmed (new cases + 695 as of 8:00 p.m. on the 15th) with 8,645 deaths (+36).
Hokkaido 19,944 (+54) Tokyo 115,584 (+175) Kanagawa 46,439 (+55) Chiba 28,021 (+76) Saitama 30,972 (+72)
Kyoto 9,200 (+6) Osaka 48,373 (+67) Hyogo 18,508 (+33) Fukuoka 18,502 (+13) Aichi 26,482 (+15)

・Sankei Shimbun and FNN (Fuji News Network) conducted a joint public opinion poll on the 13th and 14th.
Regarding the Tokyo Olympics and Paralympics, 71.7% said they would accept a cancellation or postponement as options.
68.8% supported holding the games without international spectators, limited to domestic attendees.
Approval rating for Prime Minister Yoshihide Suga’s cabinet remained flat at 51.4%, down 0.1 points from the previous survey.

・Cherry blossoms are blooming in central Tokyo. The city has quickly banned picnicking and laying out sheets for viewing blossoms in parks.
Full bloom is expected on the 23rd.

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