TT-468 -- The Japanese and Ohio, ebiz news from Japan

* * * * * * * * * T E R R I E 'S T A K E * * * * * * *
A weekly roundup of news & information from Terrie Lloyd.

General Edition Sunday, May 11, 2008 Issue No. 468


- What's new
- News
- Candidate roundup/Vacancies
- Upcoming events
- Corrections/Feedback
- News credits

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Question: outside of California, which US state is home to
the greatest number of Japanese companies in the USA?

The answer is Ohio, a mid-Western state tucked right
below Lake Erie, which is probably better known for
LeBron James and the Cleveland Cavaliers basketball
team, than it is for its 380+ Japanese corporate citizens.
According to the US State Department, Japan accounts for
about 80% of all FDI from Asia into the US, which equates
to about US$177bn in direct investments, and a large chunk
of this goes to Ohio. Japanese firms employ around 66,500
(2007) Ohioans, making them the largest single foreign
source of employment in the state...

...It is easy, being immersed in the general activity and
hubbub of commerce within Japan, to forget just what an
amazing trading network the major Japanese firms have
created internationally over the last 40 years. While
China and its market potential is the talk of the town, the
Japanese have already had 20 years to embed themselves into
their global markets, winning local trust and partnerships,
and becoming either the source of products or exclusive
brokers of them. Take almost any globally strategic field:
energy, food, raw materials, transportation, electronics,
and entertainment -- they all feature major Japanese
players who are setting the bar ever higher.

Thus, we appreciated a solid reminder of the power of
Japan's international trading network when we recently
traveled to Columbus, Ohio. Our sister company, Japan Inc.
Holdings, in April won a contract to represent the state
for trade and Japan-based project facilitation. We readily
admit that prior to bidding for the tender, none of us had
ever thought of traveling there. Perhaps like many
foreigners, a number of us had made it as far as the
Rockies, or Chicago or Detroit, but then flew over the
"flat bit" until they hit the east coast!

But that flat bit is where the major growth is taking place
in the USA these days, and the auto/technology
manufacturing corridor bounded by Detroit in the north and
Alabama to the south is now home to more than 450 Japanese
companies, not to mention hundreds of their Chinese and
European competitors. The recent level of growth in these
states -- Ohio, Kentucky, Indiana, Tennessee, and Alabama is
quite surprising, especially considering this heartland
region was considered a region of despair in the '70's and
'80's -- an economic backwater of sorts. But it is clear
that foreign companies don't care about the image. Labor is
relatively cheap, the infrastructure is excellent
(especially power, roading, and rail), the Mid-western work
ethic can be witnessed in factory output, and of course it
doesn't hurt that these states are all located somewhat in
the "middle" of the rich US market.

[Continued below...]

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[...Article continues]

The Ohio love affair for Japanese companies started back
in 1953 when legendary maverick Japanese entrepreneur
Soichiro Honda, the founder of Honda Motor Company,
traveled to Cincinnatti to buy precision machining equipment
for his burgeoning motorcycle manufacturing business back
in Japan. He was extremely impressed with the people, their
friendliness, the working culture, and the wealth of the
land, and was to become very attached to his newfound
business partners. So much so, that although he retired in
1973, he made sure that Honda's new management set up the
company's first US-based factory in Marysville, near the
capital of Columbus, in 1979, to make motorcycles.

Today, Honda America Manufacturing Company employs around
15,000 people directly, turning out around 1.4m vehicles a
year. It is the fifth largest auto company in the USA, and
is expected to rise to Number Four on its increasingly fuel
efficient models. Together with its 150+ local and Japanese
suppliers, most of whom have transplanted themselves there,
they employ more than 55,000 people. Honda and
Honda-related business account for a massive 20% of Ohio's
overall US$85bn in annual industrial production. This is
really quite astounding and tells not only what a
tremendous customer shift there has been from the USA Big 3
to Japanese brands, but also about the success of the Honda
transplant, which has since served as a model for Toyota and
others to follow.

As Honda set up shop, it was joined by other major Japanese
downstream suppliers. One of these was Bridgestone, which
pulled off a highly publicized coup by spending US$2.6bn
in 1988, a large sum of money back then, to acquire
troubled Akron tire giant Firestone Tire & Rubber. This was
in some ways the peak of the "Japanese invasion" and many
wondered whether Bridgestone had bitten off more than it
could chew. It is true that Bridgestone's experience since the
acquisition hasn't all been plain sailing, and the tire safety
controversy back in 2005, over Ford Explorer tire
blow-outs, was a good example. But none-the-less,
Bridgestone has stayed the distance and will this month
celebrate its 20th anniversary of the takeover. Although it
has moved its main manufacturing operations to Nashville,
Tennessee, it still employs around 1,000 people in Akron,
Ohio, including 600 at its technical center.

While auto manufacturing is the focus of most Japanese
companies in the Ohio region, the coverage of industries is
expanding. Joined by Indian and Chinese firms who are
finding out what pulled the Japanese to this part of the
world, an increasing number of high-tech firms are
clustering around Ohio's many universities -- which are
national centers of excellence in their own right. In the
north the Cleveland Clinic is pulling in innovators in the
medical and biotechnology sectors, while further south the
shear output of graduates from Ohio State University
(one of the largest universities in the USA) is creating
clusters of high-tech engineering. Then there is the huge
volume of military and government R&D executed by the
Battelle Memorial Institute.

Together, these clusters are allowing high-tech start-ups
to get new employees at salaries well below those in the
Bay Area in California. Perhaps more importantly, those
graduates want to live in the area because they can expect
a better quality of life than out on either coast. Homes
are affordable, families have a safe environment to grow,
and jobs are plentiful.

The Ohio story hasn't always been this favorable, though.
Go back 20-30 years, and the state was in serious trouble,
with rust-belt industries, high unemployment, and troubled
downtown areas. The state government in the 1990's decided
to take action and most of the proactive work has fallen to
the Ohio Department of Development (ODOD).

The turn-around is now well underway, and the Ohio story
is something that Japan could do well to study. This is
especially so since many smaller manufacturers in Northern
Tokyo, Saitama, Chiba, and Osaka are going out of business
due to the hollowing out of manufacturing to China. Instead
of engaging in more pork barrel politics, the Japanese
government should look at following Ohio's "Third Frontier"
development program and get serious. In this US$1.6bn,
10-year state-wide investment program, the state government
has set itself four stated objectives:

* Build world-class research capacity
* Support early stage capital formation and development of
new products
* Finance advanced manufacturing technologies to help
existing industries become more productive
* Use the Third Frontier project to facilitate additional
federal and private sector support to the value of US$6bn+

Interestingly, Ohio has a sister state relationship with
Saitama, a 4.89m person prefecture just north of Tokyo.
Saitama is also a manufacturing center, and has decided
to do something about attracting foreign firms. The
problem is, though, that like many other aging cities
around Japan, the challenge is being dealt with in a very
superficial manner, rather than addressing the whole
package at sufficient depth. As an example, METI gives
just 5 prefectures around Japan each year the grand sum
of JPY500m (JPY100m each) to attract foreign investment.
Saitama's allocation has been and gone, and after making
brochures, a website, and setting up a couple of trade
shows, there isn't much left.

Certainly nothing for schools, lifestyle, food stores,
expanded education, and the other incentives needed to
attract foreign firms and their employees to the area.

And they wonder why few foreign firms will set up there...?!

In contrast, Ohio has launched huge initiatives, such as a
tax incentive program that will kick in by 2010. They will:
* Phase out corporate state income tax
* Eliminate state tax on inventory, equipment, and
machinery investments
* Reduce personal state income tax by 21%
* Exempt sales outside the state from taxation
* Exempt the first US$1m in a corporation's annual earnings

Ohio is not out of the woods entirely yet, as nearby states
such as Kentucky and Indiana start to compete vigorously
for the same foreign companies, by offering sweeter
incentives, lower salaries, and easier union-free work
policies. But none-the-less, looking at the influx of new
business from China, India, and other BRICs and emerging
economies, we believe that Japan should be taking a closer
look at how Ohio managed to pull the transformation off.


Interesting trivia about inventions from Ohio:

1. World's first ambulance service, in 1865, in Cincinnati
2. World's first cash register, invented by James J. Ritty
of Dayton
3. World's first police cars, used in Akron
4. Wright Brothers first documented powered flight
5. World's first full-time auto service station, in 1899
6. World's first hot dog in buns, launched in 1900
7. Cleveland was the world's first city to light its
streets electrically, in 1879
8. America's first auto, made in 1891 in Ohio City
9. Commercialization of rubber vulcanization, by Charles
Goodyear of Akron, in 1839
10. Invention of Teflon, by Roy Plunkett, in 1938
11. World's first application of x-rays for surgery,
pioneered by John Gilman of Marietta, in 1896

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+++ NEWS

[Ed: Seems like it was a week for Japanese companies to sue
or be sued. We thought we'd round up the most recent
notable cases, to show how international business isn't
always a bunch of roses. Except, maybe, for the
international law firms!]

- Recommendation to ramp up foreign specialists
- Takata sued over air bags
- Terumo sued over vein harvesting
- Nichia sues over white LEDs
- Ajinomoto sues over aspartame comments

-> Recommendation to ramp up foreign specialists

So, is the Japanese government finally coming around to the
idea that foreigners are OK after all? Apparently a
government economic policy panel has recommended that up to
300,000 foreign professionals should be allowed visas to
work in Japan by 2015, about double the number currently
working here. ***Ed: Problem is, most qualified foreigners
don't want to come and already there are no actual limits
on them entering Japan. Therefore, the panel is
recommending that qualifications be relaxed and visa types
increased, so as to achieve the target. In particular, they
are recommending a substantial increase in the number of
health caregivers allowed in. The panel is also suggesting
removing one potential hurdle, which is Japan's isolated and
expensive social security program. The panel recommends the
government establish more mutual agreements with other
countries, so as to allow foreigners who return home to be
credited for the social insurance contributions already
made in Japan (or at home before coming here). (Source: TT
commentary from, May 9, 2008)

-> Takata sued over air bags

TRW Automotive Holdings, one of the world's largest auto
equipment makers, is suing Takata Corp. over patent
infringement relating to the production of air bags. The
alleged infringements involve the use of adhesive seams and
vents for bags which protect passengers from side impacts
and knee injuries. TRW says it received the patents in
1994. TRW is seeking an injunction to stop Takata selling
the products in the USA. (Source: TT commentary from, May 7, 2008)

-> Terumo sued over vein harvesting

Maquet, the US subsidiary of Sweden's Getinge AB company,
and a pioneer in vein harvesting for heart artery
transplants, has lodged a claim against Terumo with the US
International Trade Commission. The claim alleges that
Terumo has breached several patents covering endoscopic
vein harvesting. Maquet wants damages and an injunction to
stop Terumo selling its equipment in the USA. ***Ed: The
Reuters article says that the US International Trade
Commission is becoming a popular body for companies to
pursue US-related patent claims, because of its power to
ban imports that are found to have breached a patent.**
(Source: TT commentary from, Apr 29, 2008)

-> Nichia sues over white LEDs

Nichia has always been quick on the draw to protect its
patents and last week was no exception. They served papers
in the Tokyo District Court against the Japanese subsidiary
of Korea-based LED manufacturer Seoul Semiconductor. Nichia
alleges that Seoul Semi has sold white LEDs for keypads and
indicators, rather than just backlighting LCD panels of
cell phones, which is allowed. While the case hinges on
application rather than technology, Nichia is sufficiently
confident that it is seeking past damages as well as an
injunction to prevent further sales in Japan. ***Ed: Nichia
is also pursuing similar lawsuits in Korea and the USA. It
will be interesting to see how the overseas rulings turn
out and whether they mirror the findings here in Japan.
There is sure to be some commentary about Japanese judicial
bias if they don't.** (Source: TT commentary from, May 1, 2008)

-> Ajinomoto sues over aspartame comments

Ajinomoto is suing UK retailer Asda for denigrating its
Aspartame sweetener, after Asda took Aspartame off its store
shelves and said publicly that the additive is "nasty". The
Asda statement came after the retailer decided to try to
improve its flagging image with health conscious consumers.
Aspartame is widely used around the world to sweeten
yoghurt, soda drinks, and other foods. ***Ed: While
Ajinomoto tries to plug the dyke over a consumer backlash
against the additive, they should instead be more concerned
with eventual consumer law suits against them, if it is
ever proved, as more evidence is suggesting, that Aspartame
causes cancer. Now would be a good time for Ajinomoto to
hive the product off into an independent subsidiary and
firewall themselves from the consequences...** (Source: TT
commentary from, May 6, 2008)

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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