TT-765 -- Creative Invention is Alive and Well, e-biz news from Japan

An Insider's comments on Japan's high tech business world
* * * * * * * * TERRIE'S TAKE - BY TERRIE LLOYD * * * * * *
A weekly roundup of news & information from Terrie Lloyd, a long-term
technology and media entrepreneur living in Japan.

General Edition Sunday, July 20, 2014, Issue No. 765


- What's New -- Creative Invention is Alive and Well
- News -- Japanese investment in China falls 50%
- Web Content/Tech Job Vacancies -- Account manager/Sales position
- Upcoming Events
- Corrections/Feedback -- Negative side of crowdsourcing
- Travel Picks -- Art in Kyoto, Cycle trails in Okayama
- News Credits

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Looking at the decline of Japan's basic manufacturing sector, it's
easy to get depressed. Low-cost competition from China, an aging
population and a workforce cut down by 7-8m people in just the last 5
years (the "dankai sedai" - baby boomer generation), and the
competitive ossification by large electronics corporations in
particular, make it easy to wonder if Japan has a future. Certainly
the nation's politicians have to work harder to help the country's
industrial base innovate and meet the competitive challenges. This
means their professionally (instead of just politically) picking who
to back in a post heavy-manufacturing world -- not just existing
public firms, but also start-ups with inventions that will change
markets. Cool Japan is a step in the right direction, however, we
worry if the many vested interests in and around the LDP will let the
proper allocation of resources actually happen.

Thankfully, looking at the PER of listed firms we can see that it
isn't whether you are favored by the government that predicts success.
Instead, it's companies which understand innovation and the
international markets -- although it's perhaps somewhat ironic that
the world leader for patent applications was none other than
turn-around challenged Panasonic corporation, which applied for 2,861
patents in 2013, 572 more than second placed ZTE of China. Probably
it's fair to say, though, that Panasonic is a unique hospital case,
and that other Japanese companies on the list are a better
representation of management's ability to innovate and compete. See
the graph/list here:

Clearly Panasonic have problems connecting their researchers to actual
successful products - patents don't mean much if you don't use them.
They'd better hurry up, because foreign patent management companies
are setting up shop here and buying "sleeping" patents from their
competitors. The U.S. patent manager, Acacia Research, owns a massive
portfolio acquired or co-licenced from more than 200 companies
(globally, not just Japan), and has more than 1,300 active contract
licencees. Those companies it co-licences with get a share of the
royalties for the first ten years. This is a great business model that
has attracted more than a few Japanese major players, such as Renesas.
For some reason, patents here seem to get little recognition as having
value until the company gets hit with a law suit for tens of millions
of dollars. Patent protection and prosecution is also a big business
for foreign law firms in Japan.

No doubt thinking that the foreigners shouldn't be left to control the
market for recycling patents, last year the INCJ, a government-owned
investment fund, set up a JPY30bn project to scoop up sleeping
patents. It's not really clear how INCJ will monetize these patents,
and last time a Japanese entity tried to get into the patent
management business, a 2001 fund set up by Inspire with Mitsubishi and
Boeing, it was a failure. Although the Inspire fund bought patents, it
seems that they didn't have the expertise to monetize them and the
fund quietly expired in 2012. INCJ has no doubt been told to protect
Japan's crown jewels by the political powers that be -- but if they
are going to do this, they really need to buy out a foreign patent
management firm (one of Acacia's competitors maybe) so that they can
gain the know-how they will need. This would in fact be a smart move.

[Continued below...]

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[...Article continues]

Anyway, as we mentioned earlier, not everyone is asleep at the wheel
of innovation. Some recent inventions that have caught our eye tell us
that the Japanese have not lost their touch in humanizing their
products to meet consumer needs. The following selection is just a
sampler, but it offers good examples of practical thinking and
application -- mostly by mid-sized players. Maybe Panasonic should pay

1. Tuberculosis fast-detection kits

One company that does seem to have the ability to bridge inventions
with actual customer needs, is pharma-centric Nipro. This Osaka
company has a veritable fountain of projects going on which could
propel their sales and earnings into the ten-billion dollar range in
the next 5-10 years. Their latest announcement is a classic "put it in
a kit and make it easy and cheap to use" business model, something
that Japanese auto makers discovered back in the 1980's helps sell a
lot more cars. Nipro has introduced a tuberculosis (TB) tester kit
that can tell health care workers in less than a day what treatment
will be most effective. Until now, diagnosis would take up to a month,
and required an advanced facility. About 9m people suffer from TB
globally, resulting in about 1m deaths. Nipro has just had its product
tested as effective by a Swiss body, and plans to export kits to Asia
and Africa. If you're an investor, Nipro is a good company to watch.

2. Self deodorizing adult diapers

OK, bad topic, but we all get old, and there are now more adult
diapers sold in Japan than those for babies. Daio Paper has created a
diaper that when it comes in contact with compounds like ammonia or
methyl mercaptan, two components that can cause stench, it emits
additional odiferous compounds which combine with those in the diaper
to produce a soap-like fragrance. Yes, proper chemistry, not just an
overpowering deodorant to mask the smell. This is an invention we wish
we had access to back when our five kids were all in diapers -- would
have saved a lot of embarrassing moments in restaurants and airplane
cabins...! BTW, in case you were wondering, about 17bn disposable
diapers are used every year in Japan. If you took all these diapers
and stacked them up, you'd have a pile that reaches just under half
way to the moon. That's a lot of diapers.

3. Sea fish in artificial sea water

Imagine if you didn't need actual sea water to raise grouper, prawns,
and other sea fish. For a start you'd be able to help poor communities
in deserts around the world have a more efficient source of animal
protein, and you'd reduce the need for polluting coastal fish farms.
This is the vision that a team of Okayama University of Science
researchers had in producing artificial sea water. They have
discovered that healthy sea fish need just three key substances added
to fresh water to make an environment suitable for life. Apart from
the obvious one, salt, they're not giving away any secrets yet, but
they are already receiving visits from researchers and businesses in
SE Asia and the Middle East who want to see if they can licence the

4. Stay-sharp knives

A good example of commercial translation of a materials breakthrough
to a practical product would be from industrial heavy weight, IHI. The
company has been experimenting with combinations of super hard
titanium carbide molded to a softer carrier material such as stainless
steel. What they observed is that as the stainless layer wears away,
the titanium carbide layer acquires microscopic serrations which make
the blade work as if it is sharper. As a result, the new blades never
need to be sharpened other than through this natural wearing
mechanism. IHI tied up with a knife maker in Kochi Prefecture to
commercialize the product -- which they are hoping will be a hit with
professional chefs abroad.

5. High antioxidant broccoli sprouts

Japan isn't the only country in the world with an aging population,
and suddenly baby boomers all over the world are becoming aware of the
importance of antioxidants in diet to reduce lifestyle diseases. One
vegetable with particularly high content of sulforphane is broccoli
sprouts. With selective breeding (non-GMO) these sprouts can contain
up to 100 times the enzyme levels that adult broccoli possess, and
therefore can be viewed as "therapeutic" in strength. A leading
producer of sprout veges, Murakami Farm, is now producing broccoli
sprouts with low bacterial counts -- something which can be a problem
with this kind of product. The company plans to sell production
kitsets based on its seeds and growing technology to Russia and other
countries with limited vege growing seasons.

What all these inventions show us is that Japan can combine its
expertise in manufacturing and materials sciences and go back to the
basics, to create an unlimited pipeline of new and promising products.
Indeed, in May, Japanese companies earned a record JPY481bn in patent
and other IP licences. While a good chunk of this is from group
companies, the flow of income from non-related companies is rising
rapidly as well, and should be all the signal needed for other
players to move from old-style incremental manufacturing to more of a
knowledge-based model.

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+++ NEWS

- Japanese investment in China falls 50%
- Oh, dear, another TOEIC bomb
- Crybaby to be charged
- Rakuten to accept Bitcoins
- Health markets worth US$135.9bn

=> Japanese investment in China falls 50%

According to a report by China's Ministry of Commerce, Japanese
investment in China in the first 6 months of 2014 fell by a massive
50%. The ministry said that national tensions over the Senkaku islands
(Diaoyus in Chinese) have scared the Japanese investors away.
Manufacturing (the bulk of investment most years) and agriculture both
fell, while investment in services actually rose 14.8%. Like the
Japanese fall-off, investment from the USA was also down by 4.6% and
from Europe by 11.2%. ***Ed: No guesses for where that missing
Japanese investment money is going instead -- China+One countries like
Thailand, Myanmar, Indonesia, and Vietnam.** (Source: TT commentary
from, Jul 16, 2014)

=> Oh, dear, another TOEIC bomb

Once again, Japanese learners of English are reminded how poorly they
are scoring on the industry-standard Test of English for International
Communication (TOEIC). Japan came in 40th out of 48 countries, just
ahead of Thailand. This is worse, comparatively speaking, than the
2012 results, and either shows the rest of the world is suddenly
getting better at English, or Japan is getting worse. Looking at the
2012 results online, we can also see that Japan had one of the highest
rates of repeat test takers, at 78%. Apparently about 2m Japanese take
the TOEIC test each year. You have to wonder why the scores don't go
up? Anyway, women scored about 5% higher than men, with 593 points on
average versus 560. ***Ed: No need to say why Japan gets such abysmal
scores in English, it's all been said a hundred times already.**
(Source: TT commentary from, Jul 18, 2014)

=> Crybaby to be charged

Maybe his colleagues got fed up with Japanese politicians being
portrayed internationally as crybabies, because the police have
arrested Ryutaro Nonomura on corruption charges after his resignation
as an assemblyman for western hyogo prefecture. Nonomura became an
internet sensation after crying his eyes out in a public appearance,
over allegations he'd misused about JPY8m on hundreds of visits to
resorts and other venues. (Source: TT commentary from, Jul
18, 2014)

=> Rakuten to accept Bitcoins

Rakuten CEO, Hiroshi Mikitani, has apparently commented in a
presentation to vendors this week that Rakuten will start accepting
Bitcoin payments in the future. Although he didn't say when this would
happen, Mikitani seemed to be indicating that Bitcoin was becoming
more attractive when compared to fluctuating national currencies. [Ed:
No doubt a reference to the quantitative easing programs being
conducted by many countries around the world.]. Rakuten is currently
the 6th largest e-commerce platform in the world, with revenues of
JPY518.6bn in 2013. (Source: TT commentary from, Jul 16,

=> Health markets worth US$135.9bn

Market research firm RnR has released a report stating that the
Japanese pharmaceutical market was worth about US$89.1bn in 2012 and
is expected to grow to around US$104.5bn by 2020. Further, the medical
device market in 2012 was worth approximately US$46.8bn and will hit
US$73.9bn by 2020, a stronger rate of growth than the drugs market.
***Ed: Given that the growth rate for devices (6% CAGR) over drugs
(2%) was significantly higher, we think we can make one of two
assumptions: either the government's forcing down the levels of
prescriptions reimbursement is putting serious hurt on the pharma
sector, or, the devices market has been targetted for increased
spending so as to support Japanese exporters active in this sector.
Take your pick.** (Source: TT commentary from, Jul 19,

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



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=> In TT-764 we discussed comments by the two leaders in crowdsourcing
in Japan, Lancers and Crowdworkers, talking about how their business
models would likely have to change.

*** Reader responds:

Thank you for mentioning some of the negative aspects of
crowdsourcing. It is very dubious from an ethical point of view. One
aspect you don't mention is in cases where many people compete on
projects, most contributors are working *for nothing* ("on spec," as
L.A. entertainment industry jargon has it). It's disappointing to see
that there are some here in Japan who are being won over to that very
American and exploitative mindset, and who have the gall to consider
themselves entrepreneurs by taking advantage of people. I'm reminded
of recent Nobel laureate Robert Shiller's essay advocating a "new and
better form" of indentured servitude (see here:

As for "those remote workers possessing sufficient skills and
differentiation [becoming] the equivalent of bestselling authors and
musicians today," this is wishful thinking. Big successes are more
salient than failures, but the failures so overwhelmingly outnumber
the big successes that usual statistics (bell curves, means, standard
deviations, etc.) don't even apply. This is the case in Hollywood, in
Silicon Valley and in other similarly speculative fields. The math is
quite intense, but read even the beginning of Chapter 4 of Art De
Vany's "Hollywood Economics"
Moreover, in the context you mention, the meaning of "sufficient" is
usually only determined ex post, in a sort of Darwinian/Spencerian
narrative of evolutionary winners and losers.

Better that entrepreneurs direct their efforts into finding equitable
ways of allowing office workers, mothers and seniors to earn a living
at a fair wage, don't you think?



=> Kyoto Municipal Museum of Art
Seeing Art Through Kyoto Eyes

While Kyoto is usually associated with Ukiyo-e and Rinpa art, it has
rapidly developed a reputation as the capital of international and
innovative art, such as the Blanc Nuit or the White Night festival,
held in the fall each year. As one of the most cultured and educated
cities in Japan, it had a long association with European and other
International art and crafts centers, with its heritage influencing
the work of Monet and Van Gogh. One of Van Gogh's works, "Flowering
Plum Orchard: After Hiroshige" (1887) shows the linkage to Japan from
an earlier time.

The City Government has nurtured this association with several
museums, such as the Municipal Museum of Art in the Okazaki district,
otherwise known as the museum mile of Kyoto, and which is located in
the parklands east of the Kamogawa River. With the forested hills of
Higashiyama in the background, this museum, along with Hosomi Museum
and the National Gallery of Modern Art, is a pleasant way to spend a
cultural day, rain or shine. The gallery is in a grand purpose-built
building reminiscent of many galleries from the early 1920s and '30s,
and is a good example of early Showa period architecture.

An example of this association is its partnership with the Van Gogh
association in Holland, which it shares with Miyagi Museum of Art,
Nagasaki's Huis Ten Bosch Art Museum and Hiroshima's Prefectural Art
Museum. It is only natural that they have recently completed an
exhibition called Van Gogh and Paris. Van Gogh's rich paintings of
walks in the forest and country fields capturing light and space, and
even though some people prefer the more two dimensional paintings of
flowers in vases, like the still life painting of roses with
carnations (1886), I believe the picture of the water bottle and the
glass window in Cafe table with absinthe (1887) really shows his
brilliance in capturing the translucent nature of glass.

=> Cycle the Kibi Plain, Okayama
Enjoy temples, shrines and rice fields

Not far from Okayama is a place perfect for bicycle touring. It is
called the Kibi Plain. This is a 17km bicycle route that winds through
charming rural landscape you can imagine. It starts at
Bizen-Ichinomiya station and after winding through rice fields,
temples, and shrines, ends at Soja station. A bicycle rental shop is
conveniently located right in front of Bizen-Ichinomiya Station and
they will rent you a bike for just ¥1,000/day. You can cycle all 17km
and drop the bike off at the other end.

The first half of the bicycle route passes Kibitsuhiko shrine and
Kibitsu shrine, which are very beautiful and, on top of that, are free
of charge to enter. This first half of the route is very well marked.
There are a lot of navigation signs and also Japanese and English
information relating the folklore story of "Momotaro", a young boy who
was born from a peach and who went on defeat demons.



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