JIN-192 -- Resident Registry Network Stumbles Out of Gate

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

Issue No. 192
Wednesday, August 7, 2002


++ Viewpoint: Resident Registry Network Stumbles Out of Gate
++ Noteworthy News
- EC OKs Hitachi's Purchase of IBM's Hard Disk Drive Business
- Fitch Upgrades Shinsei Bank Rating
- McDonald's Slashes Burger Prices

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++ Viewpoint: Resident Registry Network Stumbles Out of Gate

Juki Net, or the national resident registry network, got off to an
inauspicious start this week as computer systems failed, local
governments opted out and chat rooms on the Internet filled with
conversations about the evils of giving everybody an 11-digit number.

The government says the national registry system will make it easier
to apply for social benefits, get passports and deal with other
government services. But the public is not so sure. Some claim the
government is up to no good, but most respond in the same way my
friend did recently: "Juki Net? What's that?"

It's an 11-digit number that will allow the government (or whoever
else can access the network) to find your name, address, date
of birth, sex and other personal information. And if you are Japanese
and you live in an area that is complying with the national policy on
Juki Net, whether you realize it or not, you now have a number.

The national government has handled Juki Net about as aptly as it has
handled the bad loan problem and the reviving of the lifeless economy.
In other words, it has utterly failed to inspire even a modicum of
faith among the populace that it will do the right thing. That's why
people like Nobuo Hoshino, the mayor of Kokubunji city in western
Tokyo, should be applauded. He showed up for work at 9am on August 5
and promptly pulled the plug on the computer terminal linked to the
network. "I'm aware some residents may not applaud this decision, but
I hope they'll cooperate until a law to protect personal information
is established," the Yomiuri quoted him as saying.

The government first needs to make sure personal information is
protected. It also must allow people access to their own records. And
it needs to show people that it has a system in place to stop fraud.
It has done none of this.

What it has done is make veiled threats to localities like Yokohama
and Suginami Ward that have opted out of the system. Here's chief
cabinet secretary Yasuo Fukuda quoted in the Japan Times this week
when asked about local governments that refuse to use the Juki Net
system: "It must be underlined that such a move violates related laws,
and we will urge them to quickly join the network."

So while a few local government officials deserve applause for
standing up to the central government's strong-arm approach on Juki
Net, the Koizumi administration continues its arrogant, out-of-touch
approach, led by perhaps the most out-of-touch of them all -- prime
minister Junichiro Koizumi. Here's what the political heavyweight had
to say on the subject of the many people with privacy concerns: "Look
at me. I cannot even talk about (privacy). All of my personal
information is exposed. I may be able to understand it if the (media
reports) are correct, but there's just too much this and that."

Well, thanks for reassuring us, PM. I guess I'll go ask mayor Hoshino
to plug the computer back in.

-- Bruce Rutledge

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** EC OKs Hitachi's Purchase of IBM's Hard Disk Drive Business

In Brief: Hitachi, Japan's largest electronics maker, got the green
light from the European Commission to buy IBM's hard disk drive
business for US$2.05-billion. The commission said the deal would give
Hitachi a leading position for hard disk drives for mobile
applications. But it added that other hard disk drive manufacturers
faced low barriers to enter into the mobile HDD segment. According to
the agreement, both companies plan to establish a joint venture in the
US, and Hitachi will buy 70 percent of the shares in IBM's hard disk
drive business and fully own the company within three years.

Commentary: IBM has been losing money on hard disk drives because of
slack demand and sharply reduced prices. This deal would not only save
IBM from the trouble of reviving its business, but it would allow it
to collaborate in a more lucrative business: open source storage
systems. Both companies are negotiating on a possible collaboration
in the field of next generation open source storage solutions,
including the development of RAIDs (Redundant Array of Independent
Disks). Hitachi's HDDs will be used in the business.

Right now, EMC has the top share in the large-scale storage market and
Hitachi is tailing right behind it. "Sure enough, the IBM-Hitachi
alliance will challenge the giant," says a source in Hitachi.

Financial Post (August 6, 2002)

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** Fitch Upgrades Shinsei Bank Rating

In Brief: Private rating agency Fitch on Monday upgraded the long-term
rating of Shinsei Bank by one notch from BBB- to BBB; the long-term
rating was also upgraded from "stable" to "positive." The agency says
the upgrade was based on the bank's accelerated progress on reducing
its nonperforming loans.

The bank was bought by a US fund a couple of years ago, placing David
Rockefeller as its director, and former Fed chairman Paul Volcker as a
senior adviser.

Commentary: Good news that Shinsei is reducing its nonperforming
loans. The majority of Shinsei's NPLs are covered by a "put option,"
allowing them to be sold back to the Deposit Insurance Corporation on
certain conditions. This put option makes Shinsei's NPL problem
smaller than the numbers indicate, argues Fitch.

But, some xenophobic critics say the way Shinsei gets rid of NPLs is
vulgar. And, Masamoto Yashiro, the bank's president, thinks the bank
is discriminated against. Last week, he discovered that the failed
retailer Daiei was repaying loans to Japanese banks, but not to
Shinsei. "We are very concerned that we are being treated
differently," said an angry Yashiro.

Financial Times writer David Ibison wrote: "Shinsei was acquired only
two years ago and the current cultural difficulties are in all
likelihood growing pains."

Growing pains or not, Fitch is putting its thumb up for the bank.

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Financial Times "It's a banking business, but not as the Japanese know
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** McDonald's Slashes Burger Prices

In Brief: McDonald's Japan has cut its burger prices again. As of
August 5, a regular burger costs 59 yen and a cheeseburger costs 79
yen -- the cheapest in company history. The prices will be reviewed
after three months, McDonald's says.

The company announced that sales and the number of customers on August
5 were up, the first time since last December that business has
improved on a weekday.

McDonald's has been out in front of a cut-throat price war in the
fast-food industry over the past few years. But president Den Fujita
decided last February that the deflationary pressures were over and
raised the price of a burger from 60 yen to 80 yen. The company's
same-store sales have dropped since then.

McDonald's competitors are trying to catch up: Lotteria will cut the
price of its set menu of a burger, drink and fries from 380 yen to 300
yen on August 10th.

McDonald's Japan

Coming in the September issue of J@pan Inc magazine: "Wireless and

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Written and edited by J@pan Inc staff (editors@japaninc.com)


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