Business

TOKYO — It's a rite of spring in Japan: Major corporations hire fresh university graduates en masse every April, starting them all at the same salary with assurances of rising pay and lifetime employment.

But lately, some companies, including Rakuten, SoftBank and Line Corp., are breaking with that tradition, signing up new employees with coveted technical skills months earlier — and paying them more than other new recruits.

As competition for workers grows in Japan's shrinking labour pool, traditional seniority and group dynamics are giving ground to the more individualised, merit-based employment system found in the West.

It is a welcome sign for Prime Minister Shinzo Abe's government and the central bank, which have been pushing for a more flexible labour market that would boost wages and revive consumption.

Takashi Murakami, a 23-year-old producer at Mercari, which developed a popular flea market app, says seniority-based pay and lifetime employment are relics.

"I'm grateful that the company seems to value me with pretty good pay," he said. "I already got a pay hike after joining the company, which motivated me to work even harder. Merit-based pay is more fitting to the times."

In recent years, Mercari said, it has been hiring college students throughout the year to grab workers with needed skills. The company even offers jobs to some second-year or third-year students.

Mercari also has a programme called "Mergrads" to provide internships and training to improve new graduates' skills.

Since April, it has started offering higher pay to some job candidates with skills in information technology engineering and computer programming, said Ayano Okuda of Mercari, who is in charge of hiring new graduates. She declined to discuss the company's pay scale.

"The competition is surely heating up," she said. "We judge each individual's ability and offer them attractive salaries reflecting their skills." 

Mass hiring 

For decades, Japan's traditional spring hirings underpinned the economy and provided a clear corporate and social ladder, grounded in — and reinforcing — the cultural emphasis on loyalty and conformity.

Under Japan's often choreographed business practices, the Keidanren, the largest business lobby, had a "voluntary" timetable that many companies followed: Start recruiting new employees on March 1, begin job interviews with fourth-year students on June 1 and informally offer jobs on October 1 ­ six months before graduation.

Labour ministry data show the entry-level salary stands at about 200,000 yen ($1,775) a month, compared with roughly 30,000 yen in 1968, or 130,000 yen in today's money. 

Demand for workers is stronger now than it has been in decades; there are 1.62 jobs available per applicant, nearly a 44-year high.

In response, the Keidanren decided to ditch its timetable guidelines by spring 2021, meaning member companies are expected to follow them until then.

But more companies, particularly in "new economy" industries such as technology and e-commerce, have adopted much more flexible hiring practices, including offering select employees higher pay.

Disparity 

Internet advertising firm CyberAgent Inc. scrapped its uniform starting pay scale in April.

Now it offers annual starting salaries ranging from 4.5 million yen ($40,000) to 7.2 million yen ($64,000) or more for IT engineers, who account for about 40 per cent of its 5,000-person workforce. 

"We face stiff competition in securing able workers," said Yuko Ishida of CyberAgent.

That means some young, incoming employees are paid more than their older co-workers. CyberAgent pays exclusively based on ability without taking seniority into account, Ishida said.

"Our competitors are also offering better salaries for high-quality workers, so we believe we can attract able workers by offering appropriate salaries," she said.

Although some say Japan is long overdue for a shift toward a more flexible, merit-based employment system, it could upset long-standing social order.

"If it spreads throughout corporate Japan, it would mean a collapse of Japan's employment system," said Hisashi Yamada, a senior economist at Japan Research Institute and an expert on labour issues.

"That would cause a disparity among workers, causing uneven distribution of work and loss of motivation among those who feel left behind," he said.

TOKYO — Asian stock markets retreated again on Wednesday, extending a rout that began last week as US political uncertainty exacerbated worries over slowing global economic growth.

Investors were unnerved by the US federal government partial shutdown and President Donald Trump's hostile stance towards the Federal Reserve chairman. 

US Treasury Secretary Steven Mnuchin had also raised market concerns by convening a crisis group amid the pullback in stocks.

S&P 500 emini futures were last down 0.6 per cent, pointing towards a lower start for Wall Street when the US market reopens after Christmas Day, when many of the world's financial markets were shut.

Markets in Britain, Germany and France will remain closed on Wednesday.

MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.5 per cent, brushing a two-month low.

The Shanghai Composite Index lost 0.4 per cent while South Korea's KOSPI shed 1.6 per cent.

Japan's Nikkei, which slumped 5 per cent the previous day, had a volatile session. It swerved in and out of the red, falling more than 1 per cent to a 20-month-low at one stage, before ending the day with a gain of 0.9 per cent. 

"In addition to concerns towards the US economy, the markets are now having to grapple with growing turmoil in the White House which has raised political risk ahead of the year-end," said Masahiro Ichikawa, senior strategist at Sumitomo Mitsui Asset Management.

US stocks have dropped sharply in recent weeks on concerns over weaker economic growth. Trump has largely laid the blame for economic headwinds on the Fed, openly criticizing its chairman, Jerome Powell, whom he appointed.

That has further rattled investors as they grappled with fears of slowing global growth, corporate earnings and US -China trade tensions.

In an effort to reassure investors, Treasury Secretary Mnuchin spoke on Sunday with the heads of the six largest US banks, who confirmed they have enough liquidity to continue lending and that "the markets continue to function properly".

"In the end, we believe that the Fed is the only presence capable of ending the current confusion in the markets," Kenta Inoue, senior market economist at Mitsubishi UFJ Morgan Stanley Securities, said in a note.

"The White House will probably keep making gestures intended to halt the rout in stocks, but the federal government is likely to remain shut into the new year. The US-China trade war also shows no signs of a resolution."

US bond yields have declined amid the rout, including a steep sell-off in oil, prompted investors to move into safe-haven government debt, adding to the growing pressure on the dollar.

The dollar traded at 110.35 yen after retreating to a four-month low of 110.00 overnight against its Japanese peer, which tends to attract demand as a perceived safe-haven during times of market volatility and economic stress.

The euro was 0.15 per cent higher at $1.1412.

The 10-year US Treasury note yield extended its fall to touch 2.722 per cent, its lowest since early April.

In commodities, US crude futures were up 0.4 per cent at $42.70 per barrel after tumbling 6.7 per cent on Monday.

US crude futures plunged to the lowest level since June 2017 on Monday, as bearish stocks added to fears of an economic slowdown.

Brent crude futures were down 0.18 per cent at $50.38 a barrel, having skidded 6.2 per cent in the previous session to their weakest since August 2017.

Safe-haven gold was well bid, with spot prices brushing a six-month peak of $1,272.83 per ounce.

BERLIN/MADRID — Models testing fashion brands like Adidas, Benetton and Gap are finding that almost a third of the shoes and clothes they try on are bigger or smaller than the size on the label indicates, explaining why many clothes bought online are sent back.

Calculating sizes more accurately could help online retailers like Germany’s Zalando and Britain’s ASOS cut costly returns and improve customer satisfaction.

“If you try on the same brand in a different colour it is sometimes a different size,” Zalando fitting model Savina Bellotto said as she squeezed a foot into a stiletto shoe with a shiny silver buckle that dug into her ankle.

Discounting to shift stock means fashion retailers are struggling to preserve profit margins, and ASOS’s warning on Monday of a major downturn caused retail shares to tumble.

Targeting returns, fast fashion firms like Zara and H&M have introduced software that suggests sizes for online customers. Customers type in height and weight, which are processed alongside historic data on purchases and returns.

“It’s a big burden for the retailer,” said Nivindya Sharma, director of retail strategy at trend forecaster WGSN. “Free returns started off as being a competitive advantage but now they’re the norm.” 

Fast fashion 

Around half of Americans expect to return clothes ordered online this holiday season due to poor fit, according to a survey by technology firm BodyBlock.

“Returns cost you a fortune. Firstly, you’ve got an unhappy customer, but also you’ve got the re-processing and putting it back into stock,” said Charlotte Kula-Przezwanski, a partner at Columbus Consulting, which specialises in retail processes.

To crack the sizing problem, Zalando, Europe’s biggest online-only fashion retailer, told Reuters it was augmenting the data it gathers online with feedback from models who check new styles.

“If we can put an article on a fitting model, just before or as an article is online, we immediately know there is a fitting problem,” said Zalando’s Director of Engineering Stacia Carr, adding that models flag about 30 per cent of stock as too big or too small.

Returns are a major issue for Zalando as about half the products it sells are sent back. A tradition of catalogue shopping with free returns means customers in its German home market are comfortable sending back unwanted goods. 

Problems with processing returns contributed to a third-quarter loss that prompted a sell-off in Zalando shares and sparked speculation it could be a takeover target for Chinese e-commerce giants like Alibaba or JD.com.

Zalando co-CEO Rubin Ritter said in November the problems with processing returns had been resolved and the company was taking steps to increase the profitability of smaller orders such as making size recommendations to reduce returns.

A change in fabric or design can have a big impact, Carr said, noting that size-related returns soared recently for one major denim brand after it adjusted its design. When Zalando flagged the issue, it changed back.

“In this era of turning around articles very quickly, the corners that get cut sometimes impact the fit of the garment,” she said.

Zalando’s small team of models initially tested shoes, but now they try on clothes too. Dresses, its top selling category, also have the highest rate of returns.

Models try on up to 120 shoes a day, measuring the inside with a special ruler and noting how each fits at heel, ankle and toes, while also looking for strong smells or quality issues. 

“It is very subjective. That is why we get the average between three models,” said model Gerard Nieto, as he measured a fleece-lined leather lace-up boot.

Cracking the sizing challenge is like solving a Rubik’s cube, because there are so many variables, Carr said.

“We know the Nordics like things more loose and oversized. The further south you go, it’s a tighter fit, the bodies are different,” she said. “We’ve all been surprised that we’ve been able to put a dent in this because it is such a complex topic.”

A rise in returns is an inevitable part of the e-commerce boom, retailers say.

“There’s a growing trend in return rates globally as the market matures,” said Roger Graell, director of e-commerce at Spain’s Mango, which expects to make at least one-fifth of sales online by 2020.

“What we hope to do with technology is make that growth rate slower.”

Mango uses sizing tools powered by Berlin-based software firm Fit Analytics, which was launched eight years ago and works with more than 200 companies — including ASOS, Tommy Hilfiger, Calvin Klein and Hugo Boss — across 95 countries. 

Fit Analytics has more than doubled revenue every year over the past three years, says CEO Sebastian Schulze.

“Margins are under pressure across the industry, you have to make sure people buy several times otherwise you don’t make money,” said Schulze. 

“If the fit isn’t right, customers will walk.”

HONG KONG- Asian stocks were mixed Monday after a weekend call by Treasury Secretary Steven Mnuchin to top US banking executives aimed at stemming the market panic which resulted in Wall Street experiencing its worst week in a decade.

The Dow and the Nasdaq ended Friday with their biggest weekly drop since the start of the global financial crisis as investors took fright over a government shutdown in Washington, President Donald Trump's public feuding with the Federal Reserve and the US-China trade war returning to the forefront.

Tokyo was closed for a public holiday on Monday but Hong Kong dropped 0.40 percent in a pre-Christmas half day of trading while Sydney closed up 0.48 percent. Shanghai was trading up in afternoon trade while Seoul slipped.

The mixed regional bag came after Mnuchin spent much of the weekend in damage control mode following multiple media outlets reporting that Trump had privately asked cabinet members if he has the authority to fire Fed Chairman Jerome Powell.
Last week, the central bank hiked rates, infuriating Trump who has ignored the traditional respect for the Fed's independence, calling it "crazy", "out of control" and a greater economic threat than China.

Mnuchin denied the reports of Trump seeking Powell's scalp, tweeting on Saturday that the president told him: "I never suggested firing Chairman Jay Powell, nor do I believe I have the right to do so."

The following day, Mnuchin announced he had called senior executives from six of the largest American banks to discuss the market turmoil and received assurances.

"The banks all confirmed ample liquidity is available for lending to consumer and business markets," the Treasury said in a statement attached to a tweet from Mnuchin announcing the calls.

"We continue to see strong economic growth in the US economy with robust activity from consumers and business," Mnuchin was quoted in the statement as saying, adding that he would convene a call with the President's Working Group on financial markets later Monday.

 'More panic and fear'

Analysts expressed both surprise and alarm at Mnuchin's Sunday statement, saying it might do the opposite of calming current jitters.

"Nothing says don't panic like saying 'I'm calling the plunge protection team tomorrow'," Michael O'Rourke, JonesTrading's chief market strategist, told Bloomberg News.

"I honestly think that's the type of event that's going to startle markets and create more panic and fear when it's meant to create confidence."

Last week's turmoil in Washington -- which included a government shutdown that appears likely to last until at least Thursday and the abrupt resignation of Defense Secretary Jim Mattis -- has spooked markets worldwide.

Japan's Nikkei hit a fresh 15-month low on Friday with its fourth consecutive day of losses, joining the tech-rich Nasdaq in bear territory. European bourses were flat or rising slightly.

Oil inched higher in Asian trade after crude-producing nations said they expect prices will arrest their recent slide and rebalance early next year, when a deal on new production cuts takes effect.

However, analysts said prospects for a global economic slowdown in the coming year -- which would weaken crude demand -- and rising US shale output are dampening sentiment and limiting any rebound from the current 15-month lows.
Prices have plunged by around 40 percent from four-year peaks reached in early October on concerns about oversupply and weaker demand.

In foreign exchange markets, the yen rose 0.1 percent to 111.10 per dollar, the euro was up 0.2 percent at $1.1390 and the pound was at $1.2662, a 0.1 percent rise.

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KUWAIT CITY — Oil ministers from the leading member states of the Organisation of Petroleum exporting Countries (OPEC) said on Sunday they expect prices will arrest their recent slide and rebalance early next year, when a deal on new production cuts takes effect.

Oil prices have shed more than 36 per cent since early October to trade at $54 per barrel, due to fears of oversupply and weak global demand.

But President of OPEC and UAE Energy Minister Suhail Al Mazrouei said that the surplus in the oil market was small compared to 2017 and expected it to vanish in one or two months. 

"Based on available figures, we have around 26 million barrels of surplus... compared to 340 million barrels in early 2017," Mazrouei told a press conference in Kuwait City.

"I think that we can easily do with this surplus and reach market rebalance in one or two months... in the first quarter of next year," he said.

OPEC — a cartel of producer countries that has long manipulated output of the commodity to influence global prices in members' favour — and non-OPEC members agreed in early December to trim production by 1.2 million barrels a day from January 1, in a bid to shore up sagging prices.

Mazrouei said that there has been higher than anticipated supply on the market in recent months, as US sanctions on Iran have had a less pronounced effect on the country's oil exports than had been expected.

Iraq's Oil Minister Thamer Al Ghadban said that there is a consensus among OPEC and non-OPEC producers to comply with the new agreement to trim output in a bid to stabilise the market.

He said the new agreement is valid for six months and the ministers will meet in April to assess the impact of the cuts.

Ghadban said he believes that the new measures taken by producers will "stop the slide in oil prices".

Mazrouei said that producers are ready to renew the agreement or increase cuts in case the market does not balance.

"If the production cuts of 1.2 million barrels a day is not enough, we will meet again to see what is enough and apply it," he said.

During their meeting next April, the producers are also expected to sign a long-term agreement to formalise cooperation between OPEC and non-OPEC members over oil output. 

OPEC has lately been cooperating closely with Russia and other non-cartel producers, in a bid to impose greater control over global output and prices. 

LONDON, England — London's Gatwick Airport reopened on Friday after a mystery saboteur wrought 36 hours of travel chaos for more than 100,000 Christmas travellers by using drones to play cat-and-mouse with police snipers and the army.

Sussex police made two arrests late on Friday in connection with the disruption and urged the public and passengers around the airport to remain vigilant. 

After the biggest disruption at Gatwick since an Icelandic volcanic ash cloud in 2010, the airport had said around 700 planes would take off on Friday, although there would still be delays and cancellations.

Gatwick, Britain's second busiest airport, briefly closed again on Friday to investigate a new drone sighting but was soon operating as normal.

"Flights have resumed," a spokeswoman said. "The military measures we have in place at the airport have provided us with reassurance necessary to re-open our airfield."

Britain deployed unidentified military technology to guard the airport against what transport minister Chris Grayling said were thought to be several drones. "This kind of incident is unprecedented anywhere in the world," he said. 

The motivation of the drone operator, or operators, was unclear. Police said there was nothing to suggest the crippling of one of Europe's busiest airports was a terrorist attack.

Gatwick's drone nightmare is thought to be the most disruptive yet at a major airport and indicates a new vulnerability that will be scrutinised by security forces and airport operators across the world.

The army and police snipers were called in to hunt down the drones, thought to be industrial-style craft, which flew near the airport every time authorities tried to reopen it on Thursday.

No group has claimed responsibility publicly and police said there was no evidence another state was involved.

Sussex Police Assistant Chief Constable Steve Barry said they were keeping an open mind about who was responsible. 

"In terms of the motivation, there's a whole spectrum of possibilities, from the really high-end criminal behaviour that we've seen, all the way down to potentially, just individuals trying to be malicious, trying to disrupt the airport," he said.

After a boom in sales, unmanned aerial vehicles have become a growing menace at airports across the world. In Britain, the number of near misses between private drones and aircraft more than tripled between 2015 and 2017, with 92 incidents recorded last year.

Thermal imaging? 

The British Airline Pilots' Association (BALPA) said it understood "detection and tracking equipment" had been installed around Gatwick's perimeter. 

BALPA said that it was extremely concerned at the risk of a drone collision. Flying drones within 1 km of a British airport boundary is punishable by five years in prison.

The defence ministry refused to comment on what technology was deployed but drone experts said airports needed to deploy specialist radar reinforced by thermal imaging technology to detect such unmanned flying vehicles.

Other ways to tackle them is typically by frequency jamming that can disable or disrupt control signals and the GPS signals that allow the drones to navigate.

The Telegraph newspaper had reported earlier that the perpetrator had circled the drone around the airport building and flashed its lights. A description of the drone by witnesses had enabled experts to determine the model of the machine, according to the report.

The drone sightings caused misery for travellers, many sleeping on the airport floor as they searched for alternative routes to holidays and Christmas family gatherings.

Flights were halted at 21:03 GMT on Wednesday after two drones were spotted near the airport. The disruption affected at least 120,000 people on Wednesday and Thursday but flights were restarted at 06:14 GMT on Friday.

At 17:40 GMT flights were suspended again but restarted less than an hour later.

It was not immediately clear what the financial impact would be on the main airlines operating from Gatwick including easyJet , British Airways and Norwegian.

Britain's Civil Aviation Authority said it considered the event to be an "extraordinary circumstance" meaning airlines are not obliged to pay compensation to affected passengers. 

Airlines will have to refund customers who no longer wish to travel, however, and try to reschedule flights to get passengers to their destinations.

Some airport staff handed out chocolate and Christmas elf toys to stranded passengers.

Some, like Sarah Garghan-Watson, chose to stick it out at the airport overnight, having arrived at 8am on Thursday.

"It's now 2 o'clock in the morning at Gatwick, and it's very bright and very noisy. It's now also very cold," she said in a video shown on Sky.

"All I can see tonight... is a sign that says 'no more sleeps until the beach'. And here we are, sleeping, in the stairs at Gatwick, because there's no flights."

TOKYO — Tokyo prosecutors have appealed a court decision that prevents further detention of Carlos Ghosn, a surprise ruling which could free the ousted chairman of Nissan Motor Co. for the first time since his arrest for alleged financial misconduct.

The Tokyo district court on Thursday also decided against extending the detention of Greg Kelly, a former Nissan executive who was arrested along with Ghosn on November 19.

There is no set timing for a decision on the appeal, but an appeal defence lawyers lodged previously to prevent the executives' rearrest was rejected in about three hours.

Late on Thursday, a man resembling Ghosn's lawyer Motonari Otsuru entered the tower-like Tokyo Detention Centre where Ghosn and Kelly are held, passing a crowd of waiting camera crews, a Reuters journalist reported from the scene. The man did not make any comments. Kelly's lawyer was not available for comment.

The executives have not been able to make any public statements since their initial arrest, though local media have reported that both men have denied wrongdoing.

Ghosn led Nissan, Mitsubishi Motors Corp. and France's Renault SA. He was indicted on December 10 for allegedly understating his income by about half over a five-year period from 2010, and rearrested the same day for the same alleged crime covering the past three years. The 10-day detention period in the second instance ran out on Thursday.

The court had widely been expected to extend the detention for at least another 10 days, as granting bail to suspects who insist on their innocence has until recently been unusual in Japan. It did not disclose reasons for its decision.

The high-profile case has put Japan's criminal justice system under international scrutiny and sparked criticism for some of its practices, including keeping suspects in detention for long periods and prohibiting defence lawyers from being present during interrogations, which can last eight hours a day.

The court's decision could reflect sensitivity to that criticism as well as changing attitudes in the courts, said Masashi Akita, a defence lawyer in Osaka with over 30 years' experience.

"They are very nervous about criticism of their lenient approach toward detention. This is a typical case of such changing, I suppose," Akita said in e-mailed responses to Reuters' questions. "I think this case has a big impact and effect on the Japanese justice practice, and such a move is favourable for the defence side."

Public broadcaster NHK said Ghosn could be released on Thursday or Friday if any appeal by prosecutors is rejected by the court and bail is granted. However, Akita said it could take until the middle of next week for all procedures to run their course — if indeed the men are freed.

Bail amounts

Ghosn's arrest marked a dramatic fall for a leader once hailed for rescuing Nissan from the brink of bankruptcy.

Accustomed to a globe-trotting lifestyle, Ghosn has been detained in a small room without a heater and a toilet in the corner. Authorities have limited his opportunities to shower and shave, a person familiar with the matter previously told Reuters.

It was not immediately clear how much bail would be, or if would even be granted.

Activist fund manager Yoshiaki Murakami, arrested in 2006 for insider trading, paid an initial 500 million yen ($4.47 million) in bail.

At the centre of allegations against Ghosn is his Nissan income, with Tokyo prosecutors charging the executive for failing to disclose compensation that he had arranged to receive later.

Nissan has said a whistleblower investigation also uncovered personal use of company funds and other misconduct.

The scandal has shaken the Nissan-Mitsubishi-Renault alliance, with Nissan Chief Executive Hiroto Saikawa calling for changes to weaken the clout of Renault SA, which owns a controlling stake in Nissan.

Renault has so far not replaced Ghosn as its head, saying his compensation had been in compliance with law and governance guidelines.

Documents seen by Reuters showed that some discussions about compensating Ghosn out of the public eye were not confined to Nissan, but also included Renault executives. Renault told Reuters that any such pay would have had to be made public in France.

Nissan on Thursday said Saikawa earlier this week held a one-on-one meeting with Renault acting boss Thierry Bollore, saying Saikawa described the meeting as "positive". It did not disclose details of the discussions.

TOKYO — SoftBank Corp. shares sank 15 per cent on debut, wiping $9 billion off their value, as investors sold off the telecoms operator after its record IPO on worries about a recent service outage and its exposure to Chinese telecoms gear maker Huawei.

The poor start for the unit of tech investment giant SoftBank Group Corp.. meant that for Japan’s mom-and-pop investors concerns about the company and the nation’s telecoms market trumped the appeal of the group’s charismatic founder Masayoshi Son.

Such a debut is uncommon in the Japanese IPO market. Of 82 IPOs so far this year, SoftBank Corp.’s $23.5 billion float was only the seventh to open below the offering price. Among recent major IPOs, Japan Display was the only one to flop, suffering a fall in its 2014 debut.

“There was a disruption in its network early this month as well as Huawei’s issues. There hasn’t been good news involving SoftBank recently,” said Tetsuro Ii, chief executive officer at Commons Asset Management.

Shares of SoftBank Corp. closed at 1,282 yen, 14.5 per cent lower than its IPO price of 1,500 yen and giving the telco a market cap of about 6.1 trillion yen — about 1.1 trillion yen below its value at the time of the IPO. Shares opened trading at 1,463 yen. “It was beyond our expectations that the shares would fall that much,” said a senior executive at one of SoftBank Corp.’s domestic lead underwriters, declining to be named since he was not authorised to discuss the matter with the media. 

SoftBank Corp. shares were the most heavily traded on the Tokyo Stock Exchange’s first section, as amid heightened risk aversion the benchmark Nikkei 225 index fell to a nine-month low, closing down 0.6 per cent. SoftBank Group lost 0.9 per cent.

The IPO was Japan’s biggest ever and just shy of the world record $25 billion 2014 listing of Chinese e-commerce giant Alibaba Group Holding, a SoftBank Group portfolio company. 

SoftBank Group raised 2.65 trillion yen in the IPO. It will retain about 63 per cent of the newly listed unit should a greenshoe option be exercised in full. The IPO is a milestone in the conglomerate’s transformation into primarily a global tech investor.

During the IPO period, Japan’s third-largest mobile phone network provider by subscriber numbers suffered a rare nationwide service outage, which it said would not affect earnings or dividends. 

Adding to investor worries, SoftBank Corp.’s relationship with Huawei Technologies Co. Ltd. came under scrutiny as governments around the world moved to shut out the Chinese firm amid worries its equipment could facilitate Chinese spying. Huawei has repeatedly insisted Beijing has no influence over it.

The Japanese company on Thursday downplayed the impact a shut-out of Huawei equipment would have, with SoftBank Corp. CTO Junichi Miyakawa saying the gap between the Chinese maker’s 5G gear and its competitors’ has closed and that the potential cost of replacing existing Huawei hardware would only be hundreds of millions of yen. 

SoftBank wants further clarity on the Japanese government’s stance before making a decision on Huawei gear, the company said. It plans to replace the network equipment, two sources said last week. 

Even before SoftBank kicked off the IPO process in November, there had been uncertainty over the growth prospects of the Japanese wireless industry after the government said there was scope for the carriers to cut fees by as much as 40 per cent.

In response Son has said SoftBank will increase automation and reduce headcount at its mobile operations by 40 per cent over the next two to three years, focusing instead on new growth areas. It has already shifted 2,500 staff to ventures outside the core telecoms business like payments app PayPay. 

Other headwinds include Japan’s ageing population and Rakuten’s entry to the wireless market, said Chris Lane, senior analyst at Sanford C. Bernstein. “All of these things point to earnings pressure on the telco side for all operators, not just SoftBank,” he said.

SoftBank Corp. is forecasting 3.3 per cent revenue growth and 9.7 per cent operating profit growth in the financial year ending in March compared to a year earlier, with profits underpinned by demand for high-speed internet services. 

IPOs are popular among Japanese retail investors, many of whom see them as sure profit bets given their tendency to open much higher than offering prices.

In SoftBank Corp.’s case, an added attraction was its promise of a dividend payout of 85 per cent, much higher than those of rivals NTT Docomo and KDDI Corp..

“A dividend yield around 5 per cent is attractive, but the mobile communication industry is expected to face headwinds from next fiscal year,” Ii of Commons Asset Management said. 

The IPO attracted about twice as many retail orders as the number of shares offered, sources at lead underwriters said last week. A smaller portion of shares offered to overseas institutional investors was three times oversubscribed.

It remains to be seen whether SoftBank’s weak market debut will have a negative impact on Japan’s IPO market, where most of companies are small startups and demand can easily overwhelm the small number of shares offered.

Kudan Inc., a startup developing “artificial perception” technology, made its debut on Wednesday on the Tokyo Stock Exchange’s Mothers market. Its shares were untraded due to a glut of buy orders.

RIYADH — Saudi Arabia on Tuesday announced an expansionary budget for 2019 but projected a shortfall for the sixth year in a row due to low oil prices.

The budget projects a deficit of $35 billion, still about 32 per cent lower than the estimated deficit for the current calendar year.

Spending is estimated at $295 billion, the largest in the oil-rich kingdom's history, while revenues, mostly from oil, are estimated at $260 billion, said a statement read by King Salman.

Saudi Arabia, which has introduced economic reforms aimed at reducing its dependence on oil, has posted budget shortfalls since 2014 when crude prices crashed.

"We are determined to pursue economic reforms, control fiscal management, bolster transparency and strengthen the private sector," the king said in a brief statement to the cabinet.

The finance ministry said the kingdom, which is pumping about 10.5 million barrels of oil per day, succeeded in reducing the estimated budget deficit in 2018 by 31 per cent to $36 billion due to the partial rebound in crude prices.

The ministry also said the country's economy, which contracted by 0.9 per cent last year, grew by 2.3 per cent.

It expects growth to hit 2.6 per cent in 2019.

The ministry said the Gulf kingdom would resort to drawing on state reserves and borrowing to plug the deficit.