JIN-221 -- Japan Turns Inward after "Shock and Awe"

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. 221
Wednesday, April 2, 2003


++ Viewpoint: Japan Turns Inward after "Shock and Awe"
++ Noteworthy News
- Sony Promotion of Kutaragi Puts Games on Par with Electronics
- Bank of Kansai to Buy Majority Stake in Kansai Sawayaka
- Expat Bloggers Big in Japan

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++ Viewpoint: Japan Turns Inward after "Shock and Awe"

Now that the American military's "Shock and Awe" war against Iraq is
beginning to look shocking and awful -- more civilian and soldier
casualties, slogging through sandstorms instead of satellite wizardry,
and fierce resistance in the place of liberation -- the initial
"gee-whiz" optimism over laser-guided jolts to the global market has
given way to glum visions. The Nikkei sank to its worst fiscal
year-end low in 21 years on Monday, effectively reducing Japan's Post
Office privatization fireworks the following day to a sad sizzle. Wall
Street's nose-dive ensued, with its initial eight-day shock and awe
run keeping the Dow Jones below 8,000 by Monday's closing in New York.

Of course, this is only a snapshot. As American military officials
struggled to voice a new party line -- the war would be long and
arduous, didn't we tell you? -- Japan quite conspicuously turned back
towards Japan. Last week's announcement by the Koizumi administration
that it would not expel Iraqi diplomats from Tokyo, despite American
pressure, was a sign of subtle but stubborn intransigence. Domestic
mergers are the rage: Lawson, one of Japan's biggest convenience store
chains, is hooking up everywhere, posting outlets in new post offices,
linking up with video chain giant, Tsutaya, and also with Nippon Oil,
Japan's biggest gas station owner. Failing domestic banks are merging
with modestly failing domestic banks. Eighty percent of Japanese are
reportedly more concerned about the threat from North Korea than any
potential threat from Iraq. And in the same poll, significantly more
Japanese construe George Bush Jr. as a greater threat to world peace
than Saddam Hussein.

Japan is notorious for such insularity. But globalism, as it was
preached in the 90s as a panacea for the world's ills, socially and
economically, is suddenly looking farcical: yet another mask for
another "ism" the modern world knows so well -- that of the imperial
power subduing others in the name of benevolence: Imperialism. After
all, if the world's one remaining superpower opts for provincial
policies of self-serving goals (witness American vice president Dick
Cheney's former oil company, Halliburton, and its contractual aims on
Iraqi oil), why shouldn't Japan be for and about Japan?

Still, today in Tokyo it was announced that the tankan survey showed
an unanticipated drop in business sentiment among major Japanese
corporations to minus 10 in March, after a predicted low of minus 8.
Plasma TV manufacturers in the industrial heartland of Osaka are
beginning to realize: If North Americans stop buying, profits will
fall. Whatever the virtues of the expanding market in China, it will
be many years before the majority of Chinese can plop down MasterCards
of sufficient value to purchase Japan's high-tech exports. At the same
time, the Koizumi administration today suffered the first of what some
predict will be many defections: farm minister Tadamori Oshima stepped
down amid swirling doubts about Koizumi's ability to lead the country.

And now there are unconfirmed rumors of a test-fired missile from
Pyongyang, as its silent leader hides from public sight amid the
American actions in the Middle East. As one retired four-star
general notes in this week's New Yorker magazine: "Hope is not a
course of action."

-- Roland Kelts

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** Sony Promotion of Kutaragi Puts Games on Par with Electronics

In Brief: Sony promoted games division chief Ken Kutaragi to executive
deputy president on Monday, putting Kutaragi one step closer to the
corporate presidency and elevating the games division to equal footing
with the electronics division. Kutaragi will also remain president of
Sony Computer Entertainment.

Commentary: Kutaragi has built Sony's games division from a minor
business into the driving force for the company's profit. The
Financial Times notes that games accounted for more than 35 percent of
Sony's profit in the first quarter of 2002. Kutaragi will now have a
more prominent position from which to preach the gospel according to
Sony: that the networked world is fast becoming a reality.

From the Financial Times

"This Phone's for You" (Sony game review) from February 2003

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** Bank of Kansai to Buy Majority Stake in Kansai Sawayaka

In Brief: Bank of Kansai and buyout king Wilbur Ross' Kansai Sawayaka
Bank have agreed to merge, according to a report in the Nikkei. Bank
of Kansai, which is affiliated with Sumitomo Mitsui Financial Group,
will turn Kansai Sawayaka into a subsidiary by this summer and absorb
it by next February. Ross' fund will continue to hold a minority

Commentary: In 1999, Ross tried to persuade the Rothschild bankers to
buy failed Kofuku Bank in Kansai, but they resisted. Ross then formed
his own fund, WL Ross & Co., raised 24 billion yen, and bought the
bank, which was relaunched at the end of February 2001. Just a little
more than two years later, he's found a buyer. Here's what he told us
in a June 2002 interview when we asked him why Kofuku?

"We felt Kofuku had good branch coverage and its problems were fairly
specific. They did not involve morality questions -- no self-dealing
or other inappropriate transactions. This is very important, because
if you have problems with yakuza, it is very difficult to achieve a
turnaround. Kofuku rang a lot of other bells for us, too, so we went
to government and asked to be invited to bid."

He also told us that a Tokyo purchase would be next: "Based on what
we've done, we feel we are ready to compete in Tokyo, and we're very
keen to enter."

From the Nikkei Net (subscription required)

"Ross to the Rescue" from June 2002

** Expat Bloggers Big in Japan

In Brief: Blogging is hot with the expat crowd, reports the Japan
Media Review. Many expats are chronicling their days in Japan with web
blogs, forming groups and even having a bloggers party. If you're
interested in the expat blogging scene, this piece is loaded with
links. And if you're a J@pan Inc reader, you're likely to recognize a
lot of names mentioned in it.

USC's Japan Media Review

"Designs for Life: Information Architecture in Tokyo" from Oct. 2002

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


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