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Japan Freight Transport Report Q3 2010
Business Monitor International, July 2010, Pages: 38
This Japan Freight Transport Report provides industry professionals and strategists, corporate analysts, freight transportation associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Japan's freight transportation industry.
A mixture of asset write-downs, restructuring, consolidation and recovery is on the cards for the Japanese airfreight sector. The bankrupt Japan Airlines (JAL), Asia’s largest air carrier, was expected to have registered an operating loss of nearly US$1.7bn in the fiscal year ended March 31 2010. This was attributed to a sharp decline in revenues resulting from a rapid slowdown in the Japanese economy. JAL and two subsidiaries appealed for bankruptcy protection in January 2010, with a combined debt of US$25bn. The company was planning to cut its spending by US$1.16bn in the current fiscal year. Nearly 4,000 workers had already opted for early retirement, which would help the airline, saving US$272.1mn more than planned at the end of March 2011. Meanwhile, it reported a 12.7% year-on-year (y-o-y) increase in international cargo volume to 49,454 tonnes in April 2010, compared with an increase of 32.9% y-o-y in March 2010. In the same period, JAL’s domestic cargo volume rose by 4.3% y-o-y to 38,050 tonnes, compared with 9.6% y-o-y in March 2010. Meanwhile, All Nippon Airways (ANA), Japan’s second largest airline, recorded an impressive 57.3% y-o-y surge in international cargo volume to 39,431 tonnes in April 2010, compared with 59.1% y-o-y in March 2010. ANA also posted a 5% y-o-y increase in domestic cargo volume to 38,372 tonnes in April 2010.
The operating environment for the Japanese freight sector was mixed at the mid-year point. A year after the electorate ended one-party dominance of the country’s political system, the new administration of the Democratic Party of Japan (DPJ) was still struggling to measure up to the challenges of government. The replacement of the prime minister (Yukio Hatoyama resigned at the beginning of June and was succeeded by Naoto Kan) was taken as a sign that the DPJ had yet to find its stride. Meanwhile, the economy continued to be a source for concern. The authors detected a poor investment outlook, muted consumer spending and a downturn in exports as Chinese and US demand was expected to falter. After falling by 5.8% in the recession year of 2009, the authors were predicting that Japanese GDP would grow by 1.9% in 2010, but lose impetus again with growth of only 0.9% in 2011. On the medium term to 2014, we expect annual GDP growth to average only 1.3%.
After 2009’s very steep falls in volumes, the airfreight sector is now enjoying a recovery. The authors forecast that cargo volume will rise by 2.5% in 2010, a small improvement after 2009’s 10.9% slump, but nevertheless a move in the right direction. Air freight carried (volume x distance) will rise a little more strongly, up by 4.8% .
Japan’s highly-developed roads can be heavily congested at certain points, and as in many mature economies, road haulage growth is limited. We see road freight volume up by 1.2% in 2010, following 2009’s recession-driven 8.8% contraction. According to our five-year forecast, volume will gain by an annual average of 0.7%, while traffic will rise 1.4%. This points to a slight lengthening of the average road cargo-carrying trip.
After collapsing by almost one-fifth (-18.7%) during the recession in 2009, railfreight will have a standstill year in 2010, with marginal growth of 0.3% to 37.72mn tonnes. The emphasis remains on passenger travel as the number one priority, so freight capacity will stay limited. Annual average railfreight volume growth will be only 0.3% over the five years to 2014. At the Port of Yokohama (POY) we are predicting 5.7% growth in total tonnage in 2010, representing a partial recovery after the very steep slump in 2009, when tonnage fell by just over one-fifth - 22.3%. However growth will ease back again as the economy cools once more in 2011. At the Port of Tokyo (POT) in 2010 we see total tonnage gaining by 7.0%, a slightly stronger, but still only partial recovery compared to the 2009 drop of 10.6%. In real terms, the authors are predicting an 8.1% recovery in trade in 2010, followed by lower growth of 4.8% in 2011 as we enter potential global ’double-dip’ territory. Average annual foreign trade growth in the five years to 2014 will be 6.2% per annum.
There is evidence of a ’rebalancing’ of Japan’s trade patterns going forward, with imports outpacing exports, reflecting a number of factors including somewhat higher Japanese export production costs, an ageing population, and the expected dip in demand from China and the US. As a result imports will grow by 7.3% per annum in real terms, ahead of exports at only 5.4%. On the whole we believe the main risk to our forecasts is political and a downside one at that. The risk is that the DPJ government fails to get a grip on the political and economic situation and enters a period of policy drift, which in current circumstances can only mean lower growth, with the resulting negative knock-on impact on freight demand and volumes.
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