TT-596 -- Forecast for 2011, e-biz news from Japan

* * * * * * * * * T E R R I E 'S T A K E * * * * * * *
A weekly roundup of news & information from Terrie Lloyd.
(http://www.terrie.com)

General Edition Sunday, January 09, 2010, Issue No. 596

+++ INDEX

- What's New
- Short Takes
- News
- Candidate Roundup/Vacancies
- Upcoming Events
- Corrections/Feedback
- News Credits

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+++ WHAT'S NEW

Welcome back to Terrie's Take for 2011. Last year we broke
with our tradition of forecasting actual events to focus on
trends instead. Readers expressed some disappointment,
because actual events are more likely to not happen and
more likely to make us look like asses. We agree that
entertainment is an important aspect of Terrie's Take, and
certainly don't mind looking more like the asses we
already are, so for 2011, we're back to specific events.

But for the record, if you take a look at the forecast for
2010, at http://mailman.japaninc.com/pipermail/terrie/, we
were pretty much on the money for 5 out of 8 forecasts and
the other 3 are still "on the way" but have been delayed
due to skillful maneuvering of the markets by the major
industrialized nations.

So here we go:

1. Prime Minister Kan will stay on for at least 6 months

Naoto Kan, the current Prime Minister of Japan, found his
way into the job by virtue of there being no other suitable
candidates. We think that after a soft start that saw Kan
using challenger Ichiro Ozawa's power base to get the job,
Kan and his team have accomplished the difficult job of
pulling away from Ozawa without causing a civil war within
the ranks of the DPJ party. We think that Kan is
underestimated and has a lot more grit than the media give
him credit for. He is slowly but surely forming a workable
policy base that will see him stay in power beyond the
calls for resignation that are going on at the moment. As
for Ozawa, the justice machine is grinding slowly in his
direction and a guilty verdict will take him out of
politics for a while to come. Indeed, we think he'll get
sick as a result of the stress and use this as an excuse
to exit the political stage.

2. Consumption tax goes on the political agenda

The increase of the consumption tax to cover social
spending in Japan is an unavoidable subject, due to the
fact that the government shows no sign of reducing its
current budget and commitments to family and retiree
benefits. Given that the next general election isn't until
Q1 2013, we anticipate that if Kan can stabilize his
position and the trade figures for Japan continue to stay
consistent, then the he will raise once more the topic of
increasing the consumption tax from 5% to 10% or above.
Last time the tax was discussed it toppled the Hatoyama
government in 2010, so Kan is going to want broad consensus
before bringing this to a national discussion level. We
think he will do this and initiate an intelligent debate
largely supported by the population and media by the end of
this year.

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[...Article continues]

3. Yen to stay in the 80's

The reason for a high yen versus the US dollar is hard to
fathom, given how shaky the government's finances are --
far exceeding the problems in Greece or Ireland. While the
US is certainly in a difficult situation as well, at least
they are doing something about their economy. 2011 will see
the US dollar have a "twitchy" first half, going up and
down as dollar buyers know that they are playing with a
contaminated commodity, then in the second half, as the
quantatitive easing falls off and economy tightens, consumer
spending will be choked off again and there will be another
downwards push on the dollar. During this first half lull,
Japan will largely ignore its internal economic issues and
be content to rely on international trade surpluses and
raising money through government bonds. In the second half
of the year, the parlous state of Japan's finances will
come to the fore again and consumption tax will become the
obvious way to buy more time. Indeed, if the tax is
increased by 5%, then that will buy at least another 5
years of excess spending before that reservoir of cash is
used up as well.

4. Oil and electrics

If Israel is going to attack Iran's nuclear installations,
it will be this year. This will be a precipitating event
that will cause oil to soar in price again, and will make
Nissan and Mitsubishi look pretty good for all their
efforts to roll out electric vehicles while most of the
market thinks they are still an oddity. From all accounts,
both companies, but Nissan in particular, are making big
strides in the viability of lithium battery technology and
we expect to see Nissan take advantage of a global oil
crisis to emerge as a star player in the stock markets.

5. No North Asia military confrontation

It looks like China has managed to talk some sense into the
North Koreans, for now at least, and the tensions between
it and South Korea have eased. However, with the
bombardment of Yeongpyeong island, the damage is done and
this marks the start of an arms build up in North Asia.
Japan isn't saying much, but we expect some big budget
earmarking to be going on over the next few months, as the
country beefs up its military. We don't think there will be
"game-ending" military confrontation between the Koreas
this year. South Korea is doing too well financially to
throw it all away, and North Korea can be bribed, as it
well knows and expects.

6. Food safety and opportunity

Japan is going to have increasing problems with food
safety, especially for foods originating in China. Because
there was no major scare in 2010, we think that increases
the likelihood of another incident this year. Bird Flu
version two mixed with imported meats perhaps? While most
such scares are more media events than real threats to
society they do have the effect of changing consumer buying
behaviors. Therefore, Japan's farming industry has an
interesting business opportunity ahead of it -- selling
high-value food back to Asia as being pure and
contaminant-free. This is already happening with fruit, and
we expect it to expand to rice, water, fish, and other
staples that are all entirely available elsewhere in Asia,
but which because of their "Made in Japan" stamp will sell
well to wealthy Asian consumers.

7. Increase in industrial accidents

Besides China, food safety in Japan is also threatened by
the potential for industrial accidents, as companies reduce
maintenance spending and try to find cheaper ways to get
manufacturing done. As an example of what a potential havoc
an industrial accident might cause, a ship carrying 1000
tons of vinyl acetate monomer, a component of synthetic
textiles and paints, sank off the coast of Niigata just
today. This particular chemical is believed to cause cancer
when found in drinking water. We can only assume that
whatever seafood is farmed along the coastline in Niigata,
we wouldn't want to be eating any of it over the next 6
months if the ship's load has started leaking.

What kind of accidents do we see happening? Anything
relating to rusting infrastructure -- with explosions of
chemical plants and factory fires at the top of the list.

8. More M&As

Because of the polarization of Japanese industry, with the
exporters managing to make profits and grow while those
serving the domestic market are suffering, the number of
M&As between Japanese firms and also involving foreign
firms will continue to increase. We think that Chinese
firms trying to take over Japanese ones will cause some
kind of media backlash within this year, and paranoia about
Japan getting bought out and controlled by foreigners will
become a national talking point. Actually we're surprised
that this hasn't happened already -- attributable, perhaps,
to the fact that most of the Chinese acquisitions have been
of low-grade or obscure companies.

Within our own area of interest, which is new tech/high
tech, we think there will be more deals like the Zynga and
Groupon deals of 2010. One company we think is ripe for
a buy-out, although the parent company isn't hurting at
this stage is Dwango's Nico Nico Douga operation -- a kind
of Japanese version of Youtube.

...The information janitors/

***------------------------****-------------------------***

+++ SHORT TAKES

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-----------------------------------------------------------

+++ NEWS

- Motor company to expand foreign R&D inside Japan
- Advanced garbage separator
- Twitter usage over New Year hits record
- China funds ramp up purchases of Japanese company shares
- Pee-pressure games in the Metro

-> Motor company to expand foreign R&D inside Japan

Electric motor behemoth Nidec Corporation is setting the
tone for future investment in Japan by announcing it will
spend JPY15bn on a new Kawasaki-based R&D center, due for
completion in 2012 through 2014 (two stages). Nothing
unusual in that. But what made us pay attention is that
Nidec will bring about 150 researchers from the USA, UK,
and India and will make English the dominant language. This
is one of the outcomes of Nidec's takeover of Emerson
Electric in the USA and its desire to bring Emerson's rare
earth-free motor technology to Japan. ***Ed: Nidec is one
very smart and motivated company.** (Source: TT commentary
from nikkei.com, Jan 8, 2011)

http://e.nikkei.com/e/fr/tnks/Nni20110107D07JFN04.htm

-> Advanced garbage separator

Separating garbage is a big deal in Japan and neighbors
keep an eagle eye out for people who can't tell plastic
from paper (except in Shibuya-ku, where the two are now
burned together). Mitsui Engineering & Shipbuilding and
Taziri Company have come up with a machine that can
separate raw waste from comustible garbage, which
householders are allowed to throw out together. The device
is a huge centrifugal drum coupled with a shredder and air
pumps. The device uses centrifugal force to retain the raw
garbage while blowing the combustibles into a separate
chamber. Apparently the machine is so good that it can
separate the tea leaves from a disposed tea bag. (Source:
TT commentary from nikkei.com, Jan 7, 2011)

http://e.nikkei.com/e/ac/tnks/Nni20110106D06JSN03.htm

-> Twitter usage over New Year hits record

In 2010 the Japanese discovered Twitter and have become a
major source of usage for the service worldwide,
confirming the fact that Japanese love texting. On New
Year's Eve, Japanese users set a global record for tweets
on the service, with 6,939 tweets per second just after
midnight. In comparison, the USA generated about 3,000
tweets per second. ***Ed: Do we really care?** (Source: TT
commentary from pcmag.com, Jan 7, 2011)

http://www.pcmag.com/article2/0,2817,2375378,00.asp

-> China funds ramp up purchases of Japanese company shares

The free market dictates that the one with money gets to
invest where they please, and so unless the Japanese
government wants to try to limit foreign investment into
its firms, a step towards commercial suicide, it will have
to put up with the fact that China-based funds, and
particularly government funds, are buying a lot more
company shares here. A Chibagin Asset Management study late
last year has found that Chinese funds have increased their
Japanese corporate holdings by more than 1000% to JPY1.5trn
in the 18-month period ending September 2011. Chibagin
reckons that at the current rate of investment, the two
main government funds will yet again double their holdings
to JPY3trn by March this year. ***Ed: Why people care about
China funds buying shares, so long as they are not holding
controlling positions, is beyond us. The share purchases
are of direct benefit to Japanese companies and pose no
security threat, although we suppose that the shares could
be dumped in times of conflict, causing a potential run for
the exit by other shareholders.** (Source: TT commentary
from japantoday.com, Jan 8, 2011)

http://tinyurl.com/23s2wk8

-> Pee-pressure games in the Metro

Only in Japan? In an effort to find new advertising display
opportunities, Sega has started testing pressure-controlled
toilet games/ads display consoles in mens' urinals at Metro
stations around Tokyo, until January 31st. The games are
designed to allow male patrons to have a bit of fun and
distraction while taking a whizz. Amongst the four games,
one measures the strength of urine flow, one allows you to
clean a screen with a hose, one allows you to compete
against another character trying to flush them away, and
the last allows you to try to cause wind to blow up a
girl's skirt. ***Ed: None of these games would last long in
the West, especially the last one, but gives some insight
into what goes here in Japan. Will be interesting if
patrons can last the distance of one game...** (Source: TT
commentary from wired.com, Jan 7, 2011)

http://www.wired.com/gamelife/2011/01/sega-urinal-games/

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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-----------------------------------------------------------

+++ CANDIDATE ROUND UP/VACANCIES

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-----------------------------------------------------------

***------------------------****-------------------------***

+++ UPCOMING EVENTS/ANNOUNCEMENTS

---------------- ICA Event - January 20 -------------------

Speaker: Keith Wilkinson, Google Analytics
- Web Marketing & CMS Consultant

Title: How Much Is Your Web Site Worth?
How to Leverage Web Analytics and Web Marketing!

Details: Complete event details at http://www.icajapan.jp/
(RSVP Required)

Date: Thursday, January 20, 2011
Time: 6:30 Doors open, Buffet Dinner included and cash bar
Cost: 4,000 yen (members), 6,000 yen (non-members) Open to
all. Venue is The Foreign Correspondents' Club of Japan.

http://www.fccj.or.jp/aboutus/map
-----------------------------------------------------------

--------------- Start a Company in Japan ------------------

Entrepreneur's Handbook Seminar 19th of February, 2011

If you have been considering setting up your own company,
find out what it takes to make it successful.
Terrie Lloyd, founder of over 13 start-up companies in Japan,
will be giving an English-language seminar and Q and A on
starting up a company in Japan.
This is an ideal opportunity to find out what is involved,
and to ask specific questions that are not normally answered
in business books.
All materials are in English and are Japan-focused.

For more details:
http://www.japaninc.com/entrepreneur_handbook_seminar
-----------------------------------------------------------

***------------------------****-------------------------***

+++ CORRECTIONS/FEEDBACK

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 editors@terrie.com.

*** No comments or feedback this week.

***********************************************************
END

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+++ ABOUT US

STAFF
Written by: Terrie Lloyd (terrie.lloyd@japaninc.com)

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