Japan's coolest summer in a decade chills cos' sales

Reviewed by Hitoshi URABE

Article:
"Japan's coolest summer in a decade chills cos' sales"
(by Reuters) Economic Times
http://economictimes.indiatimes.com/cms.dll/html/uncomp/articleshow?msid=150228

Comments:

People were concerned about possible shortage of electricity just a few months ago. Indeed, some critics were warning of possible blackout. As it turned out, the cool weather saved the power that was to be drained in running air conditioners. It was almost irony to many Japanese learning about massive power failure attacking the other side of the Pacific Ocean.

The cool summer in Japan, as some experts explain was to compensate for the heat in Europe, affected all facets of business. Weather sensitive industries were severely hit, especially the retailers and their providers who would be selling seasonal merchandise, such as beverage producers, clothing industry, and various leisure services. Beer gardens, facilities often set up on top of buildings where white-collars stop over on the way home to rid of the heat and refresh themselves, were virtually empty. Combined with indoor beer-pubs, sales were down more than 10% compared to last year. Scarcity of people in sea and mountain resorts forced many facilities, mostly retail outlets set up to serve them, close early.

Now that the summer is over, aftermath of the chill is casting its effect on harvest. Vegetable prices have already gone up significantly, often in the order of 30-50%. And a recent subject of concern is rice, the staple food of Japan, as the crop is expected to be the worst in 10 years. Although the government has announced there would be no risk of supply shortage because there is ample inventory from past years, prices of freely traded rice, on which the government does not have controls, are 30% higher than last year. It is also reported that prices of certain premium brands of rice are rising, and the fear some began to rumor is that it may induce anxiety among general public, which could lead to a panic as it did 10 years ago.

One interesting phenomenon reported amidst this murkiness is that weather-related derivatives, introduced only a few years ago in Japan and has proliferated considerably in a short period of time, is reportedly estimated to pay out 20 billion yen to compensate for the unusually cool summer.

Weather in recent years have often been unpredictable everywhere which some point to global warming as the culprit. Whatever the cause, weather has been one of the largest and most traditional risk factors in doing a business. As such, it seems only natural for means to hedge the risk to be devised and refined, and to grow further.