JIN-131 -- Prime Minister Koizumi Reads J@pan Inc!

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J@pan Inc Magazine Presents:
T H E J @ P A N I N C N E W S L E T T E R
Commentary on the week's business and technology news
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Issue No. 131
Wednesday, May 9, 2001
Tokyo

CONTENTS

+++ Viewpoint
+++ Noteworthy news
+++ P.S.

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+++ Viewpoint

Prime Minister Koizumi Reads J@pan Inc!

At least that's what we humbly concluded after reading the transcript
of the PM's May 7 address to the Diet's Lower House. The speech was
considered the first major policy statement from the newly minted
leader, and Koizumi announced that his cabinet would start
communicating directly to the public through an email newsletter. The
prime minister said, in part, that:

During the next six months we will hold town meetings
attended by relevant Cabinet members and others in all
prefectures and will launch a "Koizumi Cabinet Mail
Magazine." These, and other efforts, will foster momentum
among the people to participate in policy formulation.

The prime minister must have taken a hint from "Freeing of the Press"
(J@pan Inc, page 26, April 2001), which included commentary from
Masao Ninagawa (founder of popular AERA magazine), Masahiko Motoki
(editor in chief at online magazine Web Gendai), and Takezumi Ban, a
Kyodo News deputy editor and the brains behind YorozuBampo, a private
online media site claiming 20,000 regular readers.

Based on our extensive discussions for that story with these and
other deep thinkers pondering the interrelationship between
government, the media, and the Internet in Japan, a few facts became
clear. The Japanese are some of the world's most literate people,
with some 584 newspaper copies printed per 1,000 people (compared to
244 per 1,000 in the US). Also, email magazines and Web sites by
'private' journalists (like Ban) are attracting a large and growing
readership (another, Tanaka News, claims 150,000-plus subscribers,
more than some regional newspapers), and new media publishers like
Impress, ASCII, and atmark IT are starting to shake up the
buttoned-down world of Japanese print journalism. This world has long
been characterized by articles not being bylined, media brand names
(the Nikkei, Asahi, Mainichi, et al) having inordinate power, and
journalists fostering non-critical, cozy ties with politicians and
senior corporate captains of all stripes.

As a result, we cheered when we read Koizumi's address. He's reputed
to be a maverick (or at least as much of a maverick as the Liberal
Democratic Party can produce). Can a periodic meiru maga from the
cabinet (or even from the PM himself?) break traditional media's iron
grip on public mindshare? Our Freeing of the Press story indicated
that freeing the press in Japan will take some doing, but the
Internet is certainly helping accelerate the process. Koizumi's mail
magazine by itself may not make that much of a dent, but it is a
positive sign which will encourage other openings. As more and more
citizens log on, they will demand more accountability from those who
control the body politic, as well as a say in local, regional, and
national policies.

And don't forget wireless. The really interesting aspect of the PM's
email magazine plan is that he can expect to address his thoughts to
as many as 34.5 million mobile Net keitai users, delivered direct by
email to the tiny screen during the morning commute. Now that's
pretty cool!

-- Daniel Scuka
(Steve Mollman returns from vacation next week.)

Access the full English text of the PM's address at:
http://www.kantei.go.jp/foreign/koizumispeech/2001/0507
policyspeech_e.html)

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+++ Noteworthy news

i-mode Mulls Move

Extract: NTT DoCoMo said it and Hutchison Telecom are continuing to
consider ways to cooperate in Hong Kong, including the possibility of
introducing DoCoMo's i-mode mobile Internet service there, but added
it hasn't made any plans to offer the service there yet.

Commentary: DoCoMo owns a 19% stake in Hutchison Telephone of Hong
Kong, which, together with a 15% stake in KPN in Holland, 16% in AT&T
Wireless in the US, 20% in KG Telecom in Taiwan, and 25% in Hutchison
3G in the UK, forms the basis for DoCoMo's overseas expansion plans.
This report came in the wake of a surge in the company's share price
to the highest level this year, partly on speculation that DoCoMo
will launch its i-mode service in Hong Kong (and on widespread
expectations that DoCoMo will exceed earnings projections for the
fiscal year ended March 31). The company expects to post net profits
of JPY347 billion for the year, with i-mode one of the leading cash
cows in the carrier's inventory.

Source:
"NTT DoCoMo, Hutchison Continue to Mull i-mode for HK,"
Dow Jones on Yahoo, May 7;
http://asia.biz.yahoo.com/news/asian_markets/article.html
?s=asiafinance/news/010507/asian_markets/dowjones/NTT_DoCo
Mo__Hutchison_Continue_To_Mull_I-Mode_For_HK.html;
"How it Works," April 2001, J@pan Inc;
http://www.japaninc.com/mag/sub/2001/04/apr01_how.pdf, subscribers
only

NTT Pushes P2P

Extract: NTT has announced a new P2P system, dubbed SIONet, which
enables users to exchange video, text, and audio files. The system
separates the content and transmission programming (others squeeze
them together), thus allowing for a wider range of applications. The
scalable system is just now coming onto the market and NTT has yet to
announce any major tie-ups.

Commentary: It appears this system is aimed at providing services
that broadband users can use. What exactly does one use a 100-Mbps
pipeline -- like that being offered in Tokyo by access provider Usen
-- to the Net for? Swapping big multimedia files certainly has to be
one possibility (a typical MP3 music file is 5 megabytes), and if it
can be done machine-to-machine, without a central server
intermediating, so much the better. Napster became a sue-able target
because, although users of the system do indeed swap music files
directly from machine to machine, its server maintains a central
database of which files are located on which machine, so it isn't
pure P2P. Keep in mind that some Ethernet NICs (network interface
cards), which are used to connect a home PC to a broadband router,
can only handle 10 Mbps.

Source:
"NTT goes P2P; FunMail in Japan," cbsmarketwatch.com, May 2;
http://cbs.marketwatch.com/news/story.asp?siteid=
mktw&dist=mktwmore&guid=%7B6A906A1F%2DAE0C%2D4F01
%2D895B%2D2E5524E32975%7D

Toshiba Chooses Intel Competitor

Extract: Toshiba plans to use US-based Transmeta's Crusoe chip in its
new Libretto L1/060TNMM mininotebook that will ship May 18 in Japan.
Toshiba's new notebook, which is likely to be branded as part of the
Portege line outside Japan, will be introduced in North America in
the third quarter, sources familiar with Toshiba's plans said.

Commentary:
The Crusoe processor employs "Code Morphing" software to handle some
CPU functions, allowing the hardware to operate on less power, thus
greatly extending battery life. Sony, NEC, and Casio have also
announced Crusoe-powered machines, and there are rumors that a major
US vendor, like Compaq, may decide to adopt the Intel-competitor chip
as well. What gets us is that all the success for the US-designed
chip so far has come from Japanese notebook makers keen to
differentiate their products on the basis of battery life. The
classic model of US-developed technology being successfully
commercialized by the Japanese is clearly alive and well. James
Chapman, executive vice president of sales and marketing for
Transmeta, was quoted as saying, "Our strategy is to win big with
Japan and then export the success into the USA and Europe."

Source:
"Toshiba to Sell Transmeta-powered Laptop," CNET News, May 6;
http://news.cnet.com/news/0-1006-200-5828121.html?tag=owv

Pol's Site Wins Big

Extract: Prime minister Junichiro Koizumi's Web site received about
2.06 million hits between April 27 (the day after he was inaugurated)
and May 7. Compared to the number of hits recorded for the official
Web site of former PM Mori for the final 11 days of his term,
Koizumi's score is up 24 percent. Also, the home page of the site has
been updated for the first time since the official prime ministerial
Web site was launched in August 1994.

Commentary: Predictably, the Cabinet PR office claimed the high
traffic indicated a high degree of popularity for the new prime
minister. While correlation doesn't always prove causation, we think
this is sound indication that the public is happy with Koizumi's
attempts to reach out to the digital masses (see Viewpoint above).
The report also describes the PM's limited facility with computers;
Koizumi aides said he understands the basic principles of computing,
but can only type with two fingers. Nonetheless, maintaining a
regularly updated Web presence and instituting an email magazine to
the citizens is a huge breath of fresh air.

Source:
"Koizumi Web site gets 2.06 million hits," Daily Yomiuri, May 9;
http://www.yomiuri.co.jp/newse/20010509wo03.htm

Softbank to Post Profit -- Just

Extract: Japan's biggest Internet investor, Softbank, said yesterday
that it will post a profit for the latest business year after selling
some of its holdings in other companies. Softbank, whose investments
in Yahoo Inc. and Yahoo Japan Corp. account for more than half of its
holdings, said it expects consolidated Net profit for the year ended
March 31 to come in at JPY29 billion as it sells assets to stay in
the black. The JPY93.4 billion in special profits from share sales
will offset a JPY53 billion valuation loss from securities, and will
include a JPY36.2 billion gain from the sale of shares in Yahoo as
well as a JPY28 billion gain from a weaker Yen in the 2000-01
business year. Shares in Softbank ended down 4.6% yesterday, at
JPY5,390, less than one-tenth of their value from last year's peak
(JPY60,000-plus in early 2000).

Commentary: According to Grant's Investor, the last year Softbank had
a positive cash flow from operations was FY99-00, and since then one
of the few ways the company's been able to show positive results
overall is by selling off investments. Grant's Investor also reports
that as of September 30, 2000, the company had JPY436 billion in debt
and only a paltry JPY6 billion in net current assets; less than 5
percent of Softbank's investment portfolio had a quotable market
value as of March 2000. Masayoshi Son must be worried. When the only
way to post substantial profits is by selling off the crown jewels,
it's just a matter of time until the train runs off the rails. Son is
smart, determined, and driven, so we wouldn't write off Softbank yet,
but turning around this disaster-to-be is going to be tough.

Source:
"Softbank to post profit," Reuters on cnnfn.com, May 8:
http://cnnfn.cnn.com/2001/05/08/technology/wires/softbank_wg/;
"The Old-Old Thing," Grant's Investor, April 2
http://www.grantsinvestor.com, subscribers only

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+++ P.S.

The first 3G handsets in Europe arrived on the Isle of Man (pop.
69,000 in 1995) on April 11. They were developed by NEC for Manx
Telecom, which is set to beat global giant NTT DoCoMo in launching
the world's first 3G wireless services.

===============================================================

STAFF
Written by Daniel Scuka (daniel@japaninc.net)
Assistance with news compilation:
Richard Ochero (richard@japaninc.com)

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