Are the Expats Back?

Back to Contents of Issue: November 2003

Is the volume of foreign customers entering Japan is really starting to recover?

by John Dodd

Tokyo has long had a reputation for being one of the most expensive cities on the planet. But with the substantial increase in available accommodation and the meltdown of the global tech economy after the 9/11 disaster, the available options for places to stay and the ways of moving in and out of them are starting to change. Because of the dearth of recent numbers from the relevant ministries, we did a straw poll of local companies specializing in the expat community to see what's happening right now, and whether the business volume of foreign customers entering Japan is really starting to recover.

Modest recovery
The downturn in the US stock market in 2000, the loss of confidence in the tech sector of the US economy in early 2001, and the after-effects of the World Trade Center disaster meant that for most of the OECD countries, there has been a substantial downturn in business activity -- especially in the overheated technology markets. This translated into a general pull back of international expansion and investment -- and certainly became noticeable here in Tokyo when many prestigious foreign securities firms such as Merrill Lynch decided to retrench a substantial number of staff.

The triple whammy of 2000-2001 was little felt by local Japanese companies other than the exporters, who were already mired in a decade-long recession and knew things were bad.

We focus on the small group of companies here in Japan that specialize in servicing foreign executive customers in Japan. Many of these companies saw a devasting decrease in the volume of business during the last three years up to the start of this year. Now that the economy in the US has been picking up, since the middle of this year at least, it appears that the service sector here in Japan is also picking up as well.

Space Design's Ruth Shiraishi captures the general impression of improving foreigner inflow into Japan: "We're seeing a lot of smaller foreign venture and IT companies coming to Japan recently. As Japanese companies realize the need for immediate and grass-roots change, they are leaning more and more on outside sources. While it used to be the foreign firms trying to penetrate the Japanese market on their own, we are now seeing Japanese and foreign firms collaborating and commingling. The whole world of business in this country is undergoing immense change. Indeed, walk in to almost any 'conservative' firm these days, and you will see people of all nationalities walking in and out of their doors."

Amongst the first of the local service companies to see an improvement of inflows of foreigners and expats was Phoenix Transport Japan, a full service moving company. Phoenix's general manager Martin Giles says, "We have seen a significant overall business increase in the last 12 months. In fact, we've had to increase our staff numbers and move to larger premises to accommodate the increase in business."

To verify that this wasn't just a trend limited to a single company or service sector, we also spoke to Hamish Ross, director for Occidental Cars, about the demand for vehicles by expats.

"As of now we are seeing an increase in both customers and activity," he told us. "It is fair to say that particularly as of June this year, there has been a turn around in expats coming into Japan, and companies are starting to feel more comfortable about sending foreign employees for temporary assignment into Japan." Ken Arbour of Century 21 Sky Realty agrees, saying that, "Things could not be much worse than they were last year after 9/11 in 2001. We're seeing an increase in the number of foreigners coming into Japan, although we still have a good ways to go before we get back to the pre-9/11 era."

Increase in young professionals
Just what segment of the expat community is hitting Japanese shores is interesting. It looks like the traditional young family unit is still there, however, this time around there is also a strong pickup in the number of short-term professionals coming in to help re-jig Japan's economy. Space Design's Shiraishi comments, "We are enjoying an almost constant number of foreign customers, however, the big change is the strong increase in IT engineers and short-term project expats -- particularly those from India and elsewhere in Asia." The Mansions' Director of Sales and Marketing, Jon Loeffelholz, confirms this by saying, "Our Roppongi property caters to the single, young engineer-type guest, and we are indeed seeing an increase in this segment at this property."

That doesn't mean that the traditional expat family is on the wane however. Occidental's Ross tells us: "Our 7-8 seater vehicle range is still the most popular vehicle configuration today. Companies are still shipping over families." Indeed, Sky Realty's Arbour confirms this point, elaborating that those families are typically ones with small children rather than teenagers.

Budget constraints
So the consensus is that the number of expats destined for Japan is recovering, but that their employers are also becoming obsessed with costs and cutting budgets. We asked our panel what they thought the trends are now. Space Design's Shiraishi says: "Compared to a few years ago, many companies are fixing a budget for their expats of just JPY200,000 - JPY300,000 per month, whereas previously it was much higher. Therefore, individuals are usually left to pick up the rest of the tab if they want to spend more."

While companies are cutting back, nevertheless they do still appear to be paying the major bills. As Sky Realty's Ken Arbour says, "Companies still pay for everything relating to accommodation and moves in Japan. But they are caught in a quandary, trying to figure out how to cut back on incentives and costs, while at the same time motivating good people to come to Japan."

Caution is being exercised by all concerned, and families coming into Japan are electing to use temporary accommodation for a period before going into regular accommodation. The Mansions' Loeffelholz says, "We're seeing more families staying in our facilities. They typically stay about 2-3 months then start looking for more permanent apartments."

Apartment hotels versus permanent apartments
For the family wondering whether to choose a well appointed short-term furnished apartment or go into their own accommodation, the general consensus is that 1 to 1.5 years is the turning point. Sky Realty's Arbour says, "Anyone staying for more than one year should generally consider renting an unfurnished long-term apartment and using leased furniture. Less than that and you get hit by the cancellation charges of early termination of your lease."

Space Design's Shiraishi basically agrees that it comes down to a question of economics. "The turning point at our furnished apartments versus getting a long-term unfurnished one is about 1.5 years. This is because we don't charge Key Money, agent fees or utilities fees. You also don't have the cost of importing and exporting your furniture when you get posted to the next location."

The good life
We wondered whether this new surge of foreigners coming in were adapting to local customs, or still trying to emulate their lifestyles overseas -- particularly in terms of owning a car and pets. As could be imagined, vehicle ownership appears to be tied to the duration of stay. For those occupational specialists coming in for just a few months, demand at apartment hotel facilities such as Space Design and The Mansions for parking spaces is low. Nonetheless, those intending to stay longer do acquire vehicles, and Space Design's Shiraishi tells us, "Although most of our customers do not own or rent a car for a short-term stay in Tokyo, some of our facilities do have good parking facilities. Indeed, our Bureau Shinagawa building, to open in December, will have 90 parking spaces for residents." The Mansions' Loeffelholz confirms that they also offer parking.

Then there are pets. Almost all of our respondents said that the request for keeping a pet was low on most people's agenda, and most landlords will not permit one anyway. However, if you do have a family dog or cat you can't leave behind, then it helps to have a good realtor. Sky Realty's Arbour tells us, "Some buildings take pets and some do not -- it's that simple. We know who they are, and can advise tenants accordingly." Commenting on whether you can simply take your pet in and deal with the consequences later, he says: "In general I do not advise people to flaunt the no pet clause in their contract. However, I do know of one particular building where they are very tolerant, and even though the contract says no pets, everyone knows that it's OK to have one."

If you do decide to bring your pet to Japan, then you also will need help to organize the rather daunting pile of documentation and quarantine logistics. Luckily Phoenix has a service called Phoenix Pets, which handles all aspects of relocation of clients' pets. Pet relocation calls for extreme care, attention, experience and some good old fashioned TLC. Phoenix arranges professional pick-ups, handling, transportation and quarantine assistance. In addition, it assists with inoculations and documentation.

Being a foreigner is getting easier
It appears that the modest recovery in the global market is stimulating Japanese companies to continue on with their modernization efforts, particularly in the fields of software and systems. This is creating a new type of short-to-mid-term foreign resident: engineers and other project-based professionals. What is different for these visitors in 2003 is the fact that Tokyo now has a number of high quality yet reasonably priced services and facilities that cater to their needs -- and getting settled in Japan is not the challenge it used to be. @

Note: The function "email this page" is currently not supported for this page.