TT-477 -- Oji Homes Asbestos, ebiz news from Japan

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A weekly roundup of news & information from Terrie Lloyd.

General Edition Sunday, July 13, 2008 Issue No. 477


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

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When one thinks of Oji Paper, Japan's largest paper
manufacturing company (in terms of consolidated sales), the
image is of vast green forests in Hokkaido, excellent
paper-making technology, and the guiding hand of Eichi
Shibusawa. Shibusawa was the father of Japan's capitalist
economy, initially helping to modernize the Ministry of
Finance, then going out on his own to found the nation's
first modern bank, one of its first joint stock companies,
and helping around 500 other now major companies (such as
Tokyo Gas, Mizuho, the Imperial Hotel, Sapporo Breweries,
and Taiheiyo Cement) to get started.

One of Shibusawa's key philosophies was the promotion of
business ethics and that helping others was an intrinsic
part of making a business successful. Perhaps this is where
the Japanese view that the purpose of companies is to
provide for society first and shareholders second, came
from. On the philanthropic and education side of his life,
Shibusawa engaged in a purported 600+ projects to improve
the living standards of those around him.

What a shame, then, that Oji Paper has lost the positive
spirit and moral fiber of this great pioneer of modern

[Continued below...]

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[...Article continues]

The reason we make this statement is that despite its
pedigree, Oji and its group companies have shown that
corporate pride and covering one's back is more important
than ethics. The "ethics" we're talking about here
concern Oji's record on environmental pollution and
resulting business decision-making.

As an example, on July 8th of this last week, the Tokyo
District Court ordered Oji Paper to pay JPY590m in damages
to Seiko Epson for selling Seiko Epson a 30,000 sq. m. plot
of land in Nagano which turned out to be highly polluted
with PCBs and Dioxin. Seiko Epson had to have 8,300 tons of
soil removed to remediate the problem. Of course there was
no mention by Oji prior to the sale of the fact that the
plot was damaged.

For some reason almost no foreign media picked up on this
law suit, but it shows that Oji has a pattern of lying and
covering up pollution and general business problems. You
may recall that in January this year, Oji among other paper
producers was found to have been a leading culprit in lying
about the level of recycled fiber/paper content in their
"green" paper products. In many cases the recycled content
was only 10% - 20% of that claimed, and in some cases there
was NO recycled material present at all. While the CEO of
competitor Nippon Paper stepped down over the industry-wide
scandal, the CEO of Oji Paper, true to form, decided to say
"sorry" but to otherwise chose to dodge the bullet.

Going back a bit further, to July, 2007, Oji Paper was
forced to admit that its Fuji paper plant in Shizuoka had
emitted more nitrogen oxide (NOx) than allowed under a
local agreement with Shizuoka prefectural authorities.
What's worse, they falsified their emissions data to cover
up the problem and were only found out after the Hokkaido
Prefectural government challenged the company up north and
did its own inspection of the company's Kushiro plant. They
found that the Kushiro emissions were in some cases twice
Japan's allowable limit. Ironically, NOx is a leading
cause of acid rain, which destroys forests...!

Go further back still, and there are other instances of
similar cover-ups and subsequent court cases. However, the
point of today's Take is that a related Oji company, Oji
Real Estate, has now been found to have been engaging in
its own form of cover-up that is much closer to home.

It is common knowledge in the expat community that the
three Oji Real Estate condominium complexes in
Minami-Aoyama: Oji Palace, Oji Homes, and Oji Green Hills
are extremely popular with out-of-town CEOs and their young
families. Oji Homes in particular draws a long waiting
list of young families thanks to its 20m outdoor swimming
pool and it's convenient location right in the middle of
fashionable Omote Sando. There are approximately 20
apartments in that complex, and over the last 25 years, we
imagine that more than 200 families have lived there.

That's 500+ tenants who rented their luxury apartments in
the knowledge that they had a rock-solid landlord and the
building was safe -- or so they thought.

About two years ago. Oji started refusing to renew leases
with tenants at Oji Homes, on the basis that they wanted
to do renovations to improve earthquake standards for the
building. This sounded credible, and most of the families
have subsequently moved out despite being offered
inadequate compensation to find a similar replacement
apartment (standard practice in Japan for high-class
apartments being renovated or torn down is to offer tenants
1-2 years supplementary rent to move to digs of a
comparable level).

However, two families who've been long-term residents
decided to dig their heels in and demand from Oji fair and
reasonable compensation to move out. Oji decided to ignore
them by starting renovation work around the families,
arranging for their utilities to stay connected until a
resolution was reached, or until the living conditions
became so difficult that the families would eventually move

By "difficult" we mean that the building is being jacked up,
so as to strengthen the building foundations, and the
passage ways are soon to be full of dust, wheel barrows,
and workers lugging in and out building materials.

As work has progressed, the families became suspicious that
Oji may have had another reason for doing the construction
work and decided to hire a professional architect to come
in and assess the work. To their shock, he pointed out a
number of areas fitted with asbestos and worse still, PCBs
-- perhaps from the same source as those found in the
Nagano soil by Seiko Espon.

When confronted by the families, Oji initially denied any
presence of either substance and continued their work as
if everything was OK. However, the two families persisted
and in June (last month), in front of lawyers and staff
representing the families AND the Minato-ku Ward Office,
Oji Real Estate and Takenaka Construction company
representatives admitted that the building does in fact
have both substances, with the asbestos being present in
significant amounts, and that they'd known for some time
about the presence of these substances.

Now, let's think about this. A luxury apartment full of
young kids, top-level international executives, and their
guests, and yet Oji had known for possibly up to two
years about the presence of asbestos and PCBs! What does
this tell you about the company and its ethics?

As far as we know, we're the first to break this story to
the public, but the families are obviously hoping that the
media will pick up on the situation and give Oji the
coverage that the company obviously still needs in order
to get the message: "a quick admission of the problem
and proper settlement of tenant claims is the only
reasonable outcome".

In the meantime, if you are living in or have lived in any
of the Oji apartment complexes, you may be wondering what
the presence of asbestos means. Providing it is inert,
probably the buildings have been/are reasonably safe, but
the problem with asbestos is that one never knows when it
or the binders it is applied with will age and start to flake
off. Oji Palace is even older than the Oji Homes
facility and there has been no indication at this stage
that Oji plans any investigation or remediation of
substances possibly present there. We think this is
extremely irresponsible.

We also think it is very irresponsible that there is a
public school right next to the building site, with kids
running around in the playground every week day. Perhaps
the parents of those children are not aware that even a
wisp of the stuff inhaled into your lungs can cause
mesothelioma and asbestosis later in life. Oji can and
should be taking a lot more precautions and needs to come
clean to the public about the work being done. Elsewhere
in Japan, when asbestos is removed from schools, the
entire school is closed (so it's normally done during the
summer holidays), to prevent danger to the kids.

The following link gives you some idea of what level of
work precautions are necessary to safely remove asbestos
from a work site. From what we've heard from the residents,
so far the Takenaka workers are taking only the very most
basic of precautions, and sophisticated respirators don't
appear to be part of them.

Then of course, there is the matter of the two families
and their kids left in the building... We find it
incredible that Oji Real Estate is able to engage in such
dangerous construction work with tenants still present.
This represents a level of bloody mindedness on the part
of Oji managers that wouldn't be tolerated if those
families were Japanese. The proper venue for a showdown of
this nature is the courts, and if Oji wants the resisting
tenants to move, it should take them to court, reveal the
levels of compensation being offered, and wait for the
courts to decide before continuing their work.

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+++ NEWS

- Shinsei buys GE consumer finance unit
- CS targets "billionaires"
- Mitsubishi i MiEV due out June 2009
- Tamiflu cleared
- Consumer sentiment falls to record low

-> Shinsei buys GE consumer finance unit

Shinsei has decided to bet big time on consumer finance,
even as other companies are fleeing the sector. According
to the Nikkei, General Electric will sell its GE Consumer
Finance unit, otherwise known as Lake, to Shinsei for
around JPY580bn. If it goes through, this deal will vault
Shinsei into the No. 6 position among lending firms.
***Ed: This is a huge risk for Shinsei, however, it is our
opinion that the interest rates are still high enough and
risks now better covered that an astute and conservative
player can make money -- especially as the market settles
down after the government-mandated repayments of claims
against excessive interest in the past are settled.**
(Source: TT commentary from, Jul 11, 2008)

-> CS targets "billionaires"

Credit Suisse is joining the ranks of foreign banks
targeting Japan's very wealthy with private banking
services. It has started out by hiring in UBS Tokyo's head
of wealth management. Credit Suisse says it will target
customers with at least JPY1bn in assets and apparently
wants to get JPY1trn under management by 2010. ***Ed: By
our calculations, CS has a target of recruiting about
1,000 very, very rich people.** (Source: TT commentary from, Jul 10, 2008)

-> Mitsubishi i MiEV due out June 2009

How does one yen per kilometer sound for the price of
running your next car? Likely, you are paying around 10 yen
per kilometer at present for gas. This is the running cost
calculated by Mitsubishi Motors for its new Lithium-ion
battery powered i MiEV plug-in electric vehicle. The new i
MiEV is due to go on sale to businesses and government
agencies from next summer, and to consumers by early 2010.
The vehicle will run 160km on a single charge, and can be
charged either from a household power outlet (7 hours for a
200VAC outlet) or a special quick-charge station, which
Mitsubishi intends to install in and around the nation's
metro areas in conjunction with TEPCO and other power
utility companies. The first i MiEV's can be expected to
retail for around JPY4m, with a government rebate bringing
the price down to around JPY3m. (Source: TT commentary from, Jul 10, 2008)

-> Tamiflu cleared

The Health Ministry has said that an extensive
government-funded research program has found no link
between Tamiflu and hallucinations in pre-teens and teens.
The study was apparently conducted on a sampling of 10,000
young people, their families and doctors. Contrary to
common public perception, the study found that
Tamiflu-treated patients tended to exhibit MORE rational
behavior after the treatment. ***Ed: Given that the
government has millions of dollars invested into Tamiflu,
thanks to millions of doses stockpiled in case of a bird
flu outbreak, we consider this research somewhat suspect.
The Health Ministry should at very least reveal the
methodology and actual results in detail, and let concerned
parents make up their own minds about whether to trust the
product again.** (Source:, Jul 11, 2008)

-> Consumer sentiment falls to record low

Consumer confidence in the future of the economy fell to
its lowest level since the government started keeping
records back in 1982, due to high gas and food prices. The
sentiment index fell from 33.9 in May to 32.6 last month.
Wages grew by just 0.2% in May, while daily necessities
rose 2.4% in the same month. Official inflation is running
at a 27-year high, and thanks to fuel increases, more
price rises are in the works. As a result, consumer
interest in buying durable goods has apparently fallen to
the lowest levels since the 80's. (Source: TT commentary
from, Jul 11, 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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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

-> We said in our IPO commentary in TT476, that Japan
should allow foreigners to trade Japanese securities online
without having to go through an offline brokerage.

Reader: Two things connected to your commentary last week.

1. IPOs in Japan -- as a potential IPOer, I wouldn't do it
here. None of the small exchanges have any liquidity (look
at the volumes of our friends at Valuecommerce or
Variosecure), and to be on the TSE2, you to have fairly
extensive profits, and (thereby) pay significant taxes.

2. My E*Trade account in the US lets me buy Japan stocks.
It costs around US$20/trade, which is about double the cost
of US-only trades. The transactions appear to be automatic,
taking about 30 minutes, and I believe that you can
transfer money between accounts just as you can in the
USA. I haven't used this functionality, but you can see
more details at

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