* * * * * * * * * T E R R I E 'S T A K E * * * * * * *
A weekly roundup of news & information from Terrie Lloyd.
General Edition Sunday, November 29, 2009 Issue No. 544
- What's new
- Candidate roundup/Vacancies
- Upcoming events
- News credits
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+++ WHAT'S NEW
Takamatsu-based construction firm and one of Japanese
leading builders of condominiums, Anabuki, filed for
bankruptcy last week. The company said that it and two
group firms owed creditors a massive 150.9 billion yen
(US$1.75 billion dollars). The announcement was a shock to the real
estate industry because although Anabuki had already
announced a large loss of 13.8 billion yen on sales of 176 billion yen
in March of this year, it nonetheless seemed that the nation's
leading seller of condominiums in Japan in 2007, was
weathering the storm.
How bad is the real estate market turmoil? Well the Real
Estate Economic Institute reckons that new condos offered
for sale in Tokyo will be around 35,000 units in 2009, down
20 percent from last year, and far less than the 80,000 units built
annually during the peak period of 1999-2005. Anabuki moved
5,037 units in 2007 and as one of the largest players in the
market but without the deep pockets of its competitors, was
obviously over leveraged.
In making the bankruptcy announcement, it appears that
was a board room coup that forced out President Hidetaka
Anabuki, after he tried to get the board to seek restructuring
without going bankrupt. Clearly the extent of the losses
was so massive that despite the President's 53 percent ownership
of the company, the other directors lost their nerve and
decided to seek protection from creditors.
What makes Anabuki interesting apart from the size of its
debts -- which put it as the 5th largest business failure
in Japan this year, is the extent of its supplier/funding
universe. According to the Nikkei, the company has loans
from 71 different financial institutions and around 2,060
business partners! This is an awfully big universe in a very
weak sector, and for some downstream companies the
bankruptcy may be all it takes to tip them over as well.
As a result, we expect a slew of announcements over the
next few weeks from smaller suppliers and partners who
will go under alongside the whale.
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Then of course there are the many upstream lenders and
vendors who are big enough to survive but who will still
feel some serious pain. Among the 71 banks which look
like they are going to see heavy losses due to unsecured
loans are: Takamatsu-based Hyakujushi Bank which stands
lose about 4.1 billion yen; Shizuoka Bank which may lose
5.63 billion yen or more; realtor TOC, which will write off
4.5 billion yen of shares in Anabuki; and over the weekend
Aozora said it may lose as much as 12.65 billion yen, while the
Chugoku bank will lose around 3.55 billion yen.
What is amazing to us is not just the dispersed nature of
the loans portfolio but also how Anabuki managed to get so
much unsecured financing -- most if not all of which will
be lost. Chugoku Bank had a whopping 85 percent of its 4.16 billion yen
loans unsecured and Hyakujushi Bank about 74 percent. One wonders
if those regional bank managers actually read the
newspapers and comprehend that not only are real estate
values sinking, but there are less condos being sold around
the country as well. Beyond stating that 12 billion yen is at
risk, Aozora has not said how much in overall loans it has
extended to Anabuki. However, silence is usually
accompanied by lots of gulping in these scenarios.
The Anabuki bankruptcy teaches us a number of lessons:
1. That Japanese firms do in fact have large supplier and
funding universes. We believe this comes about from their
need to manage risk because often the companies they are
dealing with are not transparent about their accounting and
reporting -- even if they are listed. This should change
once JSOX takes hold.
2. Risk in Japan also extends to the willingness of firms
in trouble to keep on trading, even when in other
countries the directors would be sued for trading while
being insolvent. Tellingly, this is what the President
wanted to do when his board kicked him out. This coup of
a dominant shareholder is a very unusual occurrence and
normally the board would have followed the President down
with the ship.
3. Anabuki managed to continue trading for a significant
period on unsecured loans. We imagine that this event will
highlight to all banks that the world is changing and that
they must lock in guarantees for their loans, or don't make
them in the first place.
4. We wonder how many more real estate firms will bite the
dust over the next 12 months? Consumer confidence is still
very low, and the contraction looks like it will continue
for the near future.
Speaking of companies that are likely to take a lot of
suppliers down with them, there is the Japan Airlines (JAL)
possible bankruptcy, if they cannot reach a deal with
American Airlines (AA). Our take is that JAL is terminally
ill and is unable to fix itself without fresh outside
management to change the way they do things. Indeed, JAL is
an entrenched government fiefdom pretending to be a company
and needs (in our estimate) about 2/3 of its senior
managers to be fired before it will start to change. One
wonders if AA has the depth and commitment, as well as
support from the government, to help JAL achieve such
radical change. Think of the challenges posed by the LCTB
(now Shinsei) multiplied by 10.
Next, we want to share a scene that we witnessed in
Roppongi on Thursday night last week. Imagine if you will
a huge crowd gathered around a cab on the street, with many
of the onlookers holding up cell phone cameras to capture
the scene. We looked on the street for an accident victim
only to find none. Then suddenly there was a scream from on
top of the cab, and all attention was on a drunk (or
drugged?) Japanese girl in her early 20's, jumping up and
down on top of the cab's roof. The roof had partly caved in
under her considerable weight and four policemen were
trying to talk her into coming down. The more reasonable
they were, the more agitated she got and pounded down even
harder on the cab -- which looked like its roof was going to
Finally after a stand-off of 10 minutes or so, the girl
made a drunken effort to jump off and make a run for it.
The police were on her straight away and arrested her.
The moral of this story? Well there isn't one. The point
is that this is a scene which would be hard to imagine
even a couple of years ago. But a late night visit to
Shibuya or Roppongi reveals that her behavior isn't that
We do congratulate the police for keeping their cool,
even as an equally drunken crowd was egging her on.
If you were arrested or had a serious accident in Japan,
who would be there to help you? The short answer is, unless
you're living with a spouse or partner, probably no one.
That's why The Japan Helpline, run by Ken Joseph, is so
We are renewing our appeal to readers to join us in being
one of JHELP's "One Hundred Club" members. If just 100
people sign up to give 3,000 yen per month to Ken's team,
they will be able to cover their costs so that they can
continue to help those of us in need.
Your support keeps The Japan Helpline going.
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- Female drinking rises
- New double-capacity Li-ion battery from Nissan
- New fuel tax mooted
- Jobless rate falls to 5.1 percent
- Capital spending to drop 17.6 percent
-> Female drinking rises
According to the Nikkei, a survey by the Ministry of
Health, Labor and Welfare has found that more women in
their early 20's drink alcohol than men in the same age
group. Apparently 90.4 percent of women aged 20-24 had at least
one drink in the previous year, versus 83.5 percent of men.
Although this doesn't really sound like much alcohol
intake, apparently alcoholism and alcohol-related illness
are increasing as well. ***Ed: This Nikkei article is a bit
short on facts, but still interesting to read the anecdotal
evidence.** (Source: TT commentary from nikkei.co.jp, Nov
-> New double-capacity Li-ion battery from Nissan
Nissan has announced that it has nearly finished testing a
new Lithium ion auto battery that takes double the charge
of a normal Li-ion battery, and therefore can power an
electric car for up to 300km on a single charge. The new
battery's greater capacity comes from a high-performance
electrode that Nissan is developing. Nissan reckons the
battery will be ready for production in 2015. (Source: TT
commentary from nikkei.co.jp, Nov 29, 2009)
-> New fuel tax mooted
Well, the DPJ's promise to reduce taxes on gas didn't last
long. Apparently there is a rumor that the government will
introduce a new JPY20/liter environmental tax in April
2010. This will help the government "snatch" back the JPY25
in tax they are planning to give up as part of their
election promises. ***Ed: Well at least we can hope that
the DPJ keeps the environmental tax out of the hands of the
Doro-zoku (road gang) politicians.** (Source: TT commentary
from reuters.com, Nov 28, 2009)
-> Jobless rate falls to 5.1 percent
The jobless rate took a turn for the better in October,
falling from 5.4 percent the month before. Economists were
surprised by the drop, and were punting for the rate to
stay at 5.4 percent. Speculation is that the fall is the result of
more than JPY20trn of government stimulus spending in the
July-Aug-Sept quarter. While the job market may be
improving, things are still very tough for fresh graduates.
The number of university students with job offers has
dropped by 7.4 percent to just 62.4 percent. (Source: TT commentary from
bloomberg.com, Nov 26, 2009)
-> Capital spending to drop 17.6 percent
Japanese senior managers clearly don't think the economy is
out of the doldrums at this stage, and while most larger
exporters are making money again, they're hanging on to it,
most likely to pad themselves against the bad times to come.
As a result, a Nikkei survey has found that 1,598 firms in
Japan expect to reduce their capital spending by as much as
17.6 percent in the fiscal year ending March 2010. The actual total
capital expenditure will be JPY22.7trn. (Source: TT
commentary from google.com, Nov 29, 2009)
NOTE: Broken links
Many online news sources remove their articles after just a
few days of posting them, thus breaking our links -- we
apologize for the inconvenience.
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In this section we run comments and corrections submitted
by readers. We encourage you to spot our mistakes and
amplify our points, by email, to firstname.lastname@example.org.
=> Tsubakimoto Redux
Readers may recall our editorial in TT532 about Tsubakimoto
Chain and how they don't seem to have really considered the
possibility of their internal combustion engine business
going away due to a rapid uptake of electric vehicles. That
article drew an unhappy response from a Tsubakimoto
representative who pointed out that hybrids are likely to
dominate for a while and therefore chains would still be
It was interesting then for us to spot this little piece in
the Bloomberg dispaches last week...
"...Tsubakimoto Chain Co., an Osaka-based maker of chains
that link engine components, also is shut out of the market
for electric cars, which are powered by a lithium-ion
battery and motor. About 30 percent of Tsubakimoto’s 142
billion yen ($1.6 billion dollars) in sales last fiscal year were
in auto parts, all of them for gasoline engines.
"It’s a crisis-like situation," said Toru Fujiwara, head of
Tsubakimoto’s auto-parts division. "With electric cars,
there’s no way we can apply our current technology."
*** Yup, we told them so.
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+++ ABOUT US
Written by: Terrie Lloyd (firstname.lastname@example.org)
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