Investing in Japan

Back to Contents of Issue: August 2001

The subject is too big to tackle from one angle, so we go inside the minds of those approaching it from very different angles ...

by Steve Mollman

WELCOME TO J@PAN INC's second annual investor special. Because this magazine covers high-tech business and innovation, both of which are highly dependent on investors, few subjects interest us more. And while we do present an Investor section every month, the subject of investing is important enough, we feel, to dominate at least one issue per year.

Our hope is simply that you'll come away from the following pages knowing a lot more about investing in Japan than you did before. In fact, we don't know anyone who can read all of these articles and honestly say, "I already knew all that." (If you can, we'd like to interview you, pronto!) How you use, or if you use, the information gained here is of course entirely up to you -- but we can say with some confidence that, no matter who or where you are, this will prove an interesting read. We certainly had a grand time putting it together.

Here's how it's organized: Choosing four categories, we've written one piece for each, trying to look not only at the big picture, but at individuals as well. The categories are as follows:

Mutual funds: According to the Bank of Japan, just 2.4 percent of the ¥1,400 trillion in individual financial assets in this country is invested in mutual funds (also called investment trusts or, in Japanese, toushin). Increase that 2.4 percent to 10 percent, and you've got a huge new industry. We explore this arena by profiling Atsuto Sawakami, whose independent fund-management startup offers investors a low-fee, no-load stock fund named after himself. The challenges and prospects facing Sawakami speak volumes about the state of mutual funds in this wealthy but financially conservative nation.

Investors: We approached four professional investors focused on Japan and asked them about their strategies heading into next year. We were fascinated by some of their comments. Here's what one says about Nintendo: "It's one of my long-term, never-sell situations." (Who would have thought?) And if the forecasts of these gentlemen are any indicator, at some point in the next six months we'll see a recovery in the stock prices of Japanese companies that make semiconductor manufacturing equipment. No consensus on when, though; timing, as always, is key. In any case, most Japan-focused investors agree that it's been a great summer to sell in May and ... go away. One of our interviewees went away on a climbing expedition in Switzerland.

Stock markets: In this section, we run an interview that we conducted with Goro Tatsumi, the president of the Osaka Stock Exchange. A Q&A may seem like an odd format for providing an objective overview on a subject, but we feel that Tatsumi's comments -- while inevitably promotional at times -- offer not only a unique perspective, but also interesting historical context on Japan's exchange scene. Through him we sense -- yet again -- that Japan's true change agents are not in Tokyo, where this magazine is based, but in the Kansai region. (See "Click Kansai for E-Commerce," page 34, March 2001. For more on Japan's public markets, refer to "Grading the Exchanges")

Venture capital: The first question we had to ask when approaching venture capital in Japan was, What venture capital? If you think Japan's individual investors are too conservative -- and they are -- wait till you learn more about the so-called VCs. Risk-taking in Japan is rare -- risk capital more so. With this in mind, we centered this category's article on Takatoshi Matsumoto, founder of Cisco Systems Japan and Sun Microsystems Japan. Matsumoto these days runs a VC firm, Academy Capital Investment, that focuses on startups emerging from the technology labs of Japan's private universities. (To see why this approach makes sense, see "Special Report: TLOs," page 42.) By looking at his efforts and seeing where ACI fits into Japan's overall VC scene, we gain a better understanding of the state of risk capital in this country.

It's tempting to introduce the following articles by saying something along the lines of, "The individuals profiled here may all come from different fields, but what they have in common is a desire to see Japan [fill-in-the-blank]." Actually, though, what makes this package interesting is how different their desires and approaches are. It's thanks to this fact that we've been able to cover investing in Japan from so many angles.

Finally, a word of praise for Bradley Martin, former contributing editor to this magazine and guest editor for this section. As an editor and financial writer, Martin is a pleasure to work with. He is, like the individuals covered in the following pages, a real pro. -- Steve Mollman

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