Peter Tasker

Back to Contents of Issue: August 2001

This financial guru -- and noir novelist -- now runs a Japan-focused investment fund.

by Stephen Mansfield

If there is such a thing as a financial guru in a world where, quoting a well known Japanese proverb, "darkness lies one step ahead," Peter Tasker is it. The British financial analyst and founding partner of Arcus Investment, a company that specializes in value investment in Japanese securities, comes about as close as it gets.

A man of many parts, Tasker has distilled his knowledge and experience of working for almost 20 years in the Japanese financial markets into several acclaimed books, including Japan Restructures and Collateral Damage. A well-known commentator and 10-year columnist for Newsweek Japan, he has also authored a series of noir novels featuring the cash-strapped, engagingly jaundiced Inspector Mori, Tasker's fictional private eye and anti-hero. Photo-journalist Stephen Mansfield met Tasker on Inspector Mori's home turf, in the faded surroundings of the Tajimaya Coffee House in Shinjuku, in that warren of alleys known as Shomben Yokocho ("Piss Alley").

At one point you were a financial strategist for Dresdner Kleinwort Benson, swinging back and forth between Tokyo and Hong Kong. What are your main commitments now?
I do a number of things, but my main gig is that I have my own fund management company, Arcus Investment, which I set up in '98. Arcus means "bow" in Latin. The concept is that we are celebrating the accuracy of our judgement with the name. We invest money for Japanese and overseas clients into Japanese securities -- conventional funds where you buy stocks and hedge funds where you try to take advantage of stocks going down as well as up.

Five years running ('92-'97) you were voted the No. 1 analyst in Japan by the Japanese community. That must have been very gratifying.
That's right. The world of investment is one where you never know if you are right or wrong until afterwards. It's a world in which, as they say in Japanese politics, "darkness lies one step ahead."

In noir novels like Silent Thunder and Samurai Boogie, you invoke a bleak, recession-torn Tokyo, co-opting the fluctuations of the foreign exchange markets and corporate scandals, with the shenanigans in powerful financial institutions as a backdrop. How far do these reflect your own experiences in Japan?
They reflect my perceptions, though not necessarily my personal experiences. Most of the characters are blends of people I've met, so my experience is there in an altered form. There is some rhetoric involved, too: The rainy season doesn't, in fact, go on all year! There are some elements that you borrow, emphasize, and change.

How did the other books, like Can Japan Recover?, Japan 2020, and Japan in Play, come about?
They were more like pop economics, pop futurology for a Japanese audience, and again they were partly about the '90s experience in Japan, the changes in expectations and the stress that has impacted not only on the financial system but many parts of the social system, too, and the way that people see themselves and their companies, their role in society. Most of those books were written as a warning that things were going to get a lot tougher.

In a slightly older title, The Japanese: A Major Exploration of Modern Japan, you wrote in a reference to technology that, "The Japanese are emerging from their dependence on foreign sources." Does this still hold true now, particularly in the IT field?
To some extent. If we look at the raw numbers for, say, royalties paid on intellectual property, Japan now has a surplus, which means it is deriving more income from its own than it is paying for others. The balance has changed. In the broader sense, the US has made tremendous strides in the '90s, and the rest of the world will effectively be catching up with that for the next decade at least. Rather like the Sputnik the Russians put into orbit and the effect that had. That's been a very powerful factor. If you look at videogames now -- which are a bigger global industry than recorded music -- and the tremendous success the Japanese have had in that area, it shows that the shift to self-developed intellectual property, as you might broadly define it, has occurred already and has the potential to go a lot further.

Your premise in the same work was that the knowledge-intensive element in software carried a higher value and growth potential compared to the hardware, and that in some way Japan was scoring relatively low in exploiting that aspect of the market.
That's correct, and it's still true. If you look at the price of a Walkman vis-a-vis the price of, say, a CD player, the price of the CD rivals the cost of the actual hardware that drives it. The relationship has changed completely over the last 20 years. We see that, in all kinds of areas, the deflationary price destruction is very strong in the hardware area.

Do you think, then, that Japan's much commented-upon gift for development and adaptation, for translating the resulting products or services into high profit figures, is being less vigorously applied?
Yes, in a sense it's true. There was a blockage in the '90s. You also got culturalist arguments which said the Japanese are good at XYZ and should stick to it; that, for example, lifetime employment is part of the Japanese character, or the Japanese don't like taking risks, therefore they will not buy stock, et cetera. Those arguments are always dangerous because the way people behave can and often does change dramatically. People felt uncertain about the future and tried to preserve what they saw as the roots of their previous success. The more successful you are, the more reluctant you are to junk what you have, and we saw that in the corporate Japan "play safe" factor.

In the post-war years, Japan's extraordinary strides in creating wealth and infrastructure in its own way challenged the common equation between modernization and Westernization. Are the Japanese capable of turning conventional wisdom around again now by reinvigorating their economy in their own way?
Things are so blurred now, everything is changing so fast. It will have to be a different way, more flexible, more fluid. Somebody once came up with a great phrase for how corporate Japan works -- "flexible rigidities." It sounds like a new metal, a new alloy (laughs), but what it meant was that if the organizational structures were set, there was still a lot of wiggling possible. If you wanted, for example, to cut costs, you would not slash staff but cut their bonuses. The system was there to give you that kind of leverage, which meant that in previous recessions in the '70s and '80s, companies were able to come through in one piece without experiencing the disruption and blood-letting that we have seen more recently. Now we are way beyond that capacity, and we need to create whole new structures, new industries, new resources, a different type of work force. You need to risk failure, initiate new working practices; you need to bring more women into the work force and use them better. This has been happening at an accelerating rate over the last two or three years, which is cause for optimism.

That partly contradicts those cultural stereotypes that say the Japanese don't have the requisite daring-do to change.
That's right. This cultural stereotyping is partly a result of Japan believing its own publicity. In fact, Japan has always been an entrepreneurial society. There have always been a huge number of bankruptcies here even when the economy was booming. People start companies, go bust, start again. A huge part of the Japanese work force is self-employed. Look at the number of self-run shops and restaurants. It's absolutely enormous.

There are over 5,000 small, family-run factories in Sumida ward alone.
That's a good example of what I'm saying. The image presented to the world -- the salaryman, corporate Japan -- is only a tiny element, perhaps 15 percent of the workforce that are employed in major companies, with 60 to 70 percent working for companies classified as small to medium-sized. People started to believe the publicity that Japan was a managed society, controlled by the bureaucrats and the banks, supported by docile salarymen. It was never like that, but the attempt to preserve that image and to make sure that there were no disruptions caused an economic and social blockage.

What things in Japan most fire you up with enthusiasm?
The greatest cause for optimism is the track record. Japan has always risen to the challenge. There is less resistance at a street level to new technology and new things than we have, say, in Europe. When mobile phones first appeared there, for example, comedians mocked them on TV. The idea that the new is peculiar is not apparent here. Young people swim through this stuff with ease. They don't perceive any contradictions in the cliché of foreigners who come to Japan and say, "Here are a load of Japanese eating hamburgers and using English." It's not a paradox for them, it's simply a phenomenon, part of the texture of the world they live in. I think that ability to yoke together different, diverse elements and not to see any discrepancies or paradoxes helps you go forward in this world we live in. When you have a fever, for IT, let's say, it transmits very quickly throughout the culture. In this sense, there are no reactionaries in Japan. So Japan does have, in a deep, ideological, cultural sense, fluidity.

What projects do you have planned for the near future in both your daily work and in publishing?
My goal is to create financial products that will be successful in terms of providing good returns to the public. The investment environment in Japan is much less favorable than in the West, but even so, our results have been quite good. I believe it's possible to produce good investment results even in this environment, which I believe will improve over the next few years. As things get shaken up, there will be a lot of new opportunities. My career target is to participate in that and perform a useful role for the public who, as you know, stick all their money in bank deposits and in the post office where they earn precisely nothing. The growth of what you might broadly call an equity culture is very important to Japan in many senses. It's important to the public so that they can create some wealth and have a decent retirement. It's something I would like to contribute to.

On the publishing side, do you have any projects in the pipeline?
Yes, I'm working on a novel at the moment that is a slightly different thing for me -- a political satire about a rock singer becoming prime minister of Japan!

On the subject of a rock fan who did become prime minister, we now have the so-called Koizumi factor. How will the current political situation influence the Japanese securities market? Can he make a clean break with the old customs?
Creating new systems that will shake up vested interests is vital. It's dull stuff, but things like increasing the power of the Fair Trade Commission, which is placed to bust monopolies, shaving away government special corporations that are wasting huge amounts of money, getting rid of all the old bureaucrat hangouts by privatizing them, regulating the banks much more aggressively -- those things are very important. Can he do it? Well, if he can't, nobody can, because it's very unusual for Japan to have a political leader who is so popular. He's in a much better position to make progressive changes than anybody we've ever had before, or will ever have again.

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