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Japan Economy Forum

A lot of people got this impression that Japanese economy rely on export, the truth is export only count about 15% GDP, it's not that significant.

Japanese compaines are so dedicated to domestic market and they are losing international market
 
Japan turns to floating solar islands as it seeks to end reliance on nuclear power
Two companies in Japan recently announced they are to begin building two huge solar power islands that will float on reservoirs. This follows Kagoshima solar power plant, the country’s largest, which opened…

Author

  1. Jon Major

    Research fellow at University of Liverpool
Disclosure Statement
Jon Major receives funding from the Engineering and Physical Sciences Research Council (EPSRC).
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Kagoshima power plant: is floating solar the future? Kyocera
Two companies in Japan recently announced they are to begin building two huge solar power islands that will float on reservoirs. This follows Kagoshima solar power plant, the country’s largest, which opened in late 2013 and is found floating in the sea just off the coast of southern Japan.

These moves comes as Japan looks to move on from the Fukushima disaster of 2011 and meet the energy needs of its 127m people without relying on nuclear power. Before the incident around 30% of the country’s power was generated from nuclear, with plans to push this to 40%. But Fukushima destroyed public confidence in nuclear power, and with earthquakes in regions containing reactors highly likely, Japan is now looking for alternatives.

Solar power is an obvious solution for relatively resource-poor nations. It is clean, cost-competitive, has no restrictions on where it can be used and has the capability to make up for the energy shortfall. A small fact that solar researchers love to trot out is that enough sunlight falls on the earth’s landmass around every 40 minutes to power the planet for a year. To put this another way, if we covered a fraction of the Sahara desert in solar panels we could power the world many times over.

The technology already exists, so producing enough solar power comes primarily down to one thing: space. For countries such as the USA with lots of sparsely populated land this is not an issue, and there have already been a large number of “solar farms” installed around the country.
 
Three Years After Fukushima, Japan Approves a Nuclear Plant

TOKYO — For the first time since the Fukushima disaster three and a half years ago, Japan’s new nuclear regulatory agency declared Wednesday that an atomic power plant was safe to operate, in a widely watched move that brings Japan a step closer to restarting its idled nuclear industry.

The two reactors at the Sendai power plant on the southern island of Kyushu are the first to be certified as safe enough to restart by the Nuclear Regulation Authority since the agency was created two years ago to restore public confidence in nuclear oversight. All of Japan’s 48 operable commercial nuclear reactors were shut down after the March 2011 triple meltdown at the Fukushima Daiichi Nuclear Power Station created serious public doubts about the safety of atomic power in earthquake-prone Japan.

Even with the approval, it will probably be months before either of the reactors can be turned back on. In addition to further safety checks, the plant’s operator, the Kyushu Electric Power Company, must obtain the consent of local governments around the plant. The final decision on whether to restart the plant will be made by the prime minister, probably in December, according to local news media reports.

The approval follows intense political pressure on the new agency by the government of Prime Minister Shinzo Abe, who supports big business and wants to restore atomic energy as part of his strategy to revive the nation’s long-anemic economy. He also wants to end Japan’s ballooning trade deficits, which many here attribute to the rising cost of imported fuel to make up for the loss of nuclear-generated electricity.

However, opinion polls have shown that the public remains skeptical about both the safety of the plants and the ability of Mr. Abe’s governing Liberal Democratic Party to ensure that safety, as the party has long had close ties to the politically powerful nuclear industry. Those doubts were aired last month during a monthlong public comment period after the Nuclear Regulation Authority released a draft report in July that expressed approval of the Sendai plant’s safety measures.

The agency said it had received 17,800 comments, more than it expected. Many were highly skeptical about the safety of the Sendai plant, which is in a volcanically active area. Still, the agency on Wednesday ended up adopting its July findings without major modifications.

The agency said it made the decision after reviewing 18,600 pages of supporting documents filed by Kyushu Electric, as well as the results of its own inspections of the plant. It said the design and construction of the reactors and other facilities, and also the contingency plans for dealing with emergencies, met new safety standards that the agency adopted in July of last year.

“I think the huge number of public comments, more than anything, reflects the enormous sensitivity toward the restart question, and the safety of nuclear power,” Kenzo Oshima, a commissioner at the agency, told reporters. “I also see it as reflecting a strong desire after the Fukushima accident to learn from that experience and raise the level of safety.”

Agency officials have sought to reassure the public by calling the new safety standards the most stringent in the world, saying they fully incorporate the lessons of the Fukushima disaster, which happened when an earthquake and tsunami knocked out vital cooling systems at the Fukushima plant.

Opponents of the restart said the agency was ignoring the concerns raised in the public comments. They said the agency, which had started amid high hopes for more independent oversight, was looking more and more like a rubber stamp for the administration.

“There was clearly huge pressure on the regulatory agency from the Abe government,” said Akira Kimura, a professor of peace studies at Kagoshima University who has been involved in efforts to block the restart of the Sendai plant. “This government is just ramming through its agenda, with complete disregard for the public will.”

http://www.nytimes.com/2014/09/11/w...st-time-since-fukushima-daiichi-disaster.html

Japan’s Recruit Holdings plans $1.8 billion IPO next month


The biggest temporary staffing company in Japan, Recruit Holdings Co., said it plans a $1.8 billion initial public stock offering next month, in a bid to finance its ambition of transforming itself into the largest player in the industry worldwide.

The offering will be the latest in a series of big listings in Tokyo this year, which have included IPOs by blue-chip firms such as Japan Display Inc. 6740, +4.43% and Seibu Holdings 9024, -0.59%

Skylark Co., a Japanese restaurant-chain operator, is expected to list next month, and Line Corp., the developer of a popular smartphone messaging application, has also applied for a possible IPO.

The Recruit IPO reflects the growth of temporary employment in Japan, where two decades of economic stagnation have eroded the postwar norm of lifetime employment. A Japanese government survey last year found that the number of non-regular workers — including those working temporary or part-time schedules — had risen to more than 20 million, or 38% of the workforce, up by 1.5 million from the previous report, in 2007.

Recruit has said it wants to become the biggest human-resources firm in the world by 2020, a goal that would require it to leapfrog industry giants like Adecco SA ADEN, -0.86% Randstad Holding NV RAND, -0.94% and ManpowerGroup Co. MAN, +0.30%

Japan’s Recruit Holdings plans $1.8 billion IPO next month - MarketWatch

Japan Machinery Orders Rise for Second Month


TOKYO—Japanese core machinery orders rose for the second straight month in July, the government said Wednesday, suggesting business investment may be starting to recover after companies reined in spending following an April sales-tax increase.

The 3.5% rise in July from the previous month was slightly smaller than expected by economists surveyed by The Wall Street Journal and the Nikkei, who estimated that core orders increased 4% from the previous month.

Policy makers are closely monitoring spending by companies as they see it important to supporting the economy as consumption slumps following April's sales-tax increase to 8% from 5%.

Machinery orders, though volatile, are widely regarded as a leading indicator of capital expenditure. The increase in July, and an 8.8% rise in June, follow a 19.5% plunge in May.

Yusuke Shimoda, senior economist at the Japan Research Institute, said Wednesday's data point to a gradual recovery in capital spending following a slump in demand following the first sales tax rise in 17 years.

"Businesses have been cautiously observing the effects of the tax increase, but I believe corporate sentiment is improving as the economy appears to be slowly recovering," he said.

Since taking office in late 2012, Prime Minister Shinzo Abe has rolled out a series of pro-growth steps involving monetary easing, fiscal stimulus and structural overhauls, dubbed "Abenomics." Mr. Abe's policies initially raised hopes for the Japanese economy, driving Tokyo stock markets up nearly 60% in 2013.

But optimism toward his pro-growth program has been fading as data suggest the higher sales tax has taken a greater toll on the economy than had initially been expected. Abenomics' primary goal—ending more than a decade of deflation by spurring 2% price growth through monetary easing—is coming under increasing scrutiny.

A law passed before Mr. Abe took office calls for the sales tax to rise again to 10% in October 2015, provided the economy is growing strongly. Mr. Abe has said data for the July-September quarter will be key in deciding whether to raise the levy again.

Wednesday's data also showed that unadjusted core orders rose 1.1% from the year-earlier month.

Core orders exclude those from electric power companies and those for ships, due to their large sizes.

http://online.wsj.com/articles/japan-machinery-orders-rise-for-second-month-1410308037
 
Investors Bet on Japanese Stocks Even as Economy Struggles


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Even as Japan's economy struggles to gain traction, investors are betting that the country's stocks will jump higher as the market attracts more cash and company profits grow.

The benchmark Nikkei Stock Average has rallied more than 14% from this year's low in April to near an eight-month high, and is within 2.1% of entering positive territory for the year.

The most recent leg of the rally has been fueled partly by speculation that Japan's $1.2 trillion public pension fund may invest more money in stocks after a staunch advocate of such a move was appointed this month to the cabinet. A slide in the yen to a six-year low, after trading in a narrow range for most of the year, is also working in favor of Japanese exporters who dominate the benchmark stock index.

Most investors, though, point to Japanese corporate profits, which have reached the highest level since the global financial crisis as global demand for the country's products grows. Also, Prime Minister Shinzo Abe has been pushing companies to step up oversight of their management to improve how they allocate resources, a further boon for stock prices.

"Corporate Japan is in pretty good shape," said Howard Smith, head of Japan research at Indus Capital Partners LLC, which invests $6.1 billion globally. "We had a rough start to the year but it's gotten better."

Mr. Smith says Indus Capital began investing in Sony Corp. 6758.TO +1.07% this spring, encouraged by its new management, which he says could help boost earnings.

Japanese firms have beaten earnings expectations for seven straight quarters, according to Morgan Stanley. MS +0.81% The Topix index, which tracks 1,700 of the largest companies on the Tokyo Stock Exchange, on Wednesday reached the break-even level for the year. Still, as of Friday, it was trading at a price-to-earnings ratio of only 14.6, lower than 18.9 times for the S&P 500 as of Thursday.

Edinburgh-based asset manager Baillie Gifford bought shares this year in early-stage Japanese Internet-related businesses that were cheap, according to Andrew Brown, the firm's Japan equities specialist.

"If earnings growth comes through, Japanese companies have more to invest," Mr. Brown said. "That should get appreciated by investors."

There is plenty for investors to worry about, though. The Bank of Japan 8301.TO -0.31% has held off from further stimulus measures, even as a report showed last week that the economy shrank the most in five years last quarter. And a possible decision later this year to again increase the national sales tax, effective in October 2015, could also hurt sentiment toward an already weak economy.

"Long-term investors want a more obvious catalyst, which has not materialized so far," said Gentoku Kiyokawa, head of investment management at BNP Paribas Investment Partners Japan Ltd.

Still, despite recent gains, the Nikkei remains the worst performer among major Asian stock benchmarks this year. And foreign investors have had a mixed record lately, as net buyers in June and July but net sellers in August. Heavy selling earlier in the year on emerging-market jitters and nervousness about Japan's April tax increase meant that 2014 has seen total net outflows.

Bigger profits, though, should let Japanese companies return more to their investors, or invest in their businesses, sending more cash through the economy. Ben Williams, London-based investment director of GAM Holding AG GAM.EB +0.29% 's Japan funds, said he expects to see more dividends and share buybacks.

Stocks of both Mitsui 8031.TO +0.37% & Co. Ltd. and Mitsubishi Corp. 8058.TO +0.16% , Japan's two largest trading houses, outperformed after the firms bought back shares in recent months. Mr. Williams said GAM started buying into the sector earlier this year.


http://online.wsj.com/articles/investors-bet-on-japanese-stocks-even-as-economy-struggles-1410730201


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Nikkei rises to near 8-month high on weak yen


Japan's Nikkei share average rose to a near eight-month high on Thursday morning as the weak yen lifted sentiment ahead of a meeting later in the day between the central bank governor and prime minister fuelled expectations for additional easing.

The Nikkei climbed 0.6 percent to 15,889.98 in mid-morning trade after reaching up to 15,905.03, the highest since mid-January. The broader Topix hit a six-year high, rising 0.6 percent to 1,314.63. Bank of Japan Governor Haruhiko Kuroda and Prime Minister Shinzo Abe will meet at noon 0300 GMT for a regular exchange of views on the economy, sources said.
The focus will be on whether Abe will urge the Bank of Japan to ease monetary policy further if the economic rebound from a deep second-quarter contraction proved to be much weaker than expected, analysts say.

- See more at: Nikkei rises to near 8-month high on weak yen
 
Japan turns to floating solar islands as it seeks to end reliance on nuclear power
Two companies in Japan recently announced they are to begin building two huge solar power islands that will float on reservoirs. This follows Kagoshima solar power plant, the country’s largest, which opened…

Author
  1. cadd3c6398eb24fb6222d7626384a8ab.jpg
    Jon Major

    Research fellow at University of Liverpool
Disclosure Statement
Jon Major receives funding from the Engineering and Physical Sciences Research Council (EPSRC).
8823e5fec7301d41ddd130ac587e0a6a.jpg

Kagoshima power plant: is floating solar the future? Kyocera
Two companies in Japan recently announced they are to begin building two huge solar power islands that will float on reservoirs. This follows Kagoshima solar power plant, the country’s largest, which opened in late 2013 and is found floating in the sea just off the coast of southern Japan.

These moves comes as Japan looks to move on from the Fukushima disaster of 2011 and meet the energy needs of its 127m people without relying on nuclear power. Before the incident around 30% of the country’s power was generated from nuclear, with plans to push this to 40%. But Fukushima destroyed public confidence in nuclear power, and with earthquakes in regions containing reactors highly likely, Japan is now looking for alternatives.

Solar power is an obvious solution for relatively resource-poor nations. It is clean, cost-competitive, has no restrictions on where it can be used and has the capability to make up for the energy shortfall. A small fact that solar researchers love to trot out is that enough sunlight falls on the earth’s landmass around every 40 minutes to power the planet for a year. To put this another way, if we covered a fraction of the Sahara desert in solar panels we could power the world many times over.

The technology already exists, so producing enough solar power comes primarily down to one thing: space. For countries such as the USA with lots of sparsely populated land this is not an issue, and there have already been a large number of “solar farms” installed around the country.

The technology already exists, so producing enough solar power comes primarily down to one thing: space

This is pure propaganda. Solar technology is NOT complete. Reliability, or lack thereof, is the main problem. The panels generate no power at night, less power during winter days, cloudy days. It is a good complement to traditional power source, but just not a reliable source.
 
This is pure propaganda. Solar technology is NOT complete. Reliability, or lack thereof, is the main problem. The panels generate no power at night, less power during winter days, cloudy days. It is a good complement to traditional power source, but just not a reliable source.

It is also my understanding that even if these issues can be solved, until battery technology improves, the case for renewable energy is weak. So long as renewables cannot generate energy on demand (or provide it from stored batteries), it cannot replace traditional sources.

It is surprising that more focus is not put on battery technology, and so much R&D continues to chase the solar and wind questions.
 
It is also my understanding that even if these issues can be solved, until battery technology improves, the case for renewable energy is weak. So long as renewables cannot generate energy on demand (or provide it from stored batteries), it cannot replace traditional sources.

Well shouldn't we be thinking of operating cost per kilowatt hour? If a natural gas fired powerplant generates x kilowatts per $y cubic meters of fuel vs say x kilowatts at $0 for solar (yes I know you have to take into consideration start up costs and maintenance) you can look at it as a secondary source offsetting the primary. Sort of like a Toyota Prius with gas mileage.
 
Hey FUKUSHIMA nuclear plant was built by the USA, why the japanse given up they MASTER production ? Isn't FUKUSHIMA was built to withstand earthquake of 12 magnetic attitude shake.
 
Hey FUKUSHIMA nuclear plant was built by the USA, why the japanse given up they MASTER production ? Isn't FUKUSHIMA was built to withstand earthquake of 12 magnetic attitude shake.

The nuclear plant was a US design sold to the Japanese. The US didn't build it. It was not the earthquake that damaged it but the flood of water that ran through the building knocking out the backup generators. Flood protection was not in the plans.
 
Sony expects a fiscal-year loss of more than $2 billion, more than four times the size of its previous estimate.
 
Japan stocks set to ride new wave of yen weakness

A fresh bout of yen weakness is set to fuel further gains in Japanese stocks, but the economy's wobbly recovery may limit the upside, say strategists.

The yen weakened to a fresh six-year low of 108.39 against the U.S. dollar late Wednesday after the Federal Reserve's guidance on interest rates sent the dollar higher. This provided fresh impetus for Japanese stocks, sending the Nikkei 225 up over 1 percent to 16,051 on Thursday.

"The Nikkei has been struggling to get back to January highs of 16,320, but with this new development on the U.S. dollar front, we would expect the Nikkei to test that level in the next few weeks," Stan Shamu, strategist at IG told CNBC. "I expect any dips in the index will be bought into."

The inverse relationship between the Nikkei and the yen is one of the foreign exchange market's long-established trends. In the first half of the year, investors faced a stronger yen, fueled by risk aversion amid geopolitical tensions and economic concerns.

Nicholas Ferres, investment director at Eastspring Investments, who moved to an overweight rating on Japan equities in July, agrees the yen's slide will help further the rally. However, he noted there's more to Tokyo stocks gains than yen weakness, highlighting attractive valuations and improving corporate profits.

Japan stocks set to ride new wave of yen weakness
 
Japan Needs Higher Returns on Overseas Assets - Real Time Economics - WSJ

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  • September 18, 2014, 1:54 AM ET
Japan Needs Higher Returns on Overseas Assets
ByEleanor Warnock
Despite a more than a two-year stretch in merchandise trade deficits, Japan still brings in more capital from abroad than it sends out, thanks to hefty returns on its overseas investments. Yet economists warn that the country needs to increase its returns on those holdings if it is going to secure capital to fuel economic activity.

In July for example, Japan recorded a ¥828.1 billion trade deficit, its 25th in a row. But that was easily overshadowed by a ¥1.85 trillion primary income surplus (a net positive return on overseas investments), according to Ministry of Finance figures.

Economists say that as Japan’s red ink mounts, maintaining a strong surplus in the income balance is necessary to supply capital to expand businesses and finance consumption at home. If Japan can bring in more capital by lifting returns on its overseas investments, it can counter the fact that Japan’s workforce is shrinking, they say.

“I think we’re looking at a secular trade deficit. In that environment, it’s going to be extremely important to make sure the returns on your international investment holdings are high,” said HSBCeconomist Izumi Devalier. “Compared with most advanced countries, Japan’s returns are quite low.”

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According to HSBC calculations, Japan’s total stock of international assets returned an average 2.3% over the five years through 2013, compared with 3.3% for the U.S.

The reason?

First, foreign direct investment is a lower proportion of Japan’s international assets. At the end of 2013, bond and stock portfolio holdings accounted for 45% of Japan’s foreign assets, and foreign direct investment only 15%, according to the Ministry of Finance. That compares with a 39%/30% mix for the U.S. at the end of 2013, and 26%/12% for the U.K.

Second, Japan holds a lot more low-yielding debt as a percentage of total assets than its peers. Debt securities made up 36% of Japan’s foreign assets in 2013 and equity 9%. In the U.S., those numbers were 12% and 27%, respectively.
Ms. Devalier said she was optimistic that returns on Japan’s foreign assets would rise as firms looked for higher returns, including from foreign direct investment.

According to Dealogic, outbound merger and acquisition volume by Japanese firms for the year through mid-September totaled $39.6 billion, up 25% from the same period a year earlier.
 
Case in point:

More iPhones, Fewer Sonys Mean More Deficits for Japan - Japan Real Time - WSJ

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  • September 18, 2014, 6:04 PM JST
More iPhones, Fewer Sonys Mean More Deficits for Japan
ByMitsuru Obe
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Customers waiting in line since Sept. 6 outside Apple Inc.'s store ahead of the launch of the new iPhone 6 and iPhone 6 Plus in Tokyo on Sept. 12, 2014.
Bloomberg News
As Sony struggles with its smartphone business, Apple will release the iPhone 6 Friday for eager Japanese fans. The contrast between the two companies explains some of the pressing problems Tokyo policy makers face: declining exports, rising imports and persistent trade deficits that have weighed on the nation’s growth rate.

Strong iPhone sales do help Japanese manufacturers who produce many of the device’s components and ship them to Taiwanese and Chinese companies that assemble the finished products.

But such exports are far from sufficient to cover the costs of importing finished iPhones. Apple is by far the largest supplier of mobile phones in Japan, with a 35.2% share in 2013, according to a research firm IDC Japan. That compares with Sony’s 12.1% share.

That is why some economists believe the iPhone 6′s launch will have a big impact on further inflating Japan’s import bill. In September 2012, when Apple introduced the iPhone 5 in Japan, imports of “telecommunications equipment” — a category that includes mobile phones — soared 90.4%, giving a substantial lift to the total value of imports, according to the finance ministry. Overall, Japan’s imports of mobile phones surged to ¥1.6 trillion in 2013 from just ¥200 billion in 2008.

That bodes ill for policy makers who want to reduce Japan’s trade deficit. The current weakness of the Japanese currency is also expected to be a drag on the trade deficit, as it makes imports more costly. The yen is at a six-year high against the dollar this week. Earlier Thursday, Japan said it posted a trade deficit in August for a 26th straight month, with exports and imports shrinking 1.3% and 1.5%, respectively, from a year earlier.

While losing domestic market share to Apple, Japanese electronics makers are struggling to appeal to new customers overseas, especially in emerging markets where less expensive Chinese products have been eagerly embraced.

As the electronics industry declines, Japan finds it difficult to pay for its fossil-fuel imports, which have soared since the 2011 Fukushima nuclear accident.

When Prime Minister Shinzo Abe took office in late 2012, many policymakers believed the yen’s excessive strength was the main cause of Japan’s economic slump since the financial crisis in 2008. Mr. Abe brought about an sharp fall in the Japanese currency through aggressive monetary easing, hoping to revitalize exports.

Nearly two years later, exports remain sluggish. Symbolizing the plight of Japanese tech firms, Sony said Wednesday it expected to post a loss of ¥230 billion ($2.15 billion) in the year ending March 2015, almost five times what it forecast four months ago, admitting its smartphone strategy had failed. The company is skipping dividend payments for the first time in its history as a publicly traded company.

“Japan has to make something that is new and people want to buy,” said Junichi Makino, chief economist with SMBC Nikko Securities. “Sony used to have DNA for such innovations.”

---

I will explore the reasons behind this at some point in the future.
 
Sony Hopes for Playstation Profit Boost

The head of Sony Corp's PlayStation division hopes to raise its profit outlook for this year, in stark contrast to the Japanese electronics firm's mobile business which has forecast deep losses and sent Sony's stock reeling.

With Sony's three core electronics businesses - the third is imaging - looking increasingly lopsided, the company is having to shrink and restructure in mobile, and focus its growth hopes on image sensors and the 20-year-old PlayStation games console.

Buoyed by strong sales of the latest PlayStation 4 and the rollout of games and content for its network services, Sony Computer Entertainment CEO Andrew House hopes he can again raise the division's profit forecast for the year to end-March. Sony pushed up that forecast in July to 25 billion yen ($230 million) from 20 billion yen.

"We raised our profit prediction and I hope that's a trend we can continue, even within this fiscal year," House told Reuters in an interview on Thursday, adding his unit's profits looked certain to increase next year from this year's levels.

Sony has sold 10.3 million PlayStation 4 consoles as of Sept. 6, almost double the sales of Microsoft Corp's XBox One, and well ahead of the 7.2 million WiiU's sold by Nintendo Co Ltd, according to market research firm VGChartz.

House's upbeat comments came a day after Sony's struggling smartphone division announced a 180 billion yen impairment charge, triggering the company's sixth profit warning in two-and-a-half years. It also said it would not pay a dividend this year - the first such move since its 1958 listing.

SHARES ROCKED

While Sony had warned in July of a potential charge, the axing of the dividend stunned investors and sparked an 8.6 percent drop in Sony shares to 1,940 yen. That ended a 25 percent rally in the share price over the past six weeks as confidence grew in Sony's restructuring plans and its prospects in growth markets such as automotive sensors.

Sony will cut another 1,000 jobs, around 15 percent of its headcount, in its smartphone business, where it's up against fast-growing Chinese manufacturers such as Xiaomi Inc as well as established names such as Apple Inc and Samsung Electronics Co Ltd.

"If the company were to go through further restructuring, it needs cash, so from this perspective it makes sense that the company's not paying dividends," said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management.

Sony's move also sparked a surge in the price of insuring its debt against default, with its 5-year credit default swaps rising 40 percent compared with levels prior to the profit warning.

And Standard & Poor's, the only leading credit ratings agency to retain an investment-grade rating on Sony debt, put the company's credit on review for a possible downgrade to junk status. "We believe it will not be easy for Sony to maintain brand recognition and generate stable profitability in this competitive market," S&P said of Sony's smartphone business.

NETWORK SPENDING

The mobile unit's woes will mean greater scrutiny of the PlayStation's profit performance, which has typically been erratic - swerving from steep losses as Sony spent heavily to develop new consoles to strong profits when those consoles reached peak popularity.

Sony CEO Kazuo Hirai - House's predecessor - has said he hopes the PlayStation 4 can recapture the profit levels of the PlayStation 2, the best-selling game console which at its peak earned Sony more than $1 billion in annual operating profit.

While House declined to be drawn on specific numbers, he touted bright profit prospects at the game division, which brings in 10-12 percent of Sony's revenue, and aims to boost monthly revenue per user from services such as online games, which offer a steadier stream of income than one-off purchases of hardware and software.

"I do feel we have a higher opportunity to build a higher ARPU (average revenue per user) than with the PS3, and that should make a very strong profit contribution over the life-cycle," he said.

He warned, however, that profitability of the game division, which had been combined with network services such as streaming video and music as well as games, would be constrained in the near term as Sony needs to invest in its network infrastructure over the next 12-18 months.

He denied there was pressure for the games division to take up the slack for the mobile business, and noted that both Hirai and CFO Kenichiro Yoshida's background in games and networking was favorable for his business.

"Kaz obviously comes out of the games business. He was in that for 10 years in the States and has a deep understanding of what a healthy ecosystem looks like and what we have to do," said House, a 49-year-old Briton who has worked at Sony for more than two decades. "I think Yoshida coming in as CFO has been hugely beneficial for us. He comes from a network services business."

House said Sony's cloud-based TV service, due to launch in the United States this year, was an opportunity to expand the user base of its network services, now at 52 million - a fraction of Apple's 800 million or so iTunes users. Sony is also looking for more content providers after signing a deal with Viacom to stream 22 of its channels.

For some analysts, the contrasting fortunes of Sony's business pillars was not necessarily a bad thing.

"This has shown that a sensible CFO is able to control the expansionary aspirations of business heads, which if unchecked, would lead to larger losses for Sony," said Atul Goyal, analyst at Jefferies.



Sony Hopes for Playstation Profit Boost | Fox Business
 

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