David Fickling is a Bloomberg Gadfly columnist covering commodities, as well as industrial and consumer companies. He has been a reporter for Bloomberg News, Dow Jones, the Wall Street Journal, the Financial Times and the Guardian.

What's been Toyota's best-performing region since the election of Prime Minister Shinzo Abe? The U.S.? China? Europe?

If you measure unit sales , it's actually the home market. The 582,000 Toyotas sold in Japan in the three months through March were 22 percent more than in the December quarter of 2012, when Abe came to power with a promise to use radical economic policies to revive the fortunes of Japanese businesses.

Big in Japan
Change in Toyota's unit sales relative to December 2012 quarter, by region
Source: Bloomberg data

A willingness to buy the most expensive consumer goods should give pause to those who argue that households are stuck in an unbreakable cycle of pessimism -- especially now that Abe has promised to delay a planned sales-tax increase until 2019.

Corporate Japan's underestimation of local shoppers hasn't just led the likes of Shiseido and Asahi to waste capital on expensive overseas forays. It's also causing investors to sharply mark down the prospects for domestic spending. MSCI's index of Japanese consumer discretionary stocks, which surged when Abe took office in 2012, has since fallen behind staple goods -- a clear sign that shareholders believe a bunker mentality is taking hold.

Want and Need
MSCI's index of Japan consumer discretionary stocks is underperforming staple goods for the first time since Shinzo Abe's rise to power
Source: Bloomberg data
Note: Indexes have been rebased to when Abe received LDP presidential nomination. Sept. 26, 2012=100.

To be fair, that is in some ways a reversion to normality. Consumers have to buy staple goods week in and week out, so the companies that produce them ought to receive some premium for their more stable and resilient cash flows.

Still, the scale of the divergence in Japan is starting to look extreme. The Japan staples index is trading on a valuation of 22.9 times analysts' estimates for earnings over the coming 12 months, above the 20.4 times multiple for its global equivalent. The Japan discretionary index, on a multiple of 11.5, is well below the global discretionary index's 15.4 reading.

Poor Discretion
Blended forward 12-month price-earnings ratios of major indexes of consumer stocks
Source: Bloomberg data

While Japan's retail sales haven't exactly been catching fire, there's evidence that staple rather than discretionary goods are dragging down the picture. Japan's core consumer price index, which excludes volatile and essential items such as food and energy, has been growing at a faster pace than the headline inflation rate over the past year, due largely to the decline in commodity prices and a strengthening yen that's caused the cost of imported goods to drop.

The Price of Everything
Daily essentials such as food and energy have turned into a drag on Japan's inflation rate. Prices for other items have actually been ticking up for a year
Source: Bloomberg data

As far as consumer confidence is concerned, Japanese households aren't in the funk many outsiders perceive. Their willingness to spend money on costly durable goods took a heavy dent after an earlier round of sales tax rises in 2014, but has since recovered to stable, if not quite exuberant, levels.

Confidence Trick
Index of Japanese consumers' willingness to purchase durable goods
Source: Japan Cabinet Office

For the past year, the prospect of a further increase in the sales tax to 10 percent from 8 percent has been hanging over consumers' budgets. Now that's been put off for three years, they might turn to worrying more about other things, such as what will happen to their 839 trillion yen ($7.6 trillion) of household savings at a time of negative interest rates. Reflecting on that, now doesn't seem such a bad time to go shopping.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

  1. This helps strip out the effects of Abenomics' drastic currency movements, which flatter the value of overseas sales.

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David Fickling in Sydney at

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Matthew Brooker at