Japan's Retail Giant Rakuten Stock Plummets... Japan Post, Its Investor, Also Staggering

Stock Price Halved Compared to Japan Post Investment
Losses Deepen Due to Mobile Business Slump

Rakuten, once called Japan's 'distribution giant,' is facing a sharp decline in its stock price due to expanding losses in its mobile division, causing even Japan Post (the post office), which made a large-scale investment, to falter. There are concerns that if the stock price continues to underperform, the equity held by Japan Post could be recorded as a massive impairment loss, potentially affecting the operations of local post offices across the country.

[Image source=Reuters Yonhap News]

According to the Asahi Shimbun on the 28th, there is a possibility that the 8.24% stake in Rakuten, which Japan Post invested in 2021, will be treated as an impairment loss. In Japan, assets held by companies are typically written down as impairment losses when their book value falls below half and the likelihood of recovery is significantly low. Currently, the impairment amount for Japan Post’s stake in Rakuten is expected to exceed 75 billion yen (approximately 677.5 billion KRW). This corresponds to about half of the 150 billion yen invested in 2021.

At the time of investment, Japan Post acquired Rakuten shares at 1,145 yen per share. However, Rakuten’s stock price has fallen to the 600 yen range since the end of last month and recorded a year-to-date low of 473 yen yesterday, continuing a downward trend. This is because Rakuten has posted losses for 18 consecutive quarters since 2019, showing little sign of a stock price rebound.

The main cause of Rakuten’s poor performance is attributed to its mobile business division, 'Rakuten Mobile.' Rakuten has continuously spent heavily on capital investments such as building base stations, but the increase in users has been sluggish, leading to growing losses. In the first quarter of this year alone, it recorded a loss of 102.6 billion yen (approximately 92.65 billion KRW).

Its competitors are the major telecommunications companies known as the 'Big Three'?NTT Docomo, KDDI (AU), and SoftBank?who already have subscriber numbers far beyond Rakuten’s reach. As of last month, the subscriber counts were 97.49 million for NTT Docomo, 64.23 million for AU, and 51.29 million for SoftBank, while Rakuten had only 5.01 million. Moreover, Rakuten has yet to secure its own network nationwide in Japan and is currently leasing base stations from other companies.

Rakuten Mobile's plan advertisement. It emphasizes affordable prices. (Photo by Rakuten Mobile website)

Rakuten briefly gained popularity by offering a '0 yen plan' that allowed users to use up to 1GB for free to improve profitability, but this plan ended last month, raising concerns about continued subscriber losses.

Even after partnering with Japan Post in 2021, Rakuten has struggled. Last year, it recorded a record loss of 372.8 billion yen. Although losses occurred in the mobile business, Rakuten has not abandoned the sector, and its joint ventures with Japan Post have also underperformed. As investments in its core logistics and distribution sectors become more difficult, Rakuten appears to be gradually losing ground in competition with major rivals like Amazon Japan.

The Asahi Shimbun pointed out, "Since Rakuten partnered with Japan Post, there have been few notable concrete achievements. The logistics company established by the two has also incurred losses, and Rakuten counters installed inside post offices have been drastically reduced."

Japan Post is closely monitoring the situation and aims to minimize losses. At a regular press conference yesterday, Hiroya Masuda, President of Japan Post, stated, "We are seeing partnership effects in logistics, and we expect Rakuten’s talent and know-how to help accelerate digitalization, which had been delayed. We will concretize results going forward." He also emphasized, "Rakuten’s stock price decline is quite significant. If a situation arises where disclosure is required, we will disclose it according to the rules."

This content was produced with the assistance of AI translation services.