JIN-136 -- Macroeconomics and the Real Japan

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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. 136
Wednesday, June 13, 2001
Tokyo

CONTENTS

+++ Viewpoint: Macroeconomics and the Real Japan
+++ Noteworthy news
- Number of DSL users jumps 60 percent in May
- 246,000-plus pre-register for prime minister's email newsletter
- Latest subscriber numbers for Japan's mobile Net services
- Construction ministry unveils plans for e-bidding system
- New figures on ebusiness investments by Japanese corporations
- Korea Telecom faces saturated DSL market at home, enters Japan
+++ Worth a read

+++ VIEWPOINT

Macroeconomics and the Real Japan

If you've been drinking the J@pan Inc kool-aid long enough, you know
that we think that the economic climate here simply isn't as bad as
macroeconomic indicators would, er, indicate. But hey, what the hell
do we know?

This week, dire news surfaced that capital spending on plant and
equipment was disappointingly weak. Quiet weeping can still be heard
throughout our offices. After a 7.1 percent rise last quarter,
spending rose only 2.5 percent year-on-year in January-March.
Obviously this is a big letdown for us here in Japan, as headlines
responding to this news, like "Fears Deepen That Recession Will Hit
Japan" and "Spectre of Recession Over Japan," would have told you.

But here's the weird thing: look through a good set of news archives
and you'll see basically the same headlines from six months ago. Or
a year ago. Or five years ago. Things have been on the verge of
horrendous here for years. But has it ever actually been horrendous,
or even close? No. In fact, Japan is loaded. It's mega-rich. And for
most Japanese, life is jolly damn good.

Go ahead, blast me with angry emails (I feel them coming), see if I
care (OK, I do). Anyone who's lived in this country for a
significant period of time has felt the disjoint between what they
experience in and what they read about Japan. The English-language
media seems to know so little about life and business in the world's
second-largest economy that macroeconomic headlines often serve as
the primary news source. But what do macroeconomic headlines tell
us? Not a lot.

The dot-com scene in the US provides a useful comparison. It too has
a perception problem. Looking at the weekly list of dot-com layoffs,
you'd think the workers being laid off were in dire straits. But
they're not. Things were "flex" from the get-go. People knew all
along that there were no guarantees -- if anything, they gained more
skills in a shorter time than they otherwise would have (and are
thus better equipped for the job market). More misperceptions:
Living in Japan, you'd think every American teenager carries a
semi-automatic weapon. Living in the US, you'd think there were no
creative types in Japan -- only salarymen (who are, of course, never
creative).

None of these stereotypes helps much. What's particularly lacking,
though, is more in-depth and analytical news coming out of Japan.
Our magazine is helping to address that problem, but we can't do it
alone. We've been pleased to see more Western journalists streaming
through our offices lately, and you can look forward to what should
be increasingly insightful articles about Japan appearing in the
English-language media. We'll tell you about the good ones here
(usually in the "Worth a Read" section, below). One thing J@pan Inc
has definitely become is required background reading for the world's
journalists (who, for us, are quite often a deeply valued and
important source of free beer).

Just to set the record straight, there is a vibrant venture scene in
Japan -- and it's not doing so well. If you need proof, simply learn
Japanese, go to http://www.2ch.net/2ch.html, and click Companies and
Business under Ventures. This is basically Japan's version of
FuckedCompany.com (pardon the language). Here you can read that --
and these are all vicious rumors, mind you -- Kazuhiko Nishi of
ASCII is leaving the company, Rakuten sucks, Tokyo Metallic is
rusting and about to crumble, Mitsumori.com's prez got arrested for
theft, and Masayoshi Son is a dot-com swindler. Who says the
Japanese are polite? Give them anonymity and they can be as rude as
anyone. (There goes another misperception!)

-- Steve Mollman

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+++ NOTEWORTHY NEWS

** Number of DSL users jumps 60 percent in May

EXTRACT: The number of Japanese users of digital subscriber lines at
the end of May rose 60 percent from a month earlier to 178,737,
Japan's Ministry of Public Management, Home Affairs, Posts, and
Telecommunications said Thursday. Subscribers numbered a little less
than 10,000 at the end of last year.

COMMENTARY: Meanwhile, the company that pioneered DSL services --
Tokyo Metallic -- is in dire financial straits. Isn't it fun how NTT
can trample over small, innovative companies? NTT expects to hold
more than 80 percent of the DSL market by next March.

SOURCE: "Japan May DSL Net Users Up 60 percent On-Month To 178,737,"
Dow Jones, June 7, http://sg.biz.yahoo.com/010607/15/t1a4.html

** 246,000-plus pre-register for prime minister's email newsletter

EXTRACT: As of Tuesday evening (the 11th), 246,000 people have
registered for the Koizumi email newsletter, which will be launched
on the 14th.

COMMENTARY: This politician is so insanely popular here that posters
of him can't be printed fast enough. Imagine drooling young women
plastering their bedroom walls with posters of George Bush. (No,
wait -- don't.) Email newsletters are big here. Really big. In fact,
we were so impressed with what an effective medium they are that we
put a big pink "at" symbol on our July 2000 cover (see
http://www.japaninc.net/mag/images/2000/07/big_cover07.jpg). To
learn more about why email newsletters work better here in Japan
than in most places -- lots of interesting cultural reasons -- see
http://www.japaninc.net/mag/comp/2000/07/jul00_meru.html.

SOURCE: From the Japanese-language Yomiuri News,
http://www.yomiuri.co.jp/00/20010611i514.htm

** Latest subscriber numbers for Japan's mobile Net services

EXTRACT: Japan's mobile Net services market showed healthy
subscriber growth in May, as the number of subscribers to these
services rose 4.6 percent from a month earlier to 38.657 million.
The number of subscribers skyrocketed 265.8 percent in May from the
same month a year ago. Subscribers to the i-mode service rose 4.2
percent month on month in May to 24.015 million, accounting for a
62.12 percent share of this market. No. 2 KDDI posted a 4.9 percent
on-month increase in May to 7.604 million subscribers for its EZweb
mobile Internet service. This represented a 19.67 percent market
share. Japan Telecom Co. jumped 5.7 percent on-month and holds a
18.21 percent market share.

COMMENTARY: Your mobile Net services market share cheat sheet:

-- i-mode: 62 percent
-- EZweb: 20 percent
-- J-Phone: 18 percent

Amazing growth in this sector, but how much Net **usage** is going
on? No doubt it's still significant, but it's important to
distinguish between subscribers (who may never or rarely use the Net
services that simply came with the phone) and users.

SOURCE: "Subscribers To Japan Mobile Internet Svc +4.6% M/M In May,"
June 7, Dow Jones, http://sg.biz.yahoo.com/010607/15/szkg.html

** Construction ministry unveils plans for e-bidding system

EXTRACT: The Construction and Transport Ministry will introduce an
e-bidding system for large-scale public works projects from October
on an experimental basis. By 2004 the system will operate for all
the public works projects for which the ministry is directly
responsible, by 2007 for projects ordered by prefectural governments
and major cities, and by 2010 for all the nation's public works
projects (about 400,000 in fiscal '99). A full implementation of the
system will save about 200 billion to 300 billion yen annually.

COMMENTARY: A sign of the times. Japan was slow to adopt the Net
(though not the wireless Net), but now that consensus has been
reached -- i.e. the much-criticized but still influential e-Japan
initiative -- the country is indeed getting wired. You see it in the
growing number of consumer Net users, the rise of B2B, and in the
introduction of government e-bidding systems like this.

SOURCE: "Govt to phase in e-bidding for public works projects," June
7, Yomiuri Shimbun, http://www.yomiuri.co.jp/newse/20010607wo14.htm

** New figures on ebusiness investments by Japanese corporations

EXTRACT: Ebusiness-related investment by Japanese corporations grew
47 percent on year to Y2.859 trillion in 2000, according to EC
Research Corp. The figure should jump to Y4.218 trillion this year
as more Japanese companies regard e-commerce and other Internet-
related business activities as important.

COMMENTARY: Another sign of the times.

SOURCE: "Japan E-Business Invest Rising," Dow Jones, June 7,
http://sg.biz.yahoo.com/010607/15/svh9.html

** Korea Telecom faces saturated DSL market at home, enters Japan

EXTRACT: State-run telephone giant Korea Telecom (KT) announced it
would kick off digital subscriber line (DSL) Internet connection
services in Japan. The company will sell 200,000 DSL modems in the
first year at a price 50 percent less than the current prices
offered in Japan. KT has dominated the Korean broadband Internet
connection market with around 70 percent of market share. DSL users
in Japan are expected to reach one million in the current financial
year to March 2002.

COMMENTARY: Interesting. We ran a piece back in our December 2000
issue called "Fast Country," where we noted that Japan's neighbor
and rival was adopting all things Net faster and more effectively.
(See http://www.japaninc.net/mag/comp/2000/12/dec00_fast.html.) Now
it looks like the next logical step has arrived. Having grown big
and bad in its own DSL market, KT is entering Japan's. What we don't
understand is how KT will avoid the same problems encountered by
upstart DSL provider Tokyo Metallic. Granted, KT has far more cash,
but the built-in disadvantages to NTT that have plagued Metallic
will also apply to KT.

SOURCE: "KT to Start Broadband Internet Biz in Japan," Korea Times,
http://www.korealink.co.kr/kt_tech/200106/t2001060418021945110.htm

+++ EVENTS (ADVERTISEMENT)

** Mobile Content & Portals 2001 Conference in Singapore

Having spent a fortune on 3G licenses, every operator worth its salt
are launching mass market internet portals for the delivery of
content to mobiles. It is hoped that one route to a quick return on
their investment will be by dominating the already crowded mobile
portal space. MOBILE CONTENT & PORTALS 2001 conference to be held at
the Grand Hyatt, Singapore from 9-10 July 2001 will be THE event
that offers both the opportunity to network with the leading lights
of the industry and the chance to arm yourself with the latest
developments in mobile content & portals. For further information,
visit http://www.ibc-asia.com/mobileportals.htm or contact Denise Ho
at +65 835 5105, email: denise.ho@ibcasia.com.sg."

** Carriers World JAPAN 2001 takes off from 11-12 July at
Royal Park Hotel in Tokyo.

Everything you need to know about Telecoms in Japan, 2001 and
beyond. This conference features presentations by 23 industry
leaders who will share their visions for Japan carriers in the new
economy - at a time when nothing is for certain but the need for
innovation, extensive contacts, and a wealth of up-to-date
information at one痴 fingertips. * Keynote Addresses by Alistair
Grieve, CEO, Reach, and Tsunekazu Matsudaira, Managing Director,
KDDI * High-Level Presentations and Panel Discussions by 23 industry
leaders including NTT, J-Phone, Crosswave, France Telecom, US
Embassy Tokyo, Level 3, Nomura Research Institute, Exodus, Concert,
ADC, Ovum, RateXchange, and many more
http://www.carriersworld.com/carriersworldjapan2001/
Contact us at 65.322.2700, or Email: fiona.chiew@terrapinn.com

** "Interactive Contact Centres・to be held in Tokyo on 2-3 July
2001

marcus evans, the world's leading provider of business events, is
proud to present a strategic business conference, "Interactive
Contact Centres - Acquiring and retaining client loyalty through
next-generation customer support and management strategy -・to be
held in Tokyo on 2-3 July 2001. Take this opportunity to attain an
understanding of developing a customer support centre and new
methods of telemarketing. For further details, please visit:
http://server41.hypermart.net/marcusevans/download/
jp86_mkt_eng_0517.pdf

10% discounted rate applicable for J@pan Inc newsletter readers.
Please contact Kyomi Azuma at (81) 3-5790-6480 or email:
kyomia@marcusevansjp.com

+++ WORTH A READ

"Where's the Venture Capital?" Newsweek, June 8,
http://www.msnbc.com/news/584740.asp

We had a nice chat with the writer, Steven Levy, who will be here on
"a 60-day quest to get to the heart of Japanese high-tech culture,
to gain real insight into a key aspect of this fascinating but
frustrating country." We look forward to enjoying his insights --
and fresh perspective -- in the following weeks.

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STAFF
Written by Steve Mollman (steve@japaninc.net)
Assistance with news compilation:
Richard Ochero (richard@japaninc.com)

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