2024-03-15 23:04:00
On March 15th, in response to the strong content of the spring labor union, there is a view that domestic demand stocks will become more popular in the stock market due to expectations for domestic consumption. The photo is of the Tokyo Stock Exchange building, taken in October 2020 (2024 Reuters/Issei Kato)
TOKYO (Reuters) – In response to the strong content of the spring labor market, there is a view that domestic demand stocks will become more popular in the stock market due to expectations for domestic consumption. On the other hand, some small and medium-sized enterprises, which will be the focus of the future, do not seem to have the capacity to continue raising wages, and there is also the view that the link between wage increases and consumption will be limited, so it is difficult to predict whether there will be any room for higher prices.
According to the first tally of the 2024 spring labor-management negotiations (spring labor negotiations) announced by Rengo on the 15th, the average wage increase rate combining base raises (bare) and regular wage increases will be 5.28%, the highest rate since 1991. , the highest level in 33 years.
Real wages, which take into account the impact of prices, have currently been negative for 22 consecutive months, but if they turn positive through wage increases, speculation about a recovery in consumption may lead to investors looking at retail and service-related stock prices. , it has been pointed out.
Currently involved in the hotel business, Kyoritsu Maintenance (9616.T), opens new tab and J. Department store stocks such as Front Retailing (3086.T), opens new tab have been performing well, and a strategist at a domestic securities firm said, “There are signs that a recovery in consumption is gradually being factored in.”
Unlike under deflation, under inflation it will be easier to pass on increases in raw material costs to sales prices. Maki Sawada, a strategist at Nomura Securities, says the risk of falling into a vicious cycle of low prices and declining wages is small, saying, “Expectations for an end to deflation will lead to expectations for improved corporate performance, which will likely support the domestic demand sector.”
In particular, there are strong expectations for stock price increases for inbound (visitor to Japan) stocks, which have benefited from the recovery in the flow of people. The number of foreign visitors to Japan, which had fallen due to the coronavirus pandemic, was 2,688,100 in January, returning to roughly the same level as in January 2019, before the coronavirus pandemic. Looking ahead, there are strong expectations that the number of visitors to Japan from China will make a full-fledged recovery.
Tatsunori Kawai, chief strategist at au Kabucom Securities, pointed out, “Despite the yen’s continued depreciation, many companies have been able to make solid profits.” If domestic consumption increases due to wage increases, “I think this will lead to expectations for further improvement in performance, especially for stocks that have already benefited from the recovery in inbound tourism, such as services and railway-related industries.”
Tetsu Sekine, a senior analyst at Daiwa Securities, points out, “Compared to the past, young people today receive relatively high salaries immediately after joining the company, and are more likely to benefit from wage increases.” He expects strong growth expectations for products such as Round One (4680.T), Opens New Tab, Sanrio (8136.T), and Opens New Tab, which are often used by young people. These companies are said to have more leeway in attracting customers than Oriental Land (4661.T), opens new tab, whose customer traffic has already recovered.
Some say that not only so-called “experiential consumption” such as travel will increase, but also the consumption of goods. Phillip Securities analyst Kazuhiro Sasaki said, “Purchasing appetite for home appliances and durable goods is expected to increase, and related stocks can be expected to see an upward trend.”
However, the large wage increases are mainly for large companies, and it is difficult to predict whether they will spread to small and medium-sized enterprises or whether they will be sustainable at this point.
According to a survey of companies conducted by Tokyo Shoko Research, 85.6% of companies plan to raise wages in fiscal 2024, the highest level ever since statistics began in 2016. On the other hand, when looking at the implementation rate by company size, the implementation rate for large companies was 93.1%, while it was 84.9% for small and medium-sized enterprises, a difference of 8.2 points. “In fiscal 2013, the difference between large companies and small and medium-sized companies was 5.7 percentage points, but I get the impression that the gap is widening,” Mitsuhiro Harada of the Information Headquarters points out.
There is a clear polarization due to differences in the ability to generate wage increases and profitability, and some small and medium-sized enterprises “are currently experiencing ‘wage increase fatigue’ due to the burden of last year’s wage increases” (Mr. Harada). ).
“Right now, there are many consumers who still have to cut back on their lives,” said Hajime Kitano, a strategist at SBI Securities. For this reason, in the consumption-related field, the search for discount and second-hand shop-related stocks such as Pan Pacific International Holdings (7532.T), opens new tab and Bookoff Group Holdings (9278.T), opens new tab will continue. I’m watching.
Some believe that wage increases are unlikely to directly lead to consumption. In Japan, as the population ages, more than 30% of households are unemployed, and “the link between wages and consumption is decreasing,” Toshihiro Nagahama, chief economist at the Dai-ichi Life Economic Research Institute, points out.
Not only does the deflationary mindset of consumers persist, but also the increased burden of child and childcare support, the wage increase “could be used for savings. Isn’t it likely that the virtuous cycle of prices and wages will extend to consumption to a limited extent?” says Nagahama.
●Year-to-date performance of consumption-related stocks
(Calculated based on the closing price on the 15th)
Hiroko Hamada Editing: Noriyuki Hirata Hitoshi Ishida
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