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TOKYO (MNI) – Japan’s tertiary industry index, which measures
spending in the service sector, fell a seasonally adjusted 0.6% on month
in December, posting the first drop in three months on slower
electronics and car sales, the median forecast by economists in a Market
News International survey showed.

The Ministry of Economy, Trade and Industry will release the data
at 0850 JST on Wednesday, Feb. 16 (2350 GMT Tuesday).

The expected fall in December will follow a preliminary +0.6% m/m
in November and +0.3% in October.

The median forecast showed that the index stood at 98.0 in December
against 100.0 for the 2005 base year, down from a preliminary 98.6 in
November and matching the level in October.

Akiko Kosugi, economist at Dai-Ichi Life Research Institute, said,
“The December figure will confirm that the economy was pausing.”

Many shoppers rushed to retail stores before Dec. 1, when the
government halved the reward points it offers for buying TVs, air
conditioners/heaters and refrigerators that require less power to
operate.

This caused a pullback in sales of consumer electronics in
December. Sales of machinery and equipment including consumer
electronics fell 9.4% on year in December, the first drop in 16 months,
after a 48.4% surge in November, METI data showed.

Moreover, new vehicle sales fell 28.3% in December, posting the
fourth straight year-on-year drop, after the government ended its
subsidy for buying low-emission automobiles in September.

In August 2010, new vehicle sales jumped 46.7% y/y as consumers
rushed to car dealerships before the government finished receiving
applications for the program. It continues applying lower tax rates to
buying and owning energy-efficient vehicles.

Reflecting the recent slump in demand for electronics and
automobiles, combined sales at wholesale and retail levels fell a
seasonally adjusted 1.1% on month in December, after +3.7% in November
and +0.9% in October, METI data showed.

Looking ahead, Akira Maekawa, senior economist at Global Futures
and Forex, said, “The tertiary industry index is expected to be flat for
the time being, due mainly to the pause in economic activity.”

The tertiary industry index hit the record high of 103.5 in August
2007, when Japan’s economy was still in the longest post-war expansion
period. It hit the record low of 94.4 in March 2009 in the aftermath of
the collapse of Lehman Brothers in September 2008.

skodama@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4838 **

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