TT-492 -- Job Cuts in Full Swing, ebiz news from Japan

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A weekly roundup of news & information from Terrie Lloyd.

General Edition Sunday, November 2, 2008 Issue No. 492


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

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The global nature of the financial meltdown over the last 4
weeks has meant three sure outcomes for major businesses
here in Japan: 1) there is no market in which to seek safe
haven, 2) even the healthiest of large companies is having
to batten down the hatches for a rough 2009 -- this is of
course what is killing the stock market, and 3), a lot of
people are going to lose their jobs.

The job-cutting aspect has already started in a number of
Japanese manufacturers, but looking at the employment
figures put out by the government, you wouldn't know it.
This is because, we suspect, Japanese firms are cutting the
easiest-to-trim sections of their workforces first, and
thus the numbers won't become apparent until the cuts go
deeper into their core full-timer workforces early next

According to the Ministry of Internal Affairs and
Communications, the nation's jobless rate actually fell,
from 4.2% in August to 4% in September -- with about
2.71m people out of work. This means that the workforce
currently numbers around 63.95m people.

As with most things, the USA is much quicker to reflect the
reality of the current turmoil, and there the unemployment
is already at around 6.1% of the workforce, with about
479,000 new jobless registering last month. This is
significantly up from the 332,000 who were unemployed a
year ago, although less than the peak 499,000 registering
after hurricanes Ike and Gustav hit several months back.
Apparently U.S. companies have already cut 760,000 jobs
in the last 9 months.

So is unemployment really down in Japan? Or is this the
calm before the storm?

[Continued below...]

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[...Article continues]

Experts in the USA are predicting that the unemployment
rate there for next year will rise to 8% or more, a surge
of 30% over the current rate. Now, 400,000 newly
unemployed is already considered a recessionary
environment in the U.S., so with even more people set to
lose their jobs, fear will increase and consumer spending
will drop even further. Most Japanese exporters either
make products for global consumers, or tools for
companies that do, and either way they're going to be hit
by the downturn. Although the delay in layoffs may be
longer, because Japanese firms are reluctant to take the
PR hit that comes with layoffs, the fact is that there is
already a precedent for letting people go in an acceptable
manner -- being set by Matsushita and others back in the
late 1990's. So we believe that the job cuts are not long
in coming.

Or, more correctly, perhaps we should say that the job
cuts are already happening, but the local media is
downplaying the trend...

First to go have been the foreign workers in overseas
plants. Two weeks ago, Nissan announced that it would cut
its workforce by 1,680 people at its Barcelona assembly
plant -- one of two major plants the company has in
Europe. This is almost 1/3 of all the people working at
that facility and represents the halting of one of the
3 production shifts. Sales of vehicles in Spain have
plunged 24% in the last 9 months, and when the numbers
finally come out at the end of the year, we expect that
sales for this current quarter might be almost
non-existent. Indeed, Peugot has said that it expects a
17% fall in auto sales in Q4 in Western Europe. We think
the final numbers will be worse and Japanese firms will
share blood shed.

Certainly Toyota knows this, and so the company is laying
off another category of "outsiders" -- non-permanent
workers at its factories here in Japan. Apparently the
company employs 6,800 contract workers, also known as
fixed-term workers, a number which is 2,000 down from March
and 4,000 down from the peak of 10,800 employed in 2004.
Back then, non-permanents accounted for 30% of the
company's total workforce. The thing about these contract
workers is that so long as they are employed for less
than 36 months, then the company can flexibility lay them
off in times of hardship -- as will many other companies
around the country now that Toyota has set the pace.

In addition, in Q2, June-August this year, Toyota laid off
an extra 8,000 temporary workers -- for a total of around
10,000 redundancies so far this year. Are you seeing these
numbers in the major newspapers? Not really. This is
probably because Japan's number one advertiser is sitting
on an estimated JPY4trn (US$40bn) of cash reserves (not
including other assets) which make it difficult for the
company to defend its actions in the Japanese context of
being needed to be seen to be looking after your own. In
this respect, the message clearly is that you need to be
a full-time employee to be considered "one of the Toyota
family". Otherwise you're just a squatter.

Now that Toyota, a core company in the Japanese industrial
complex, has been able to lay off so many people and yet
has drawn no protests from the politicians, bureaucrats, or
press, this portends badly for a large number of Japanese
working in other companies and who are also not full-time
employees. Some readers may recall that out of 64m
(approx.) workers in Japan, a full 33.5% (as of 2007) are
now part-timers, contract employees, temps, freeters, or
otherwise non-permanent workers. For these people, the
on-going downturn represents a high likelihood that many
of them will be handed termination notices over the next
3-6 months.

However, they can't afford to not work. According to a
recent Reuters article, there are now more than 10m
"working poor" in Japan. The term apparently refers to
those earning less than JPY2m (US$20,000) a year.

Lastly, it surprised us to learn in an AP article that the
government does NOT track the number of jobless foreigners.
Surprising if only because we're all paying taxes and
unemployment benefits. Maybe these aren't counted either?

So, given that there are at least 755,000 foreigners (as of
2006) working here in Japan, and probably another 350,000
or so working illegally, you can bet that this group will be
another at-risk segment to lose their jobs. The AP article
says that the government HELLO WORK centers used to
get about 700 foreigners looking for jobs each month, but
in August due to the massive layoffs by auto manufacturers,
the numbers of foreign newly jobless people doubled to
1,500 a month. Local officials note that the number of
Japanese applicants has not changed appreciably (yet) --
so clearly Toyota, Honda, and Yamaha are dumping on
their Brazilian-Japanese and Chinese workers first.

Could be a bleak Christmas for many people.

...The information janitors/


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+++ NEWS

- Surrogate baby born in India to come to Japan
- Former Ambassador Baker starts new consulting firm
- Govt. announces JPY30trn stimulus package
- Panasonic to take over Sanyo?
- Loan reserves for SME's to be relaxed

-> Surrogate baby born in India to come to Japan

In a good demonstration of why the Japanese government
doesn't like surrogate births, a baby conceived of a
Japanese father's sperm and an unidentified donor's egg
and who was born in India in July, has been given a
temporary one year visa to enter Japan with the father's
family. The complication comes with the fact that the man
and his wife divorced before the baby was born and India
does not allow adoption by single parents. Nonetheless, the
family's pleas prevailed and it looks like the man's mother
will be tasked helping to raise the child. Apparently the
baby was born in Anand town in Gujarat state, which is
considered a major surrogate birthing center in India.
Surrogate mothers are available at a cost of around
Rs.100,000 (US$2,500). (Source: TT commentary from, Oct 31, 2008)

-> Former Ambassador Baker starts new consulting firm

Former U.S. ambassador to Japan and prior to that a
Republican senator for Tennessee, Howard H. Baker, Jr. has
announced that he is launching a new consulting service
called The Japan-U.S. Strategic Advisory. The new business
will serve major Japanese companies looking to set up or
develop further in the USA. Baker has apparently lined up
a number of prestigious U.S. advisors formerly with
government or big business, and will provide strategic
consulting, including doing future impact assessments of
near-term business decisions made by his clients. ***Ed:
Good timing, we say. The Japanese definitely need help
navigating the current financial turmoil in the U.S. and
will want to avoid a repeat of their PR disasters that came
with their acquisitions of the late 1980's.** (Sources: and other websites, oct 29, 2008)

-> Govt. announces JPY30trn stimulus package

Not wasting his time with just one stimulus package, PM
Taro Aso has already announced another larger package worth
around JPY26.9trn (US$269bn) -- shades of George W. Bush!
We're not sure whether this second round has been properly
thought out, but the heart of it will be a U.S.-style
JPY2trn (US$20bn) cash giveaway to households. The money is
supposed to provide short-term stimulation of the retail
sector by getting people into the stores -- but we think
most people will save the money, instead. The giveaway is
still being argued about in parliament, with one specious
fight over whether rich people should get any cash -- they
pay tax don't they?! Anyway, the giveaway should result in
the average family of four getting around JPY60,000
(US$600) on a one-time basis. In addition, the package
includes JPY20trn (US$200bn) in loan guarantees to SME
businesses, and there will be a reduction of highway toll
rates. (Sources:, and other websites, Oct
31, 2008)

-> Panasonic to take over Sanyo?

Panasonic's announcement of a bumper financial year last
fiscal year was well timed for a second major announcement
-- the company plans to take over a majority stake in Sanyo
Electric -- perhaps as early as the end of next month
(November). Apparently Panasonic is poised to by a 70%
share of Sanyo, by buying 430m preferred shares from
Sumitomo Mitsui Banking, Daiwa Securities SMBC, and Goldman
Sachs. Sanyo is the world's biggest maker lithium-ion
batteries, as well as owning a burgeoning solar cell
business. Combined, the group sales of Panasonic and Sanyo
for FY2007 were about JPY11.22trn, so the merger would
create the largest electrical equipment producer in Japan.
(Source: TT commentary from, Nov 1, 2008)

-> Loan reserves for SME's to be relaxed

The government has said that it is looking to relax credit
risk screening standards for existing loans to SME firms,
so as to make it easier for banks to extend further loans,
providing the recipient company is making proper efforts
to rehabilitate itself. Currently, when a company asks a
bank to reschedule a loan, even though the company may
be improving significantly, the bank is unable to do so
without first downgrading the company's credit rating --
thus usually resulting in the company being considered a
non-performing loan and thus requiring the bank to put
aside additional loan reserves -- something most banks
obviously don't want to do. This means that there is no way
for a bank to extend a loan, even though they judge that
the company is fundamentally a good credit risk. ***Ed:
However, on the downside, there are apparently JPY57trn
(US$570bn) of loans to borrowers rated as "requiring
attention", one rating above non-performing, and that HAS
to be a big concern! Are we on the verge of another bank
blow-out here in Japan? This time driven by government
mandate? ** (Source: TT commentary from, Nov
1, 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.

------------- Looking for English Magazines? --------------

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Newsweek, National Geographic, Scientific American, People
and many more. is now offering subscriptions to English
magazines at great prices.

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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

*** In TT491, we said in the news section that the extra
costs associated with maintaining health facilities would
require the government to hike consumption tax by 4%. We
then went on to comment: "Ed: Now, this is in ADDITION to
the 10% hike recommended to enable the government to pay
pensions for those in their last few years of working
life. So we're talking about a possible 400% increase in
the consumption tax to look after the nation's elderly by

*** As one of our readers rightly points out:
"The consumption tax in Japan is 5%. A 400% increase would
mean the consumption tax would be 25%. Yet you seem to only
mention 14% of new tax for a total of 19%. Where is the
additional 6% coming from?"

==> Our response:
OK, we admit a math lapse here... The correct comment from
us would have been that the consumption tax will increase
to 4 times its current level.


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Written by: Terrie Lloyd (

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