TT-552 -- Pressures to Change Japan, ebiz news from Japan

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A weekly roundup of news & information from Terrie Lloyd.

General Edition Sunday, February 7, 2010 Issue No. 552


- What's new
- News
- Candidate roundup/Vacancies
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This last week, government junior coalition member and
Financial Services Minister Shizuka Kamei shot down any
ideas about giving foreigners the right to vote in local
elections. He warned in the media that doing so would cause
"ethnic tensions" as foreign permanent residents started
electing representatives who didn't represent the opinions
of rank and file Japanese citizens. Kamei's words repeat
similar utterances from Tokyo governor Shintaro Ishihara,
who has also stated he opposes suffrage for foreign

Media speculation is that Kamei is specifically against
giving any sort of leverage to the nation's many
third-generation Korean "foreign" residents, whose numbers
make up almost half the foreigners with permanent residence
in Japan. Korean associations have been pushing the
government for many years now to bring voting rights to
their members.

Whatever Kamei's opinion, while the bill should have been
submitted to parliament this year, its main proponent,
Ichiro Ozawa, the shadow-master of the DPJ, is now having
significant challenges to his leadership and may even
have to resign from politics due to his ongoing funding
scandal. Thus, the legislation will probably be put on the
back burner for now.

That's a shame, because the bill would have marked the
opening shot of a series of changes that are urgently
needed if Japan is to survive as an economic power.

Demographically, politically, economically, and legally
(think class suits against Toyota and CITES restrictions on
Bluefin tuna), Japan is faced in 2010 with an unprecedented
flood of internationally-led challenges that will force a
national rethink. We're hoping that this is the year that
both politicians and their electorates start to realize
that the equivalent of another Meiji era is required to get
Japan back on track. Are they up to the challenge?

We thought as a microcosm of a ground shift going on in
world events and the potentially damaging effects on Japan
if it doesn't get real about its role in the world, we'd
pick up some diverse examples of where the pressures are
coming from.

[Continued below...]

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[...Article continues]

1. Child Abduction in Divorces

Japanese law is buried in archaic concepts that were
appropriate 130 years ago but which are out of place in
today's society. Just look at the family court and its
complete irrelevance to procedures relating to a forced but
equitable divorce settlement to see evidence of this. The
husbands don't get to see their kids because there is no
concept of shared custody, and in return they don't pay
child maintenance. The family court has almost no power to
enforce judgments against these deadbeat dads and thus the
30% rate of divorce hitting Japan is creating a new
generation of single-mother families which are embittered
and living below the poverty line.

Then throw foreigners and international marriages into the
mix and things get even more difficult. But at least with
foreigners they don't have any legal rights and are easily
thrown out of the country if they get too noisy...

But that's about to change. Just today, Kyodo carried a
news piece that the U.S. government has had enough of
Japan's double standard on child abduction and has said
firmly but politely that if the Japanese government doesn't
sign the Hague Convention on Child Abductions, something
which would prevent (mainly) Japanese women from fleeing to
their homeland in defiance of foreign court orders, then
the U.S. would not support Japan's efforts to get its
citizens back from North Korea, either. Interesting
challenge from the U.S. and a clear warning to Japan to get

One reason for Japan's foot dragging on signing the Hague
Convention on Child Abduction is probably because in
signing the agreement, they would also have to make some
radical changes to their domestic legal system. Not only
would they have to make child abduction by parents
criminally punishable and enforceable, and they would also
have to overhaul the family court and police enforcement
system that goes with it. This is because the signing would
require the police to go in and seize abducted children and
return them to their country of habitual residence, to
allow the courts there to decide custody and subsequent

2. Ganging up on Toyota

The latest chapter in the saga of the escalating Toyota
faulty accelerator recall is that the U.S. Transportation
Secretary, Ray LaHood, took the unusual step on Wednesday
of warning the owners of pretty much every type of Toyota
motor car to leave them parked at home unless they were
driving to a repair shop, as a safety measure. He then
retracted part of the statement and softened it somewhat
-- but the damage was done. Now millions of Toyota owners
are concerned about whether their cars, and the brand
behind them, is safe.

The problem has been in how Toyota has responded, oh so
slowly, to the increasing number of complaints about
accelerator problems. Then once the recall was finally
decided, the company allowed a deeper level of
indecisiveness to creep in by not recalling all marques at
the same time, and to allow U.S. opinion leaders such as
Apple co-founder Steve Wozniak to make Toyota look as if
there is a secondary (and more insidious cause) fault --
in the maker's electronic control systems.

In Woz' case, he had a Prius and found that it accelerated
by itself when he used the cruise control. He tried to get
the attention of Toyota some months ago, but they pretty
much ignored him. Now that the recall is in full swing,
suddenly the press are all ears to the idea that there is a
more serious cause than just the accelerator assembly
itself, and indeed Toyota has offered to test Woz' Prius
and its electronics for him. You have to wonder: if the
electronics are not the cause of the problem, why did they
take in Woz' car?

All this makes Toyota look like it's hiding the real reason
for the problems, or that it's incompetent, and it
reinforces the common wisdom that the Japanese don't know
how to make software.

Not only is the brand getting beaten up in the marketplace
but there are going to be some whippings on the political
podium as well. There are apparently a number of Senate and
House panels convening over the issue, and senior Toyota
executives will be expected to spend days if not weeks
explaining what is really going on and what they are doing
about it. Any slip up language-wise or in the facts of the
case will only heighten peoples' suspicions that Toyota has
known about the problem for a long time and has hidden it.
This will serve to hurt Toyota badly in a number of class
action law suits that are now being organized in the USA,
as well as law suits from the up to 19 fatalities that are
potentially attributable to the accelerator faults over the
last 10 years.

Then of course you have the U.S. coming up for mid-term
elections. Unemployment and the current state of the
economy appear to be creating a perfect storm of populist
opinion against foreign companies, and since Toyota is one
of the most visible, we expect the company to become a
potential target for foreigner bashing over the coming
months. Only very careful PR crisis management and a lot of
goodwill expensed by Toyota will avoid this happening.

3. Ban on Tuna?

Last in our examples is that of fish consumption. Japan
eats more than half of the world's sashimi grade tuna, in
particular 80% of the Bluefin tuna caught in the Atlantic
ocean. Now, the state of Monaco has proposed to the world
body governing wildlife protection, the Convention on
International Trade in Endangered Species of Wild Fauna and
Flora (CITES), that Bluefin fishing exports be banned
altogether. The vote will be held in March in Qatar, and
given that Bluefin tuna numbers have fallen 75% since 1957,
it is possible that the proposal will be carried.

This would be disastrous for the sushi trade in Japan, and
the prospect of not being able to buy the best cuts of Toro
has many in the fish industry outraged over how foreign
countries can be allowed to determine for Japan what its
citizens can and cannot eat. Of course, this is the same
quandry Japan finds itself in over whaling as well --
another hot issue given the alleged ramming of a Greenpeace
boat by a Japanese whaler in the Antartic last week.

Outraged they may be, the nation's delicacy consumers need
urgent education on the new reality of international
treaties, conventions, investment, and trade.

Anyway, the CITES listing won't actually ban fishing of
Bluefin, just the export of the fish to foreign countries
outside those bordering the Altantic. This clearly means
the Japanese, which is why people here feel targeted. This
event reminds us of the soy bean supply disruptions back in
the 1970's and should serve as a stark reminder that Japan
is indeed seriously exposed in terms of food self
sufficiency. While more food factories may be part of the
answer, a cheaper and easier path is for the government to
QUICKLY learn how to improve its international relations so
as to continue a stable supply of food, even if it isn't
gourmet sushi any longer.


It may seem to some readers that these examples are just
random events and that there is no real evidence of an
international backlash against Japan. However, we posit
that since the domestic economy is inevitably going to get
worse over the next few years, due to higher taxes, aging
population, and ballooning government debts, it is easy to
imagine that Japan is just now passing the point of no
return in terms of being afford to maintain its aloofness
and relative isolation vis-a-vis the rest of the world.

Instead, the nation's overall lack of understanding about
how the rest of the world works and views Japanese actions,
as well as the inflammatory rhetoric by rightists and
right-leaning politicians, are very concerning. For us,
the writing is clearly on the wall that international life
lines of investment (in JGBs) and non-Japanese workers are
going to be needed sooner rather than later, and that the
whole issue of immigration, competent handling of foreign
business and government policy issues, and effective
national PR and goodwill building are going to be just as
important as is the actual selling JGBs, going green, or
ensuring certain cultural delicacies can still be bought
in Tsukiji.

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+++ NEWS

- 10% of nation lives in condo
- Office vacancies up to 8.25%
- Foreigners shouldn't get voting rights
- Another medical M&A by Japanese firm
- Big Softbank investment

-> 10% of nation lives in condo

Fading are the days when most Japanese lived in detached
homes like the ones portrayed in Sazae-san. Instead more
people are moving into either lower end apartments or into
large condominium projects. In fact, about 11.42% of all
families and singles around the nation now live in
condominimums according to Tokyo Kantei Co. Perhaps
surprisingly, the city with the highest number of condo
dwellers is Fukuoka in Kyushu, with 29.24%, followed by
Tokyo with 27.49%, and Kobe with 26.97%. (Source: TT
commentary from, Feb 4, 2010)

-> Office vacancies up to 8.25%

The declining economy is showing up no where more
prominently than in the increasing number of office
vacancies appearing around Tokyo. The January 2010 vacancy
rate in central Tokyo rose 0.16% for January, over
December, hitting a high of 8.25%. The company which
creates the vacancy survey, Miki Shoji, said that the
vacancy rate rose because of a number of new large office
buildings being completed during this period. The average
rent in central Tokyo is now JPY18,904 per tsubo, 13.85%
less than the same month last year. Osaka's central
business area vacancy rate rose to 10.50% and in Nagoya it
rose to 12.7%. (Source: TT commentary from,
Feb 4, 2010)

-> Foreigners shouldn't get voting rights

Financial services minister Shizuka Kamei created waves
last week with a blunt public statement that he is against
the DPJ plan to give foreign permanent residents the right
to vote in local elections. He said that doing so would
create friction between nationalist elements and
foreigner-supported candidates. It appears he was referring
particularly to the possibility of Koreans being able to
take part in such local elections. ***Ed: The DPJ is saying
permanent residents should be enfranchised to at least some
extent, since they pay taxes and yet have no say over how
those taxes are used. Hear, hear.** (Source: TT commentary
from Feb 4, 2010)

-> Another medical M&A by Japanese firm

Japanese medical companies continue their acquisition wave,
with dialysis equipment maker Nipro saying that it would
buy diabetes test devices company Home Diagnostics for
approximately US$215m. This is a 90% premium over Home
Diagnostics' previous closing price, and the deal involves
a cash buy-out. (Source: TT commentary from,
Feb 3, 2010)

-> Big Softbank investment

Softbank has said that it will invest US$75m into YouTube
competitor, Ustream. The video website company says that
it has plans to expand into Asia and will be relying on
Softbank to assist it to do this. Although you may have
never heard of Ustream, the company reckons it has 2m users
and provides more than 50m views per month. Key
capabilities for Ustream are live broadcasts from users'
webcams and mobile phone broadcasts. (Source: TT commentary
from, Feb 2, 2010)

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
by readers. We encourage you to spot our mistakes and
amplify our points, by email, to

In reference to our comments about China competition in TT550, and about the quality of Chinese R&D in particular, our reader responds:

*** Reader: You might be interested in the latest Science and Engineering Indicators 2010,, published by the US National Science Board. There is a one page story about this in a recent issue of Science magazine. While China may have a long way to go to bring their R&D quality up, the rapidity of their ramp-up in R&D investment is breathtaking.

I agree that the quality of Chinese scientific research lags far behind the Japanese and the West in quantity and quality, but I think it would be a mistake to dismiss their efforts. Consider that China basically wiped out their academic infrastructure during the cultural revolution and when they reopened, they had to start from scratch. Since then, the speed of their academic development has been unprecedented on this planet. They were still ranked 116th in citations/papers for the 10 years ending in April 2008 (, but that was a marked improvement from their rank 2 years earlier and surely this 10-year moving indicator lags.

Just as we saw with recent Olympic sports success, China has made it a national priority to upgrade its domestic scientific capabilities. Toward that end it has lured many overseas Chinese scientific stars back. Among them is the author of the most highly cited paper in 2009 of papers published from 2007 to 2008 ( Another Chinese researcher has the 4th most cited paper. These are only anecdotal evidence, but they are not isolated examples.

Take the brightest and most promising scientific candidates from a young population of 1.3 billion, and you get some really brilliant students to join in a scientific enterprise with rapidly improving leadership and equipment.

Sure, European, American, and Japanese research quality is much higher now. But given China's rapid investments and potential, the global reordering underway in other fields will extend to scientific research as well. Let's hope that the openness necessary for optimal research allows Chinese science to contribute to global cooperation and mutual advancement of all people.


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