TT-793 -- Who Does Well with a Weak Yen? 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, February 22, 2015, Issue No. 793

- What's New -- Who Does Well with a Weak Yen?
- News -- Delicious goats too tempting for trainees
- Upcoming Events
- Corrections/Feedback
- Travel Picks -- Light Up in Shirakawago, Samurai Mansion in Fukuoka
- News Credits

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Back in November 2012, just before Abe was elected Prime Minister, an
analyst with the European asset management firm, Pictet, confidently
opined that the depreciation of the yen up to that date had probably run
its course, and that the currency would stabilize at JPY82=US$1.00. Now,
18 months later, he no doubt regrets having made that call...!

Instead, with the US dollar now at around 119 yen, it seems that it has
a good chance of softening even further. In the last 26 months the
currency has depreciated a stupendous 53% from the pre-Abe high of 78
yen. We remember the days when a 30% currency change over 2 years was
considered dramatic and destabilizing, and yet here we are at more than
50% and mostly we sit back and complain about how things are getting
more expensive. Thankfully there is a global oil glut, otherwise, lives
for ordinary Japanese could be significantly worse.

And we have to laugh when people like Finance Minister Taro Aso blithely
say things like, "Monetary easing is aimed at pulling Japan out of
deflation quickly. It is not accurate at all to criticize (us) for
manipulating currencies." With a 53% devaluation in the yen but annual
year-on-year inflation of just 2.4% (and over the last 9 months, just
1%), either the Finance Ministry is incompetent in figuring out what
drives inflation or the nation just got very lucky being able to halve
the value of its currency while barely stimulating prices.

And we certainly don't think the Finance Ministry is incompetent.

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[...Article continues]

In forcing the yen down, no doubt the government was thinking to prime
the country's export engine and rebuild company profits so as to
increase the tax base. The problem has been that exports only amount to
about 16% of Japan's GDP and many companies have already moved
off-shore, so the net benefit of the cheaper yen has been muted. Those
companies who are in the service sector or who rely on imported
materials/products but don't export again are suffering. Sure enough,
Teikoku Databank announced back in November last year that bankruptcies
with liabilities of at least JPY10m were up 120% in October, and 180% in
the first 9 months of 2014.

Darwin's law at work.

The winners at present are those companies who have a vertically
integrated set of processes -- where, for example, black iron sand that
arrives in ship cargo holds can be transformed into cars without having
to send interim processes and components off-shore again. This means
that manufacturers who have kept their vertical stacks in Japan, such as
Toyota, are benefiting hugely. Another example is Japan Display, an
amalgam of LCD units from Sony, Toshiba, and Hitachi, which is
apparently in discussions with Apple to build a massive new JPY200bn
plant in Ishikawa-ken, to keep up with booming demand for high-grade
mobile displays.

But there are other beneficiaries of a weaker yen. An obvious one that
we cover frequently is inbound tourism, where foreign tourists are
apparently spending about JPY2trn (US$16bn) annually. Remember, this
number doesn't include employment and other flow-on spending in the
tourism sector. So, given that Japan's GDP is about JPY588trn
(US$4.9trn), inbound tourists are spending their way to about 0.4% of
the GDP. Once you factor in the flow-on effects, inbound travel is
creating more like 1% of GDP -- and this number will probably double in
the next five years.

Another big beneficiary of the lower yen is real estate -- of any kind.
Foreign commercial real estate purchases hit JPY977.7bn in 2014, the
highest in the last 11 years, and up 80% over the previous record
investment year, 2007. Purchases of office buildings in downtown areas
led the way in terms of value, but there was also strong demand for
hotels, holiday homes, and residential real estate. As a comparison on
office rent, for a Tokyo baseline of JPY100, an equivalent property in
Hong Kong would cost JPY165.6 and in London JPY146. Office vacancies are
now at a 6-year low of around 5.5%.

You don't normally think of primary produce as a big export earner for
Japan, and until now nor has it been. However, funds are starting to
flow within the agriculture and fishing sectors for projects that will
help bump Japan's exports up towards the PM's goal of JPY1trn by 2020.
In the first 9 months of 2014 exports were JPY336bn, an increase of 9%
over the same period in 2013, so maybe things are finally starting to
move. At first there was concern that the high cost of fuel would
scuttle plans for fishing in particular, and there were reports of boats
remaining tied up at shore because the cost of diesel made each foray a
money-losing proposition. However, the recent fall in oil prices seems
to have removed that hurdle, for now anyway.

What is especially good about fishing is that it is not limited by land
area, and with the recent acceleration of fish farming, high-value
inventory is starting to appear in the markets. We were amazed when we
heard that Japan will shortly start selling farmed Amberjack in Vietnam
-- almost a coals-to-Newcastle scenario. Farmed Tuna is another strong
opportunity, and now that Kinki University has cracked raising farmed
tuna from eggs of captive parents, they are already breeding and selling
fish to restaurants in the USA. Japan has a massive 4.4m km2 of
territorial waters, the 8th largest Exclusive Economic Zone (EEZ) in the
world, and so they are not going to be running out of space to put those
fish farms any time soon.

Do we believe that the yen weakening will go too far and there will be a
confidence crisis by investors? Possibly. But it's more likely that the
nation's employers will adjust and we will see exports and inbound
spending leap as a result. If the general population has to suffer in
the meantime, that is nothing new, and if any population is willing to
suffer for the general good, it's the Japanese. We think the bigger
threat is a currency war by Japan's neighbors. Some of these countries
(think Korea, Indonesia, Vietnam, and Thailand -- and, of course China)
are really starting to feel the effects of the weak yen, and they are
likely to take aggressive and potentially destabilizing currency
weakening actions of their own as a result. This will not only stymie
Japanese efforts but also likely cause trade friction which could become
nationalistic in nature.

...The information janitors/


+++ NEWS

- Free translation service translations made public
- Japan Post buys Toll Holdings
- Delicious goats too tempting for trainees
- Cool Japan does translation, subtitling
- Survey confirms gender-based wage discrimination

=> Free translation service translations made public

As The New Yorker's Peter Steiner once pointed out, one of the problems
of the internet is that no one knows if you are a dog. Such was the case when a Chinese software
developer created a free translation service that has become popular in
Japan, and which company and government employees were using to
translate internal documents. Unfortunately for those users, their
translations were then stored in viewable web pages, meaning that even
sensitive documents were available for anyone to see. As a result, the
government's cyber security organization, NISC, will ban government
employees from using free translation sites in the future. (Source: TT
commentary from, Feb 20, 2015)

=> Japan Post buys Toll Holdings

Japan Post has announced that it will buy out Australian logistics
company Toll Holdings, for around US$5.1bn. The high price is about 11
times expected FY2014 earnings and a 49% premium over the company's
current stock price. It does make sense, however, when you look at the
stampede of logistics firms wanting to grab e-commerce shipments
business. The Toll acquisition will give Japan Post access to Toll's
global footprint of 55 countries and significantly improve the company's
ability to compete. Coincidentally, a second Japan-focused logistics
acquisition happened on the same day, when Kintetsu World Express bought
out Singapore-based APL Logistics, for US$1.2bn. Clearly logistics
companies servicing e-commerce giants are on the move. (Source: TT
commentary from, Feb 18, 2015)

=> Delicious goats too tempting for trainees

It may not be front page news, but it appears that one of the downsides
of not paying Asian "trainees" enough to work in Japan's factories is
that they are always hungry. Not only is this inconvenient, in the case
of two Vietnamese trainees, it was fatal for two goats eating parkland
grass for a research project. Apparently the two young men, who are now
in custody and who face two-year prison terms, were caught after killing
and eating the goats for a birthday party. The two are awaiting
sentencing now. (Source:, Feb 21, 2015)

=> Cool Japan does translation, subtitling

From ramen shops to translation companies -- Cool Japan has an
interesting take on its mission to spread Japanese culture through
innovators around the world. Imagica Robot Holdings, previously a
company related to Kodak in Japan and one of Japan's largest video
post-production companies, has co-invested with Cool Japan and Sumitomo,
to buy out a Los Angeles translation, subtitling, and dubbing company
called SDI. The three partners paid a staggering US$160m for the
privately owned company. Imagica will hold 50.1% of SDI, but it appears
that they will leave the existing management to continue running the
business. SDI has 1,000 employees spread across 37 countries. Clients
include Sony, Warner, Paramount, Fox, Netflix, Hulu, and Google -- in
other words a who's who in digital content. (Source: TT commentary from, Feb 19, 2015)

=> Survey confirms gender-based wage discrimination

The health ministry published its annual Basic Survey on Wage Structure
and confirms yet again that the wage gap between men and women is
significant and efforts to achieve parity are moving at a glacial pace.
Female wage earners made an average JPY238,000/month, compared to
JPY329,600 for males, putting the women on average at 72.2% of men. This
was actually the highest wage for women since data was first compiled in
1976. The survey also shows that while the average monthly salary
increased 1.3% in 2014, to JPY299,600, the increase was well behind the
2014 average inflation rate of 2.7%. ***Ed: No wonder consumers are
keeping their purses closed.** (Source: TT commentary from, Feb
20, 2015)

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.



No events to announce this week.


=> No corrections or feedback this week.



=> Fairytale Winter Tour: Shirakawa-Go, Gunma
A Surreal Landscape of Shirakawa-Go Light-Up Event

Beautiful photos of the Ogimachi Village in Shirakawa-Go deep under the
snow were included in one of the articles about Japan that went viral in
social media. This made me very interested in the location and I did
some research on the internet and found out it was only 5.5 hours from
Tokyo. Based on popular reviews, Ogimachi village is best (magically)
viewed during the Light-Up Event on selected weekend nights in the
winter season. Without further ado, I planned my trip a month in advance.

Shirakawa-Go is based in the Shokawa Valley in Gifu Prefecture. It's
main attraction is the Ogimachi Village, which features 59 gassho houses
and which was declared a UNESCO World Heritage Site in 1995 along with
the villages of Ainokura and Suganuma in Gokayama, Toyama Prefecture.
These houses are known for their unique steep thatched roofs shaped like
gassho or "praying hands" and interestingly, no nails were used to build
them. Most families in these villages were involved in the cultivation
of silkworms and produced silk until the 1970s.

=> Ohana Estate, Fukuoka
A samurai mansion in central Yanagawa

The Ohana Estate, former residence of the Tachibana family, occupies
prime real estate in the center of the canal city of Yanagawa. The
Tachibana family had been important supporters of Hideyoshi Toyotomi and
were rewarded with land in present-day Yanagawa for their loyalty.
Although they lost their position when the Tokugawa clan rose to become
shogun, by the 1620s, they had reclaimed their place of power in
Yanagawa and remained the lords of the region until the Meiji Restoration.

Every ruling family needs an impressive home and the Tachibana family
was no exception. The estate was begun in 1697 on a parcel of land
surrounded on all sides by the canals. The current Western-style
buildings were constructed by the 14th descendant in the family in the
early 1900s. While the original house was officially known as the
Shukkei-tei, the house has long been called Ohana. The land itself was
once known as hanabatake (flower field) by the locals and the nickname
for the villa just stuck.


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