JIN-229 -- The Banking Industry's Carl Ghosn

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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. 229
Wednesday, June 4, 2003
Tokyo

CONTENTS

++ Viewpoint: The Banking Industry's Carl Ghosn

++ Noteworthy News
- Takenaka's Tempest in a Times Teapot
- Bill Okays Sending SDF Troops without Iraq's Consent
- Martha Stewart Targeted in Criminal Investigation

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++ Viewpoint: The Banking Industry's Carl Ghosn

The recent furor surrounding the government's 2 trillion yen bailout
of Resona exposed the worst elements of the Japanese banking industry
and cast a long shadow over its prospects for meaningful reform.
Especially disheartening was the opprobrium aimed at the financial
services minister, Heizo Takenaka. It was classic LDP dinosaur
rhetoric, pronounced through the editorial sneer of the Yomiuri
Shimbun.

But we think that the regulator represents one of the few glimmers of
hope in the Koizumi administration, and that the bold banking reform
package that bears his name is to be applauded. Resona's effective
failure is all the evidence we need to be confident in our
assessment: Japanese banks remain in deep trouble, and structural
reform is the only way forward.

So in the midst of all this gloom, we were especially pleased to see
a little item in the Nihon Keizai Shimbun. Todd Budge, a former GE
Capital executive, has become the first gaijin chief executive and
president of a Japanese bank. Even more exciting are the plans he has
in store for his new charge.

It's one of those events that probably had to happen eventually
anyway. With big banks struggling and failing and merging, there were
always going to be opportunities lurking in the melee. Western buyout
merchants have long seen the potential in the fraying edges of the
Japanese economy, and Lone Star is a seasoned pro at spotting them.
In this case, it jumped on the collapsed ruins of Tokyo Sowa Bank,
which until two years ago was under effective state control.

Now, the newly named Tokyo Star Bank is flourishing. The full-year
results of Japan's ailing megabanks are depressingly awash in red
ink. Star, on the other hand, turned a profit.

We just spoke to Budge and found a man ripe with new ideas. As well
as concentrating on several new products, Star is looking to gain
customers by offering Japanese individuals and companies a set of
services to which they are entirely unaccustomed. Budge is committed
to efficiencies within his business and, above all, speed. At the
moment, the branch network is fairly small, but he hints that with
the megabanks being forced to sell off prime sites, there could be
even more opportunities for Star to use its very strong capital
position to strike while the iron is hot.

Star has rigorous risk assessment abilities -- something gravely
lacking in other Japanese banks -- but remains a risk-taker. This is
something that accounts for its impressive record of gaining new
corporate customers from small- and medium-sized businesses.

The auto industry has Nissan's Carl Ghosn. Now the banking industry
has its own breath of fresh air.

-- The editors

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++ NOTEWORTHY NEWS
(Long URLs may break across two lines, so copy to your browser.)

** Takenaka's Tempest in a Times Teapot

In Brief: Last week's story in the New York Times declaring that
Japan's bank reformer, Heizo Takenaka, "is preparing to return to
academia as early as September" set off a mini-typhoon of denials and
disavowals in Kasumigaseki. According to the paper, Takenaka has
discussed his future with "at least one" Ivy League university,
preparing for his departure at the hands of LDP heavyweights trying
to banish him and his reforms to the ledgers of history. Koizumi
called the report "absurd," and Takenaka himself claims that his
lawyers will send a written objection to the Times as an official
protest.

Commentary: Any type of reform in Japan is faced with violent
opposition that gathers strength as soon as the pain registers.
Takenaka recently suggested that the Times report was the result of
some shrewd "leaks" proffered to the media by his opponents. But
it's also true that things will only get worse before they get
better. And as the Times story notes: Takenaka is an academic at
heart who has previously held posts at several universities in Japan
and in the US. The information may well have been leaked and have
little basis in fact. But the vehemence of the denial (Koizumi
himself called the report "absurd") is also suspect -- and may be an
example of the Bard's "Methinks thou dost protest too much."

Source:
The New York Times
http://www.nytimes.com/2003/05/28/business/worldbusiness/28YEN.html

Links
"Who Wrecked Japan's Economy?" from the June 2003 issue
http://www.japaninc.com/article.php?articleID=1112

"The Year Ahead" from the January 2003 issue
http://www.japaninc.com/article.php?articleID=973

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** Bill Okays Sending SDF Troops without Iraq's Consent

In Brief: A bill dealing with the reconstruction of Iraq would allow
Self-Defense Forces to go to Iraq before a provisional government is
put in place, according to a report in the Nihon Keizai Shimbun. SDF
troops would basically assist British and US troops in Iraq, and would
not be allowed to transport or provide weapons or ammunition. Under
current law, the SDF cannot set foot on foreign soil without getting
consent from the nations involved, which means a government would have
to be in place in Baghdad for SDF troops to go. The ruling coalition
hopes to get the bill passed in the current Diet session.

Commentary: There has been talk of US troops moving out of Okinawa in
the last week or so, and though the Pentagon has denied these rumors,
they have prompted some pundits to talk about Japan's waning strategic
value for the US. Actually, the opposite is probably true. Japan is
moving in lockstep with US wishes, and this bill to get SDF troops
over to Iraq -- while largely symbolic -- is a case in point.

Source:
Nikkei Net
http://www.nni.nikkei.co.jp/AC/TNKS/Nni20030603D03JFN01.htm

Links:
"In Defense of the Realm" from the April 2003 issue
http://www.japaninc.net/article.php?articleID=1065

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The latest issue of J@pan Inc magazine is now available online!
Click here for the lowdown:
http://www.japaninc.com/contents.php?issueID=49

Subscribers can access our hot-off-the-press features, including:

- Whaling and Japan
As Japan renews its quest for whaling rights on the eve of this
month's International Whaling Commission meeting in Berlin, Debbi
Gardiner asks why the nation is singled-out for blame by anti-whaling
forces -- and why it remains relentless.

- Game Over?
Game giant Nintendo is best known for being clever and cute. But, as
Leo Lewis discovers, the company is now struggling to survive fierce
competition. Can it match the needs of mature gamers? In London,
Lewis meets the company's creative genius, Shigeru Miyamoto, to find
out.

J@pan Inc: www.japaninc.com
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** Martha Stewart Targeted in Criminal Investigation

In Brief: Martha Stewart burst onto the Japanese retail scene in
December 2001. Soon after that, her American empire started to look a
bit wobbly, with charges of insider trading tainting her closely
guarded image. It looks like that image may take another turn for the
worse as the US Attorney's Office in New York plans to convene a grand
jury to return a criminal indictment against Stewart related to the
insider trading accusations.

Commentary: In a July 2002 feature, Roland Kelts argued that Stewart
needed the Japanese market now more than ever. At the time, her
partner K-Mart was going through bankruptcy proceedings. But now, the
importance of the Japanese market to Stewart's empire cannot be
underestimated. Her image has been dragged through the dirt in the US,
with a recent TV special portraying her as a domineering madwoman, and
books and articles galore detailing her faults. It may be time for
Stewart to really focus on Japan and salvage what she can of the very
messy situation she is left with in the US.

Source:
http://www.forbes.com/home_europe/2003/06/05/cx_da_0605topnews.html

Link:
"Martha, Wal-Mart and the Next American Invasion," from July 2002
http://www.japaninc.net/article.php?articleID=831

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STAFF
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