Opulent Trains Show Japan Is Eager to Spend

October 4, 2013 Leave a comment

Opulent Trains Show Japan Is Eager to Spend

By Chris Cooper and Kiyotaka Matsuda October 03, 2013

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A four-day luxury package can cost more than $10,000. The rear car features two deluxe suites and an observation lounge

A train ride on the Seven Stars in Kyushu can set you back 391,000 yen ($3,900). For that price, a passenger gets three nights in a suite with walnut and maple paneling. A lounge car offers plush sofas and a pianist to provide live background music. The restaurant car features dishes devised by Koji Shimomura, whose Tokyo restaurant was awarded two stars by Michelin. The service makes its debut Oct. 15. Tickets are sold out until June.At least some Japanese believe it’s safe to spend again. Prime Minister Shinzo Abe is moving to stoke inflation, increase government spending, and loosen regulations to spur consumer spending in the world’s third-biggest economy. The gross domestic product is forecast to grow 1.3 percent in the fiscal year starting next April, accelerating to 1.5 percent in fiscal 2015. Those figures hardly compare with the double-digit growth of the 1970s and 1980s, but they beat the three recessions Japan has endured in the past five years.

The Japanese stock market has advanced 36 percent so far in 2013. About 90 percent of stocks held by individual investors in Japan are owned by people in their fifties or older, says Hideo Kumano, chief economist at Dai-ichi Life Research Institute. “Abenomics is helping push up stocks, and that’s giving a boost to older people,” Kumano says. “Seniors are a big market in Japan.”

The luxury market is eager to cater to these older citizens, as well as to younger affluent businessmen and their families. Lured by the weaker yen, the number of tourists from overseas—mostly Hong Kong and Taiwan—rose 23 percent to a record 5 million in the first half of 2013, the Japan National Tourism Organization said in July. The market for luxury goods increased 8 percent, to $27 billion in the latest fiscal year, according to consultants Bain. That appetite for luxury goods and services will probably increase as Japan prepares for an influx of visitors for the 2020 Summer Olympics, says Takeshi Minami, chief economist at Norinchukin Research Institute in Tokyo. Marriott International (MAR) is adding a Ritz-Carlton hotel in Kyoto, and Japan Airlines (9201:JP) has expanded its domestic first-class service. “People are looking for luxury, something one rank above the rest,” says Dairo Murata, a retail analyst at JPMorgan Securities Japan (JPM).

Kyushu Railway’s Seven Stars luxury train, which has 14 rooms spread over seven cars, travels around the western island of Kyushu. Chairs in the viewing room rotate so passengers can enjoy the scenery, including volcanoes and mountains. East Japan Railway (EJPRY), the country’s largest railway operator, is following Kyushu’s lead. It’s hired former Ferrari designer Ken Okuyama to help create its own luxury train for service starting in 2016.

Japan’s high-end travel services are flourishing even though average wages haven’t risen on a sustained basis since the asset bubble burst in the early 1990s. But the optimism is such that this depressing economic fact fails to bother some analysts. “You don’t need higher wages to boost spending,” says JPMorgan’s Murata. “Businesspeople and tourists can do that.”

The bottom line: Japan’s growth may be slow, but it’s still enough to prompt a bull market in stocks and a boom in luxury services.

Filed under Macro Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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