* * * * * * * * * T E R R I E 'S T A K E * * * * * * *
A weekly roundup of news & information from Terrie Lloyd.
General Edition Sunday, December 20, 2009 Issue No. 547
- What's new
- Candidate roundup/Vacancies
- Upcoming events
- News credits
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+++ WHAT'S NEW
It's that time again -- the last Terrie's Take of the year,
and as a result we take a look back over the news calendar
for a quick review of events that have shaped Japanese
business in 2009 and which are likely to affect our
fortunes for the next 12 months as well. We'll be off for
two weeks and back as usual on January 10th -- with our
predictions for 2010, so don't miss it.
Also, just before kicking off, we'd like to thank the
hundreds of people who answered the JHELP Christmas
Appeal. It's not too late if you still want to get involved in
this rather unique "cash-less" donation program. What
you're donating instead of money is your time and a
sign-up to our new Metropolis Members Club as well
as PayPal. More details at www.metropolis.co.jp/members.
So what caught our attention in 2009 and why?
Japan had a nice surprise when the new Obama administration
decided to send its second highest profile official,
Secretary of State Hillary Clinton, to Japan ahead of any
other country in Asia. Clinton's visit highlighted to the
world that Japan was still the favored ally in Asia, no
doubt due to the almost US$1bn in treasuries and other U.S.
government debt held by the Japanese, as well as a
commitment from Japan to join the global fiscal stimulus
measures being undertaken by first-world governments in
support of the U.S. Japan on its side still wants the U.S.
to maintain its nuclear umbrella over the nation,
especially in light of earlier missile tests by North
* March is the most miserable month for many Japanese,
because it marks the start of the pollen cycle for the
nation's sugi (cedar) and hinoki (cyprus) trees. Hay fever
has become worse over the decades since WWII, due to an
ill-fated decision in the 1950's to choose Sugi trees as
the primary species for afforestation. Now 20% of the
population, if not more, suffer severe symptoms from hay
fever. Authorities have admitted the problem and have
undertaken to halve the number of sugi trees over the next
One sector of the population that doesn't mind the
situation, though, is tissue makers! During hay fever
season 2009, the most popular product is Daio Paper's
Elleair Lotion Tissue, a moist tissue that is easy on the
skin. Japan's domestic tissue market has sales of about
JPY100bn annually, with moist tissues accounting for 5%
but growing steadily.
* The battle of Japan's highly profitable internet/mobile
content titans went into its next phase in March when it
became clear that game specialist Gree was severely besting
(Social Network Service) innovator Mixi in the stock
market. Gree hit a market cap of JPY102bn, based on its
FY2008 forecast of increasing profits by an amazing 560% to
JPY3.8bn (a number it actually achieved by its fiscal year
close in June 2009). In contrast, Mixi's market cap fell to
Gree has been on a huge roll since it debuted on the
Mothers start-up market with a per share price of JPY5,000,
a 52% premium over its IPO price. The reason for Gree's
dream run is that more than 70% of its revenues come from
user subscriptions to its games, not from ads - unlike
Mixi, which depends on ads for more than 90% of its income.
Unfortunately the ad market has been severely impacted by
the global downturn, while individual consumers are still
spending on escapist pursuits.
* The Japanese government's fiscal stimulus measures hit
high gear with a cash handout to all residents, to spend as
they pleased. In a gesture modeled on the U.S. Bush
handouts of 2008, the government gave every working age
resident JPY12,000 and every child and person aged 65 or
more JPY20,000. Debate raged over whether the stimulus
would have any appreciable effect on the economy (it didn't
- less than 20% of the handouts got spent on consumption),
while costing the nation JPY2trn to fund it.
* Another stimulus measure which was much more popular, was
the lowering of expressway tolls to a flat JPY1,000 on
weekends and national holidays. This had a dramatic impact
on the usage of the nation's road infrastructure, and
coupled with falling petrol prices ensured that on certain
weekends, Japan returned to having dozens of 30km+ traffic
jams. Indeed, in May's Golden Week, a record unbroken
traffic jam of 50km occurred.
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* Nihon Unisys, a major Systems Integration firm owned by
trading house Mitsui, announced its plans to enter the
electric vehicle infrastructure business by establishing a
network of around 1,000 electric vehicle recharging
stations by fiscal 2011. The company plans to install the
stations at shopping centers, offices, and other commercial
locations throughout the country. It will provide customers
with both 100- and 200-volt outputs, allowing slow- and
quick-charge options. Payment will be by smart card. There
is no doubt that many other companies will jump into this
area, helping Japan to quickly build out the recharging
infrastructure needed to push electric vehicle usage into
* A story that moved the nation in April and which has a
high level of relevance for Japan's future - was about
immigration. The Supreme Court validated an Immigration
Bureau deportation order for a Filipino couple, Arlan and
Sarah Calderon, and made them leave the country after being
found guilty of entering in the early 1990's with fake
passports. While this may seem an open and shut case, their
13-year old daughter, Noriko, was born in Japan and only
speaks Japanese. The Immigration authorities gave the
family the agonizing choice of being able to leave Noriko
behind in Japan so that she could continue her schooling,
or taking her to a country she'd never been to before and
couldn't function in - a choice that the family tearfully
made by saying goodbye to Noriko at Narita airport.
The case saw 20,000 local townspeople sign a petition
asking the government to make an exception for a family
that by all accounts was popular and hardworking. While
appearing hard-hearted, the issue for the government is
that there are an estimated 150,000 visa over-stayers
(2008 estimate) to whom thousands of children are being
born each year, leading to a large moral problem for Japan
going forward. Clearly there is a lot of work ahead for the
government in forging a workable immigration policy.
* The full impact of the global recession became clear when
even Japan's biggest and brightest were humbled by
plummeting sales. Auto maker Toyota reported a group
operating loss of JPY461.01bn for fiscal year 2008 ending
March 31st, 2009, the company's first operating loss in 71
years. At the same time, Nissan Motor also reported a large
loss of JPY137.9bn on revenues of JPY8.437trn, Nissan's
first operating loss in 14 years.
* H1N1 (swine flu), or "new type influenza" as it is
referred to by the authorities, hit Japan in full force. At
the end of the month there were 361 infections recorded
nationwide, mostly blamed on tourists returning from abroad
and bringing it with them. The flu scare was worst in
southern and western Japan. In the Kansai hundreds of
schools and kindergartens closed for a week or longer and
victims were isolated at hospitals. The Shingata flu
continues even today, although it appears it peaked in
* After all the negativity of the preceding nine months,
the fiscal stimuli applied by first world governments
around the globe appeared to be taking hold and the
banking sector and the stock market started to recover.
The Nikkei topped 10,000 for the first time since the
Lehman Shock, lifted by improved commodity prices and news
that May consumer spending had unexpectedly improved.
* A glimpse of the future was provided with the start of
production of the world's first mass-produced electric
car, the Mitsubishi iMiEV, in the company's Okayama plant.
Mitsubishi is about a year ahead of its competitors and
until production volumes increase is offering the first
year's output of 2,000 units of the micro-vehicle for
around JPY3m - well out of reach of the average family.
As a result, most of the vehicles will wind up in company
fleets and as test vehicles.
* Facing the need for more tourist income, the government
made the decision to allow Chinese tourists to travel to
Japan individually instead of in organized groups. The
move is expected to increase the number of Chinese
tourists by about 20% to 1.25m visitors in 2010, from
approximately 1m visitors (estimated) in 2009. More
importantly, they are expected to generate about JPY40bn
in spending while here.
* Leading beverage makers Kirin and Suntory shocked the
drinks industry and corporate Japan by announcing that they
would merge the two companies. Unlike many other mergers of
well-known brands in recent years, the Kirin-Suntory merger
differs in that both companies are in great shape
financially and are combining for strategic reasons rather
than out of immediate desperation. This gives the deal
tremendous symbolic importance to corporate Japan, and is
seen as a sign of more to come. The joint market
capitalization of the Kirin-Suntory entity will be around
JPY2trn, just 20% of the market cap of Coca-Cola -- so they
still have a ways to go to be considered a major player
* While global media focus is on China and its efforts to
spend its U.S. dollars on natural resources before the dollar
starts buying less, we should not forget that the biggest
Japanese companies are already deeply entrenched in the
supply-and-demand chains stretching around the world. This
point was reinforced in July when Tokyo Gas announced that
it would buy a fully-priced stake in Australia's Gorgon
Liquefied Natural Gas (LNG ) project. The world's largest
gas utility said that it would be buying 1% of the project
for an estimated JPY30bn in costs contribution. Japan is
the world's largest customer for LNG, consuming about 75m
tons annually. The Gorgon project is expected to produce
around 15m tons of LNG yearly from 2014 and Tokyo Gas has
already signed obligations for 1.2m tons of that output.
Japan has its 4-yearly Lower House election and for only
the second time in 50 years, the ruling Liberal Democratic
Party (LDP) is booted out of office. The opposition
Democratic Party of Japan (DPJ) wins by a landslide margin
of more than 300 seats out of 480 seats, and for the first
time has control of both the Lower and Upper houses, giving
it a virtual carte blanche to enact reform. Whether it does
so remains to be seen, but early moves are encouraging.
* On September 28th an American dad was arrested in Fukuoka
for trying to abduct his kids back to the USA, after his
Japanese ex-wife had first abducted them from him in the
USA. The Dad was 38-year old Chris Savoie, who subsequently
spent 3 weeks in jail in Fukuoka until the police decided
not to charge him -- providing he left Japan without
comment. Interestingly, Savoie was also a Japanese citizen,
and by Japanese law he had not committed an offense that
any other Japanese had previously been charged for, putting
the police and prosecutors in a bit of a predicament.
Savoie's actions were subsequently vilified in both
Japanese and foreign press, but his actions have definitely
had a catalyzing effect on Japan's foot dragging over
signing the Hague Convention on international child
abduction. No one is holding their breath for quick fixes,
because not only does Japan need to sign the treaty but
they also will need to change internal child custody laws
to fit 21st century international values.
* A rather surprising M&A occurred in the pharmaceutical
field, following earlier blockbuster deals in 2008. Seventh
ranked Dainippon Sumitomo Pharma announced it would buy
U.S. start-up Sepracor for JPY250bn, almost the same amount
of money as Dainippon's ENTIRE sales of JPY264bn recorded
in FY2008. This high-risk move came as the company's
revenues plunged 23% in FY2008 due to competition from
generic drug makers -- more evidence of the huge pressure
that Japan Inc. is under to change.
* Citibank completed unwinding the last of the major assets
that it acquired when it picked up Nikko Cordial Securities
and its various subsidiaries. Market analysts say that Citi
came out of the Nikko experience relatively intact, and was
able to raise a significant amount of cash for its
beleaguered headquarters. The asset was telemarketing
company, Bellsystems24, a business that was originally
started by CSK's visionary founder (now deceased) Isao
Okawa. Bain was the lucky suitor, reportedly paying around
JPY100bn and beating out Permira Advisors and CVC Capital
(working with Blackstone Group) in the process.
* Corporate Japan's relentless search for international
revenues in face of a continued depressed market back home
was further punctuated by Canon's gutsy JPY98bn (Eu730m)
offer to buy our rival Dutch-based printer maker Oce. Canon
paid a big 137% premium over Oce's average closing stock
price for the 12 months. It was Canon's largest M&A
purchase to date.
And that's it from us for 2009... See you next year.
...The information janitors/
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- Governor's mansion unsold
- Jobless insurance premiums to rise
- Where will the government's 2010 revenue come from?
- iPhone takes 46% of smartphone market
-> Governor's mansion unsold
It has come to light that the Tokyo Metropolitan Government
has spent the last 15 months trying to find a buyer for its
Shoto, Shibuya-located official governor's residence. The
government built the residence in 1997 for JPY1.2bn, and is
now trying to sell it for JPY4.8bn. There are reportedly
some negotiations going on with foreign embassies, but in
the face of a strengthening yen there are no takers yet.
***Ed: This property is just up the road from the Tokyu
Honten Department store. It's crammed into a long narrow
block that is unlikely to be appealing to developers.
Someone needs to call in a proper property valuer instead
of going by the pricing of nearby but much more desirable
properties in the same area.** (Source: TT commentary from
nikkei.co.jp, Dec 16, 2009)
-> Jobless insurance premiums to rise
We reported earlier in the year that it was likely that
unemployment premiums would rise again, after they'd been
lowered last year by the LDP. Sure enough, it appears that
this will happen in April 2010. The increase will
apparently be 0.4% of the employee's salary, up from the
existing 0.8% to 1.2%. The premiums will be shared 50/50
between employer and employee, just as other social
insurance premiums are. ***Ed: While this increase is not
major, we wonder if it foretells likely future big increases
in unemployment contributions over the coming years? We
wouldn't be surprised to see this "pseudo tax" double or
triple if the number of unemployed rise beyond 7%. (Source:
TT commentary from nikkei.co.jp, Dec 18, 2009)
-> Where will the government's 2010 revenue come from?
An interesting Forbes article sourced from Reuters explores
the government's options to raise cash, in light of
drastically falling income tax revenues. According to the
article, the government plans to issue no more than
JPY44trn (US$491bn) in new bonds, and with tax income way
down, it will therefore be looking at overhauling the many
fiscal leaks and leeches that are currently inherent to the
system. The "leaks" include dipping into some deliberate
created reserves such as foreign exchange and other cash
held under the Fiscal Investment and Loan program, as well
as raiding job insurance and other funds set aside to cover
future commitments. The "leeches" include hospital funding,
campaign pledges (child care and road taxes), and of course
general government spending.** (Source: TT commentary from
forbes.com, Dec 17, 2009)
-> iPhone takes 46% of smartphone market
A study by Impress R&D has found that Apple's iPhone now
accounts for 46% of the entire smart phone market in Japan,
almost four times the 14.6% share held by the next most
popular smartphone maker, Sharp's W-Zero 3 Advance phone.
Industry experts say that a combination of discounting by
Softbank Mobile coupled with significant advertising did
the trick. (Source: TT commentary from appleinsider.com,
Dec 18, 2009)
NOTE: Broken links
Many online news sources remove their articles after just a
few days of posting them, thus breaking our links -- we
apologize for the inconvenience.
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In this section we run comments and corrections submitted
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*** No comments or feedback this week.
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+++ ABOUT US
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