TT-510 -- Bargains and cheap won

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A weekly roundup of news & information from Terrie Lloyd.

General Edition Sunday, Mar 22, 2009 Issue No. 510


- What's new
- News
- Candidate roundup/Vacancies
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- Corrections/Feedback
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A Japanese business acquaintance who usually travels
overseas to the U.S. or Europe excitedly reported that she
and her girlfriends were this year planning to go to
Seoul, South Korea on a shopping expedition. According to
her, the Won has dropped so much, they can buy brand goods
for discounts of up to 50%, which easily "pays" for the
cost of the journey and the hotel bills.

This coterie of Japanese middle-aged ladies is not alone.
This year they are part of a major trend, of Japanese
exploring their nearest foreign neighbor in a replay of the
Winter Sonata boom that started back in 2002, when Korean
heart-throb Bae Yong Joon appeared in the iconic TV series
on NHK national TV. According to JTB and other major tour
agencies, although overall the number of Japanese tourists
heading abroad overall fell by 10.5% last month, the number
of tours going to South Korea rose by 24.6%.

Bookings to South Korea for Q1 are apparently up by 100% to
200% depending on the tour agency. The Japan Association of
Travel Agents reckons that most of the increase is due to
women going on shopping sprees and to beauty spas at luxury
Seoul hotels. ANA has had to add an extra daily Osaka-Seoul
flight to keep up with demand, and Asiana Airlines has
announced that it will start flying between Incheon and
Ibaraki from next year, with the expectation of carrying at
least 28,000 passengers a year.

[Continued below...]

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[...Article continues]

The precipitator for this travel boom is of course the
dramatic drop in the value of the Korean Won versus the
Japanese yen. The won has plunged since last September from
under 10 won to the Japanese Yen to 14.8 last week, a drop
of almost 50%. Earlier this month, the currency was at its
lowest levels against the yen and U.S. dollar in over 11

The 250,000 Japanese tourists traveling to Korea in
January, up 55% over the same period last year, are of
course delighted. According to luxury brand retailers in
Seoul, sales are soaring. Lotte Shopping, South Korea's
largest department store chain is reporting that in Q4
2008, profit was up 22%. A 100ml bottle of Chanel No. 5
perfume that in Tokyo would cost around JPY20,000 (US$208)
in Seoul costs just US$125. Apparently OL's are not just
snapping up perfumes and Gucci handbags, but are also
hitting the casinos as well. The Korean government reports
that 64% of the 105,168 visitors to foreigner-only casinos
in Seoul and Busan last month were Japanese.

While Japan-Korea tourism is booming, the previously high
numbers of Koreans making their way to Japan has naturally
fallen by a similar level, with noticeable effects on local
economies that have been previously benefiting from the
Korea trade -- such as retailers and hotels in Fukuoka.
There was a 52.3% drop in visitors from South Korea, to
129,600 in January, the biggest single-month fall since
1991. Luckily for Kyushu, visits by Chinese to Japan are
still picking up and the number of Chinese increased during
the Lunar New Year by 31.4% over the same period in 2008.

The cheap Won appears to be helping South Korea immensely
on the trade balance front as well. While exports from
that country fell 17% in February compared to a year
earlier, this is actually a pretty good result compared
with the frightening 46% drop in Japanese exports in
January. Then this week, it was announced that South Korea
in fact recorded a record trade surplus of US$4bn for March
versus a year earlier. Yes, exports were down again by
13.4%, but due to their weak currency, imports were down a
much larger 40.3%, thus providing a handy surplus.

It's anyone's guess as to how long the cheap won will
continue and whether this will really help the country
trade its way out of trouble. Experts are saying that
Korea, much like Japan, can only expect its economy to
improve once consumers start spending again. According to
the IMF, South Korea's GDP is expected to fall by 4% in
2009, setting a low benchmark point for a 4% recovery in

In the meantime, however, the Bank of America has said that
the won is the "most undervalued currency in Asia" and thus
one thing is for sure -- with good food, shopping, and
luxury pampering being a lot cheaper for harried Japanese
business women and housewives than ever before, their
numbers traveling to Seoul and Busan are likely to keep
climbing. Thus we imagine that this bout of
recession-induced trade will do as much for inter-country
relations as Yon-sama did in the early 2000's.


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+++ NEWS

- Major setback for JGC
- Online content revenues to climb
- Financially weaker firms give up on bonds
- ETC equipment in short supply
- Katagi working for Picsel

-> Major setback for JGC

Oil refinery construction company JGC had a major setback
this last week, when a massive Kuwait oil refinery project
was canceled. JGC was scheduled to provide about US$4bn of
construction materials and services for the project, out of
a total project value of around US$14bn. JGC shares fell
around 8.2% on Friday alone, the biggest decline of the day
on the Nikkei 225. The cancellation was apparently due to
opposition political pressure over the awarding process for
the contracts. (Source: TT commentary from,
Mar 16, 2009)

-> Online content revenues to climb

A study done by the Tokyo-based Fuji Chimera Research
Institute has concluded that the market for digital content
sold online will continue to rise apace, reaching sales of
JPY630.5bn (US$6.57bn) by 2012, up 29% from last year. The
institute reckoned that video and music purchases by
individuals and families, and e-learning by corporations
would continue to experience strong growth. (Source: TT
commentary from, Mar 20, 2009)

-> Financially weaker firms give up on bonds

Widening spreads in bond yields are causing financially
weaker companies to abandon plans of raising capital in
the public bond markets. The Nikkei says that companies
with BBB or lower credit ratings are now having to pay up
to 5% higher yields than government bonds (JGBs) to
bond buyers -- the highest rates in more than 20 years.
As a result, the number of BBB-class issuances dropped
77% from last year. Issuances by healthier companies
are still very active, however, and around JPY725.2bn of
bonds are expected to be sold in March 2009. (Source:
TT commentary from, Mar 19, 2009)

-> ETC equipment in short supply

The government's strategy of radically cheaper pricing
for the nation's expressways in the weekends is clearly
having the desired effect. The cheaper tolls only apply
to drivers with cars fitted with ETC highway payment
devices, and thus there has been a run on ETC devices
around the country. Leading auto parts reseller Yellow Hat
reports that they have sold 30 times the usual volume of
ETC devices in the last month. The devices are being
subsidized, and these subsidies were supposed to end at
the end of March. However, because of the shortages, the
government assistance will continue through to April at
least. ***Ed: This is a clear example of how the
government can "move" the markets -- by deregulating
and strategically dropping taxes.** (Source: TT
commentary from, Mar 20, 2009)

-> Katagi working for Picsel

Although a week out of date, we were interested to see a
press release stating that Scottish browser software
company Picsel Technologies has hired ex-NASDAQ Japan CEO,
Ted Katagi, as Global Chief Operating Officer (COO). Picsel
has gained notoriety recently by launching a massive
lawsuit against Apple Inc., over that company's iPhone and
iPod products. The lawsuit involves Picsel's browser
patents. Here in Japan, Katagi has done a deal with
Kyocera, whereby that company will licence Picsel’s UI
Platform for high-quality photo and image viewing on mobile
devices. (Source: TT commentary from,
Mar 10, 2009)

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.

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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 our issue TT507, we covered the demise of Access
Technologies, a leading Tokyo recruiting firm. A reader
kindly pointed out several apparent inaccuracies in the

==> Reader: You've probably heard already, but your article
on Access Technologies had a couple of inaccuracies which,
while they don't affect the overall meaning, I'm sure
you'll want to know about.

First, ATI did not go bankrupt. Bankruptcy is a situation
where a company's liabilities exceed its assets and is put
into receivership either by its creditors or voluntarily to
avoid seizure of its assets as collateral. ATI closed down
of its own volition, and paid its staff compensation and
its creditors (if any), as far as I know.

Second, Wise Partners is not a unit of DBJ, it is an
independent private equity fund. Wise has a business
alliance with DBJ, who is an investor in the fund, is my

*** Our Response: There is in fact a receiver appointed to
dispose of the assets of the company, which would indicate
that in reality this was a bankruptcy. Therefore, we're
sticking to guns on this part of the story.

The relationship between Wise Partners and DBJ is a bit
more complicated. On page 88 of the DBJ English-language
CSR report, the bank notes that: "Entities not considered
to be subsidiaries where DBJ has more than a 50% ownership
interest... as of March 31, 2008 are mainly as follows:
ADS Global Partners Ltd., Wise Partners Co., Ltd..."

Frankly, we can't see how a company owned more than 50% by
another can't be considered a subsidiary, but we asked DBJ
and they told us that indeed the two parties are no longer
related... so perhaps the Wise management conducted an MBO.
Unfortunately there is no record of any MBO details on the
web. It would be helpful if Wise Partners actually had a

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