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Japan Freight Transport Report Q3 2007Product Type: Market Research ReportPublished by: Business Monitor International Published: August 2007 Product Code: R302-1475 Description Nippon Yusen Kabushiki Kaisa (NYK), one of the world’s largest shipping companies, has been sailingthrough difficult market conditions, though there are now signs of a recovery. NYK, the nation's largest shipping company, said its group net profit for the three months ending in December 2006 fell 31%, hurt in part by higher fuel costs. NYK plans to boost its fleet from 742 ships to 796 between now and March 2008, mainly with more bulkers. The company is predicting its pre-tax profit before extraordinary items will rise for the first time in three years during the current fiscal year to 31 March 2007, with liner operations in particular showing an improvement. Investment bank UBS recently hiked its price targets for Japan's three major shipowners on the back of renewed optimism for the liner, dry-bulk and carcarrier sectors. BMI’s Japan Freight Transport Report acknowledges that there have been signs of weakness in global shipping markets, with the big increases in capacity beginning to lead to oversupply and falling rates. But we still think there will be a relatively soft-landing rather than a crash in the industry. We are forecasting average annual growth of maritime freight carried at a rate of 3.0% over the 2007-2011 five-year forecast period. Our Japanese shipping forecast is based on various factors. Among them, the Japanese recovery should continue at a moderate but still significant rate. We forecast average annual GDP growth of 2.2% over the next five years, after 1.7% in the preceding five. Companies like NYK and its competitors are well organised and able to adapt: NYK, for example, is introducing a series of energy-saving programmes and restructuring to offer clients an integrated global logistics service. In addition, Japan’s commodity imports, manufactured exports, and growing trade with China underpin expected maritime freight demand. That said, we are relatively cautious over freight turnover forecasts for other transport modes. High petrol prices, although coming down, have exerted a dampening effect on road haulage volumes. Fuel prices and safety concerns are also holding back airfreight, but Japanese airports are beginning to reduce landing fees. As a result of these adjustments, we now expect average annual growth in total freight turnover to be 2.5% over the 2007-2011 period. The operating environment is good, but not spectacular. Japan has a composite score of 44.0 out of a potential total of 70.0 in our freight transport business environment rating. This places it just below the average score for the region as a whole (44.8). Japan scores highly for long-term economic and political risk, transport infrastructure growth and for the regulatory and competitive environment. But its overall score is lowered, due to weaker performances for freight growth and on the transport intensity index, which is a measure of foreign-trade dynamism. This is not unusual for a more developed economy like Japan, where growth rates are much more moderate. For the 2007-2011 forecast period, we expect the transport and communications sector to outpace the economy as a whole. It will achieve average annual growth of 2.3%, versus 2.2% for overall GDP. The total value of transport and communications GDP will rise to US$321.4bn in nominal terms by 2011, representing 6.3% of Japan’s GDP. Table of Contents
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