TT-715 -- Foreign Card Restrictions at ATMs. E-biz 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, June 23, 2013, Issue No. 715


- What's New -- Foreign Card Restrictions at ATMs
- News -- Transgenic organs from pigs within 5 years
- Upcoming Events
- Corrections/Feedback -- Late buses have run for years
- Travel Picks -- Ginkakuji in Kyoto, Sunrise Seto train
- News Credits

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Back in July of 2007, Seven Bank announced that its then 12,000-store network of ATMs would start taking foreign credit and ATM cards, so that foreign travelers could easily withdraw cash from their foreign bank accounts while holidaying or doing business in Japan. There was a small cheer by foreigners all over the country as a result, and another brick in the wall of insularity disappeared. Yes, the nation's post offices already provided an alternative, but Seven Bank's move meant that international ATMs were now available everywhere and that you no longer had to worry about weekend and after-hours access.

To their credit, Seven Bank went whole hog and gave cash access to the holders of most of the biggest operators globally, including: Visa, MasterCard, AMEX, JCB, and China's UnionPay.

Then in December 2009, Seven Bank unexpectedly announced that it would suspend service for MasterCard, Maestro and Cirrus cards, in response to what Seven Bank said, was "A revision in conditions by MasterCard that will impede the Company’s [Seven Bank's] provision of ATM services.” Only a few insiders were privy to what those conditions were, but they were obviously severe enough that the dispute lasted 9 months and service didn't resume until 2010.

Well it now turns out that Seven Bank has once again suspended MasterCard, Maestro, and Cirrus cards, apparently around April 20th (we were slow in learning this), and so if you're one of the burgeoning number of tourists looking to withdraw cash to spend here, you'll be out of luck unless you go to the post office, or one of the few Citibank or Shinsei ATMs.

It seems clear that Seven Bank does want to do business with foreigners, and probably the higher-than-normal (but still cut price) margins it earns from overseas remittances by foreign workers were partly responsible for the bank recording a 13% rise in profit for FY2012, to JPY19.5bn. Indeed, as recently as May, the company announced that by January of next year, its now more than 18,000 ATMs will handle another seven languages, being Chinese, Tagalog, Portuguese, Spanish, Vietnamese, Indonesian, and Thai, in addition to Japanese and English. One can assume from these extra languages that the company has now learned just which nationals have a prevalence of sending money home. Those customers did 190,000 international money transfers through Seven Bank last year and are expected to double that volume in FY2013.

[Continued below...]

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[...Article continues]

We started wondering what is up with this current MasterCard suspension and spoke to several experts in the card industry. From what we can glean, the current dispute is over fees. The problem for both parties is that there isn't a lot of money in Seven Bank's business model, and if fees are too high, then when coupled with expensive new fraud protection requirements, they could force the retail bank out of the foreign funds withdrawal business. Strangely this only seems to be a problem for Seven Bank with MasterCard and not Visa. Oh to be a fly on the wall of their negotiation meetings...

Technical compliance is definitely a major added cost and could have been the straw to break the camel's back. Recently MasterCard and its competitors started upgrading their cards for better fraud prevention and to improve payment services. This is something known in the industry as fraud "liability shift", whereby MasterCard set April as the deadline for its card acquirers to process its EMV-chip card security features for internationally issued Maestro cards or else accept becoming liable for any card fraud that would otherwise have been prevented.

We can't imagine this new requirement went over well with Seven Bank. Doing the sums, if the cost of upgrading an ATM to handle the EMV chips was (just our guess), JPY100,000 per machine, then Seven Bank's 18,000 ATMs would cost it about JPY18bn to upgrade -- an entire year's profit for the bank (not just their ATM business). No wonder then if Seven Bank is saying that "enough is enough", even if the overall purpose of the EMV chips is to make credit cards safer and thus save money.

Anyway, this got us to thinking about the Japanese banking system in general, and we asked one of Tokyo's top payments systems experts, Steve Wiig, for an opinion. He very kindly contributed the following to this week's Take.

[Steve's Commentary:]

Why is Japan’s payment network so disconnected from the outside world? One clue is that at Japan's ATMs, instead of finding the brand logo of a major payment network like Cirrus or Star, you will instead find dozens of logos of individual banks listed. Why? The problem is that Japan's payment networks do not enforce interoperability among connecting institutions. This includes CAFIS, which is operated primarily by NTT Data and enjoys a 70%+ market share for credit card transactions CAFIS is an old-fashioned system that uses a fixed-file format to send transactions instead of embracing the ISO standard 8583 for Financial transaction card originated messages.

Crucially, what that means is that each of the card-acquiring banks on the CAFIS network must negotiate with each separate issuing bank with which it hopes to exchange messages instead of all parties simply abiding by a common standard.

Imagine if mobile phones or Internet browsers could not interoperate and you needed a different phone handset or Internet browser to visit certain websites. This same issue is why many banks offer no interoperability with other banks and why even the banks that try for domestic interoperability give up on processing international transactions.

The status quo locks in customers to NTT Data and its ecosystem of domestic IT vendors. Japan’s banks are awash in mainframes and stone-age IT. Incredibly, most ATMs in Japan are driven by actual mainframes. These monsters require nightly batch runs, which is why there are weekend and evening blackout periods on some ATM networks -- a rarity in most modern countries. Conversely, complying with international standards of payment networks such as Star and Cirrus requires a discipline of complying with periodically updated messaging requirements based upon ISO 8583, and that is beyond the capability of many domestic banks. Equally, domestic banks just don’t see services to international customers as a priority, so it's a Catch-22 situation.

But it seems to me that Japan’s disconnect from international ATMs is a serious problem for a government which is trying to increase tourism and host the 2020 Olympics.

Fortunately there are recent precedents for the government reforming structural problems in Japan’s bank infrastructure. Zengin-net was established in 2012 as the clearing agency in Japan for electronic funds transfer, after receiving a license for the fund clearing business in September 2010 after the "Payment Services Act" was enacted. This reform measure replaced outmoded methods and implemented an updated SWIFT standard. Further, the Act On Settlement enacted in April 2010 liberalized the market for non-banks such as Paypal, Brastel and Toppan (which prints pre-paid cards.


[Ed: Back to our commentary.] While we're not sure that government deregulation in the banking network overall is going to help Seven Bank in its dispute with MasterCard, there probably is a role for the government in subsidizing domestic banks for the costs involved in internationalizing their operations and in particular their ATMs. Tourism has been picked as one of the few future industries that Japan feels it can use to compete against its low-cost neighbors, so anything that makes it easier for foreigners to spend more money here should be viewed as a matter of priority. Luckily, there are only a few standards to comply with and mostly they fall under Visa, MasterCard, and country-specific issuers like UnionPay.

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+++ NEWS

- Transgenic organs from pigs within 5 years
- HPV vaccine no longer recommended by Health Ministry
- Kyocera-Mitsubishi-JA deal on solar
- Serial fraudster shows up at Microsoft
- Exports revenues up 10%, volumes still down

=> Transgenic organs from pigs within 5 years

New guidelines likely to be approved by the government will allow Japanese scientists to push ahead with a plan to grow and harvest human organs in pig donors. The scientists are planning to start with pancreases first, then move on to other organs such as hearts and kidneys. With easily purchasable pancreas transplants, the first wave of beneficiaries are likely to be diabetics. ***Ed: With Japan promoting medical tourism to Asia, one wonders what Muslim patients will think of this potential new source of organs?** (Source: TT commentary from, Jun 21, 2013)

=> HPV vaccine no longer recommended by Health Ministry

In an interesting conflict with thinking in health circles abroad, the Ministry of Health has stated that it is withdrawing support of the active vaccination of teenage girls for HPV. The government is not banning the use of HPV vaccines, but has told local governments to no longer promote their use. The Ministry says it wants to study for itself claims that the vaccines can cause severe side effects, including death, convulsions, paralysis, and GBS. ***Ed: Conversely, just a day before this government announcement, there was a report released by the CDC in the USA showing that in locations where the HPV vaccination was carried out, there has been a reduction of the incidence of HPV infections in girls aged 14-19 by 56%, from 11.5% of the population to 5.1%. Tough to know whether the vaccinations are risk-free enough to do them or not, and in the end our family decided against them.** (Source: TT commentary from, Jun 20, 2013)

=> Kyocera-Mitsubishi-JA deal on solar

In a classic move by Japan Inc., Kyocera, Mitsubishi, and the National Federation of Agriculture Cooperative Associations (Zen-Noh) have agreed to start rolling out mini-solar facilities on barns, distribution centers, and parking lots all over Japan. The project will start out with a 30MW target at thousands of locations, and by the end of 2015 will expand to 200MW -- becoming one of the largest solar networks in Japan. ***Ed: What's the bet that this is Zen-Noh's opening gambit to having the government allow farmer members to expand and reclassify some of their under productive farm land as solar farms instead? Anyway, seeing such a powerful lobby group get into solar has one good outcome: it means that the subsidies for solar power are probably here to stay.** (Source: TT commentary from, Jun 21, 2013)

=> Serial fraudster shows up at Microsoft

Demonstrating how difficult it is to take action against wayward employees, a recent news item on RocketNews reports on the case of an IBM Japan consultant who embezzled about JPY100MM from the company between 2005 and 2009, then after being fired moved on to a similar job at Microsoft Japan and was caught doing the same thing there. The article doesn't go into the details, specifically as to whether IBM took legal action against the employee, but it is clear that Microsoft at least filed a complaint. Notably, it took a full 18 months for the police to take action and actually arrest him. (Source: TT commentary from, Jun 20, 2013)

=> Exports revenues up 10%, volumes still down

Depending who you talk to, Japan's export sector is either doing great or it isn't. The overall 15% devaluation of the yen against the dollar has meant that on a revenues basis, the value of exports rose 10% in the year through to May, compared with investor expectations of just 6.5%. On the other hand, by volume, exports were still down 4.8% over the same period last year. ***Ed: Smoke and mirrors?** Reassuringly, analysts are saying that the yen devaluation overall has created more benefit than the extra costs it has created -- pointing to the fact that while fuel for power plants contributed to a JPY994bn trade deficit, earnings on overseas investment income brought the current account back into the black. Exports to the United States rose the most, by 16.3%, while those to China were up 8.3%. (Source: TT commentary from, Jun 19, 2013)

NOTE: Broken links
Some 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

=> In TT-714 we carried a news item about the Tokyo Metropolitan Government starting trial late-night bus services between Roppongi and Shibuya. As a reader points out, this isn't really news...

*** Our reader says: This piece is out of touch. There have been late night buses out of Shinjuku (for those who miss the last train) for many years. They are not cheap, and don't run 24 hours, because an overnight in a manga kissa for say 1,200 yen, or a capsule hotel from mid-night to 5 or 6 am, are much cheaper options. At a late enough hour -- when SobudaiMae (between Sagami Ono and Ebina) becomes the last stop for trains from Shinjuku -- it costs maybe 4,000 yen and a long wait in line for a midnight taxi ride from SobudaiMae to Ebina or Hon Atsugi. So late buses from Shinjuku have to be cheaper than that. Dormy Inn in Akihabara is one example of a hotel offering a limited number of discounted short-term stay options (on a sign outside) -- the discounts may or may not be for short-term *daytime* stay, but Toyoko Inns (for example) offer discounts to as low as 4,800 yen or so after 11pm if rooms are free. Further, local bus companies in the suburbs have been offering "shinya" late-night bus services for many years: e.g. buses from 11:20pm, costing around twice the normal fare.



=> The Zen & Moss Gardens of Ginkakuji, Kyoto

Built in 1482, Ginkakuji was originally built near the Eastern Mountains of Kyoto as a retirement villa for Shogun Ashikaga Yoshimasa. The initial plan was to make something similar to the famous Kinkakuji or Golden Pavilion, located near Kyoto’s northern mountains, which belonged to Yoshimasa’s grandfather, Ashikaga Yoshimitsu. Instead of covering the pavilion with gold, Yoshimasa wanted to use silver. During its construction, the work had to stop due to the Onin War. The initial plan to cover the pavilion with silver was never completed before the death of Yoshimasa in 1490. It was then decided to leave the pavilion as it was when its owner died. The Pavilion was later transformed as a Zen temple.

Today Ginkakuji is famous not only for its main building but also for smaller temple buildings, a moss garden and a beautiful Zen garden in which the focus point is the sand mound representing Mount Fuji. Around this mound are sand raked waves referring to a view from the moonlight. This garden requires the work of many employees truly dedicated keeping it in good condition, and you will surely see one of them when you visit the temple.

=> Takamatsu to Tokyo by Train, Kagawa
Float by Okayama & Himeji on the Sunrise Seto

In the past, many night trains operated throughout Japan. Some trains had sleeping cars and a dining car, while others with sitting cars only. However, due to the development of the Shinkansen (bullet train) network and popularisation of air travel, most of them became defunct. Today there are only four regular night trains. These are: the limited express train Sunrise Express (Sunrise Izumo between Tokyo and Izumo-shi and Sunrise Seto between Tokyo and Takamatsu), the limited express train Hokutosei (meaning the Big Dipper or the Wain) between Ueno and Sapporo, the limited express train Akebono (meaning dawn) between Ueno and Aomori and the express train Hamanasu (meaning rugosa rose) between Aomori and Sapporo. Luxury trains such as the Twilight Express between Osaka and Sapporo and the Cassiopeia between Ueno and Sapporo only operate irregularly.



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