TT-735 -- Vested Interests and Abenomics, 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, Nov 17, 2013, Issue No. 735


- What's New -- Vested Interests and Abenomics
- News -- GHQ wanted different hanging method
- Web Content/Tech Job Vacancies
- Upcoming Events
- Corrections/Feedback
- Travel Picks -- Kurokawa Onsen in Kyushu, Dumplings in Yokohama
- News Credits

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On November 7th the nation was treated to the spectacle of Rakuten
CEO, Hiroshi Mikitani, spitting the dummy over a Health Ministry
decision to backtrack on deregulation of Internet sales of OTC drugs,
after being forced to allow such sales per a court decision at the
start of the year. Although the ministry said that it was only
re-regulating less than 1% of the drugs in question, Mikitani's point
is that they are setting the scene for a complete ban on future online
sales of prescription drugs, which is a huge market, worth about
JPY9trn annually.

With this spat, Mikitani is voicing what many other Japanese
businesspeople think, that Prime Minister Shinzo Abe's Abenomics could
be doomed by his government's inability to deal with vested interests
-- in this case, the 100,000 members of the Pharmacist Association.

As we have been noting in our newsletter over the last few months,
while Abe has successfully reinvigorated the stock market by having
the BOJ buy mountains of government debt, thus devaluing the yen and
earning exporters windfall profits, this play only goes so far. Abe's
and the country's problem is that long-term promises to the voting
public, i.e., mostly old people who are expecting lifetime pensions
and almost-free health care, are hard to take back. So if the
government can't contain its ongoing rise in social welfare costs, its
only other option is to raise taxes and induce inflation to stimulate
consumption and thus economic growth.

So Abe has started out right, by focusing on corporate profits and the
stock market, but to keep the momentum going -- his so-called "third
arrow" -- he now has to deal with reform of entrenched sectors that
will supply that growth. The problem is that these sectors are where
the government's (the LDP's) main supporters lie, and thus are
politically difficult to deal with. For example, the Japan Medical
Association (JMA) through its Nippon Ishi Renmei lobby group, is one
of the largest donors of funds to the LDP, and most certainly does not
want sectoral changes that will upset its control of the highly
lucrative medical market.

Neither do those entrenched in pharmaceuticals distribution,
education, pre-schooling, aged care giving, labor dispatching,
agriculture, rail transport, roading management, telecommunications,
postal service, electricity, water, gas, and the thousands of other
public and semi-public bodies that regulate the most financially
rewarding parts of the economy. Indeed, as Mr. Gary Dugan, the Chief
Investment Officer for Asia-Middle East for US$53.4bn U.K. investment
company Coutts said in the recent Bloomberg interview, "The worry is
that Japan is controlled by pressure groups..." Yup, even some of the
biggest investors on the planet know to call a spade a spade.

[Continued below...]

----------- THAI'S NEWEST DESTINATION - SENDAI ------------

On December 3, 2013, THAI launches flights to Sendai, direct and
non-stop from Bangkok. Sendai is the capital city of Miyagi
Prefecture, situated in the heart of the scenic Tohoku region. THAI's
new flights will operate non-stop from Bangkok every Tuesday, Thursday
and Saturday, with TG680 departing Bangkok at 23:59 and arriving in
Sendai at 07.55 on the following day. The return flights will operate
on Wednesday, Friday and Sunday, with TG681 departing Sendai at 10:30
and arriving in Bangkok at 15.40.

For ticket reservations, please visit or call
THAI's Japan number at 0570-064-015, or the international
Contact Center at +66-02-356-1111.


[...Article continues]

Anyway, Mr. Dugan pointed out that his rather sizable fund was
"maximum overweight" on Japanese equities until October, when it
started selling some positions because it was worried about Abenomics
stalling. The fund has decided that two major signals will tell them
if Abe is serious or not, and worth backing. These will be whether he
restarts the nation's nuclear reactors and gets electricity prices
back under control, and whether he will cut corporate taxes.

Dugan points out quite rightly that although Japanese companies are
sitting on about JPY220trn of cash (BOJ estimate for June), they are
not going to pass this on to employees as regular salary increases
until they can see that their cash flows are protected. Dugan says
energy costs and corporate taxes are the key to this happening.
Interesting to see the smart money spell it out for the rest of us.

So will Abenomics be successful or not?

Our take is that it is already too late for Mr. Abe to influence a
further increase in the national consumption of goods and services to
take us past April 2014. Companies are not going to part with that
JPY220trn of cash if they think that the sky is going to fall in next
year. And given that real wages for employees actually decreased this
year, families other than those 15% lucky enough to hold stocks are
not going to be buying a lot of luxuries beyond April either. So we
have a log-jam that is unlikely to be moved in the short-term by
anything the government dreams up in the next 5 months.

Instead, we think that any major change in Japan's economic future
will depend mostly on external factors. For example, will there be
another war in the Middle East? If so, and if Abe gets the nuclear
power stations back on line beforehand, then investors will seek safe
haven in Japanese yen -- actually a very negative event for Japan,
since the yen will move back to JPY80-JPY90 to the dollar. This will
cause government debt servicing costs to sky rocket and most likely
cause panic among investors. Read the theories of hedge fund investor
Kyle Bass in the USA to understand the downside of a massive loss of
confidence in government debt.

Another potential spanner in the works will be if the U.S. or a number
of Japan's exporter neighbors decide that enough is enough and start
competing with Japan to weaken their own currencies (or in the case of
the U.S. they simply strong-arm the Abe government to keep the yen
higher). Indeed, we've been amazed how submissive Korea, Taiwan, and
China have been in allowing Japan to devalue its currency so
dramatically. At some point, most likely when the yen falls below the
100 mark, we expect these countries to start taking much more
aggressive countermeasures, and given the state of relations with
China, this could get very ugly.

So what is Abe to do? The reality is that there probably isn't
anything he can do beyond what is being done now. His problem is that
his countrymen and women like their status quo and will only change
when forced to -- usually by external or extreme circumstances. A
failure by the government to fund its debts would qualify as one such
tipping point. Another would be a trade war or cold war with China or
with several nations all at once. At that stage, the government of the
day, probably years after Abe has retired, will announce national
austerity measures, including limiting social welfare to those who
pass a means test, massive cuts in infrastructure spending, and hiking

The U.K. has been down this road before, and we think it's only a
matter of time before Japan will as well -- but not willingly and not
before it has to. How long? Well if like the U.K., the consumption tax
does go all the way to 20% in the next 5 years, then in absence of
external calamities, we expect the government to buy itself another
10-15 years of dithering at least.

...The information janitors/


+++ NEWS

- JR East looks to expand internationally
- Interesting food export trends
- Yen to head lower against U.S. dollar
- Teacher salaries to be cut
- GHQ wanted different hanging method

=> JR East looks to expand internationally

One wonders why a semi-government monopoly would feel the need to go
abroad, when things are quite comfy at home. Still, whatever the
reason, JR East has announced that it will open an office in London
early next year, making this their fifth overseas. Apparently JR East
is hoping to land a role in the UK's new HS2 high-speed railway to
operate between London the northwest of the country. Estimates are
that the global market for railway infrastructure will hit JPY22trn by
2020, up 20% from last year. The foreign push seems to be working, in
that JR East recently won a major contract for an urban rail system in
Bangkok, bidding alongside Toshiba and Marubeni for the project
against incumbent Siemens of Germany. (Source: TT commentary from, Nov 14, 2013)

=> Interesting food export trends

While Japan Agriculture (JA) may wring its hands publicly about TPP
opening the flood gates for food imports, the fact is that many
farmers are already looking to the future and have concluded that
there are export opportunities in Asia. This Nikkei article focuses on
several companies that are exporting Japanese produce (land and sea)
to SE Asia. According to the article, Japan exported JPY449.7bn of
agricultural and fisheries products in 2012, and the government has
set a goal to increase this to JPY1trn by 2020. Further, it is
estimated that there are now about 56.3m Asians who earn more than the
average Japanese, comprising a promising consumer base for Japan's
high-grade exports. ***Ed: You can contrast that JPY449.7bn number
with the UK's agriculture and fisheries exports, which were about
JPY2.2trn in 2009. Japan has a long way to go to catch up.** (Source:
TT commentary from, Nov 16, 2013)

=> Yen to head lower against U.S. dollar

The Japanese yen closed at 100.01 to the U.S. dollar on Friday, its
lowest level for two months, and this coupled with strong
yen-weakening comments from Finance Minister Aso Taro are indications
of more weakening to come, according to FX experts. In lieu of any
international crises, the consensus is that the conditions are right
for PM Abe's team to push the yen lower still, in an effort to give
the economy enough momentum to get past the rise in consumption tax
slated for next April. ***Ed: The logic is right, in that further
weakening of the yen for the next 5 months will contribute to record
exporter profits and make it difficult for companies to resist calls
to share those profits as wage increases with employees. Problem is
that they will probably pay one-off bonuses rather than increase base
salaries -- further frustrating Abe's efforts to turn the economy
around.** (Source: TT commentary from, Nov 14, 2013)

=> Teacher salaries to be cut

Good editorial in the Japan Times (for some reason their paywall let
us in today) about the Finance Ministry's proposal to cut the salaries
of teachers at elementary and junior high schools. Apparently the
mandarins at the ministry are trying to find ways to cut costs among
government employees, and realized that teachers of little kids get
about JPY100,000 a year more than municipal officers (whoever they
are), and so they are going to reduce the nation's roughly 600,000
teachers by JPY100,000 a year each -- ironic, given that the
government is trying to strong-arm private companies into increasing
salaries. ***Ed: As the editorial points out, one wonders what the
long-term costs to Japan's education standards will be, though.**
(Source: TT commentary from, Nov 16, 2013)

=> GHQ wanted different hanging method

Documents newly uncovered show that the U.S. occupation officials in
1949 tried to get Japanese prisons to change their hanging method,
after it was found that they were using a 19th century system that is
painful and slow. Although the request was made, Japan still uses the
same archaic method today. ***Ed: Apparently the hangman's knot is
supposed to be placed at the left front of the neck, so as to jerk the
head back, break vertebrae in the neck, and sever the spinal cord.
This, according to a lengthy article on Wikipedia, causes the hanged
person to become unconscious almost immediately, instead of taking
10-20 minutes suffocating to death.** (Source: TT commentary from, Nov 17, 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

----------- IT expert looking for part time work ----------

I am a Permanent Resident of Japan, residing in Japan since 2000. I am
operating a business consulting firm assisting Japanese firms
venturing into Indian market. I have 15+ years of experience in
IT/Project management/BPR in Financial industry, am fluent in Japanese
business communications (oral), and possess a MBA in International
management and finance from McGill University Japan. I am looking for
a part-time role of about 4-6 hours per day.

Contact: 090-4206-3881



=> Are you in web content or engineering? If so, this section is for you.


- Experienced Sales Manager

If you have experience selling media, software, or other intangibles
and are bilingual (Japanese and English) and looking for a place to
grow, Japan Inc. Communications is looking for a sales manager to lead
its new media sales team. The role will be to develop the market for
our media products, the largest sites of their type in Japan, and to
grow the sales team to 6-10 people over the next 12 months. The role
involves selling to clients in Japanese, while English is the primary
language in the office. The position is open to anyone with 3-5 years
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Friendly team, interesting technology, incentivizing remuneration
package, and varied work are all part of the opportunity. Please send
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- Bilingual account manager for major tourism portal
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- Bilingual sales trainee for web media properties, JPY2.5M-JPY3M +
10% commission
- Japanese language web project manager, bilingual, JPY4M - JPY5.5M
- English-only experienced PHP Zend software developer, 5 years
experience, JPY3.5M - JPY5M

Interested individuals may e-mail resumes to:




----------------- ICA Event - November 29th-----------------

Speaker: Stephen Givens, Corporate Lawyer based in Japan
Title: "Does Softbank Know What It is Doing Outside Japan?"

Details: Complete event details at

Date: Friday, November 29th, 2013
Time: 6:30 Doors open, Buffet Dinner included and cash bar
Cost: 4,000 yen (members), 6,000 yen (non-members) Open to all. No
sign ups at the door!!!!!!!
RSVP: RSVP by 10am on Monday 25th November, 2013. Venue is The Foreign
Correspondents' Club of Japan

---------------- Start a Company in Japan -----------------

Entrepreneur's Handbook Seminar 15th of February, 2014

If you have been considering setting up your own company, find out
what it takes to make it successful. Terrie Lloyd, founder of over 17
start-up companies in Japan, will be giving an English-language
seminar and Q&A on starting up a company in Japan.

This is an ideal opportunity to find out what is involved, and to ask
specific questions that are not normally answered in business books.
All materials are in English and are Japan-focused.

For more details:



=> Our piece on the Japan Times paywall in TT734 last week drew some
good reactions from readers. Possibly the best one was from a reader
providing some background on how the Japan Times gets its content.
We're always happy to learn something new.

*** Our reader says: In your most recent newsletter you note that
Japan Times offers "news that is relevant to resident foreigners, such
as proposed new legislation, crimes and punishment, and the background
to political events. In this respect, the Japan Times is a valuable
and badly needed community resource, and represents a viewpoint that
is outside the official Japanese reporting world (i.e., the canned
output you might read on Kyodo)."

Without getting into the a debate about Japanese journalism, and
without in any way disparaging the essential role the Japan Times
plays in expat life, I just wanted to point out that a lot, probably
the bulk, of the Japan Times' news coverage of Japan comes from Kyodo.
Surely the Japan Times and other dailies (including Japanese language
dailies) have more latitude to write editorials, analysis, and in
depth features than Kyodo does, as Kyodo is a news wire service. I'd
pull up stories to illustrate my point, but I am still trying to
figure out how to deal with this pay wall myself.

*** We respond: Thanks for your backgrounder. While we knew that JT is
using Kyodo, because of course they state as much when they do so, we
were more relating to the various follow up stories that they have
done on Narita imprisonments of foreigners, the situation in
Fukushima, international child abductions, and other in-depth in-house
reporting that generally they have done a good job on.

That said, for an audience of just 17,000 people (their print run less
the reportedly 10k copies that go to university libraries), you have
to wonder if there is even a role for a newspaper like them in Japan.
It's an all-round tough situation.


---------------- Help Still Needed in Tohoku --------------

The Japan Emergency Team, operator of Japan`s only Disaster Relief
Vehicle is asking for help to keep the Disaster Relief Vehicle
running. The DRV, a 30 foot converted Motorhome sleeps up to ten, has
shower, cooking, facilities and is still on site in Tohoku where it
assisted in providing showers, food and emergency assistance as it
still does. In addition it has a mobile `convenience store` which
provides necessities to those in temporary housing.

The Japan Emergency Team was formed in 1989 when 38 students from Chuo
University went to assist in the San Francisco Earthquake making
history as the first overseas disaster assistance from Japan. When
there is not an ongoing disaster in progress the DRV visits schools,
government and other events to promote disaster awareness and is as
much in demand when there is a disaster as when there is not.

Sponsorship includes a logo on the side of the DRV, participation in
regular disaster awareness events and more. Those able to help are
asked to contact for a sponsorship packet or to invite
the DRV to an event.



=> Autumn in Kurokawa Onsen, Kyushu
Soak up the foliage while soaking in the hot

There's no bad time to be in Kurokawa Onsen but autumn is a
particularly attractive season to spend a few days in this tiny hot
springs village just north of Mt Aso. Early to mid-November brings out
a blaze of maple leaves, both on the town streets and around the
outdoor baths (rotenburo) of the many ryokan (traditional inns). There
is a definitely a winter chill in the air by this time of year, but
what better way to warm yourself than with a dip in the hot springs?
Weekends in Kurokawa can get fairly crowded, so come on a weekday and
you'll find the place pleasantly quiet.

=> Din Tai Fung Restaurant in Yokohama
XiaoLongBao: Savory & delicious soup-filled dumplings

In 1993, The New York Times named this restaurant "One of Top 10
Gourmet Restaurants in the World." In 2012, Los Angeles Times Readers
voted it "Best Chinese Restaurant" of Southern California. Founded in
1958 and headquartered in Taiwan, DinTaiFung has several locations in
Japan much to my delight. If you are already familiar with their
XiaoLongBao then you'll know how extremely good these delicate steamed
dumplings are. If not, then I highly recommend you give it a try.
They're a world famous dish!

What is XiaoLongBao? They are buns traditionally steamed in bamboo
baskets, with a soupy center. According to an article in the Wall
Street Journal, the secret to the savory soupy center is that it is
made with a collagen-rich pig skin that is solid at low temperatures
but melts into liquid when the dumpling is steamed.



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