Market Watch

Japan and the Consumer Market—One Year Later

While concerning, the direct impact was minimal

March 14, 2012

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For several decades, Japan has been seen as the global leader in consumer electronics (CE)—viewed as an innovator, manufacturer and trend-setting consumer. And while other countries and regions have sought to claim such august honor for their own, Japan has continued to be reckoned as a major force in all aspects of the CE world.

The horrific Japan earthquake of March 2010 threatened to change all of that. The casualties and property damage have been well documented, and while any impact on the consumer market is insignificant in the face of such tragedy, the extent and timing of the disasters effects on the consumer market were no less concerning.

Nonetheless, the direct impact on consumer electronics equipment production was, in fact, fairly minimal—at least when looking at the factories building televisions, video game players, Blu-ray drives and the like, in what is a reflection of the continuing trend of electronics manufacturing moving to lower- cost regions such as China. Very little of the actual consumer systems manufacturing was directly affected, and most finished-goods factories likewise escaped unharmed except for some high-end digital camera facilities.

The real concerns lay further back in the supply chain, and the earthquakes effects fueled great uncertainty at that time as they related not only to the factories building components or producing raw materials, but also even more fundamentally on the power grid supplying the factories for components such as the raw silicon wafers, lithium ion batteries and Blu-ray pickups.

Ultimately, however, the previously overfull inventories proved to be sufficient to carry the manufacturing of consumer goods and their constituent components through the rebuilding period, and CE industry production capacity as a whole was little affected.

Would They Still Buy?
Still, the impact of the disaster on Japanese consumption was a concern, as the Japanese populace naturally shifted its focus to recovery and rebuilding rather than on spending for consumer items. Some of this change was reflected in the Japanese consumer confidence metrics, which plummeted from 40.6 in February 2011 to 33.4 in April following the earthquake. Yet despite the disaster and other ills including the global financial crisis, Japanese consumer confidence had completely recovered by the end of 2011.

In truth, the effect—or lack thereof—of the earthquake on Japanese consumer spending can be seen by looking at some key CE systems. Flat-panel TV sales in Japan actually climbed in the second quarter last year, up 6.7 percent from the first quarter to 5.4 million sets. While totals for the year were lower, this was more likely due to the global economy, as it was in the fourth quarter when shipments declined from 2010 numbers.

In a similar positive indicator, the number of Blu-ray households in Japan almost doubled in 2011, growing from approximately 9 million to more than 17 million. Another metric related to Blu-ray recorder shipments, which are overwhelmingly Japan-centric: Shipments of these devices grew by 40 percent in 2011.

Clearly, any impact of the Japan disaster on CE spending was short-lived. And though pummeled by one crisis after another including the Thailand floods late last year, the CE market will overcome those too—just like it did the earthquake.

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