Sunday, January 17, 2010 – Osaka, Japan
Nikkei, Japan’s leading newspaper specialized in economy/business and politics, reported January 13 through 15 2009 that long-discussed turnaround of JAL (Japan Air Line) is finally to start. On condition that Corporate Reorganization Act is to be adopted, hurdles to accept support from public institution of “Company Turnaround Aid Institution” have been finally overcome, and the new CEO is appointed. JAL, which had tried to reinvent before in vain, will try again with full support from the government as its last chance.
1. What has been happening until now？
JAL’s turnaround has been under discussion for a long time and it was decided to be done under the Japanese government’s control as explained in the previous article JAL to be GM of Japan – Turnaround under Government’s Control. However, stakeholders (financial institutions, government, JAL employees retired and currently working, etc.) could not come to a consensus the methodology of the turnaround, especially financing, and revision of turnaround plan and negotiation had been ongoing even after the policy of government’s interference was announced on October 24.
2. What had been the hurdles to proceed with the turnaround?
In short, there were the following 4 topics that had been under discussion.
1) What the framework of turnaround methodology to be?
There are a number of methodologies of turnaround of a company, including usage of Chapter 11 equivalent law/Corporate Reorganization Act, or other options, which would determine action plan. It took a while to finalize this point.
Stakeholders finally agreed to adopt Corporate Reorganization Act, which is to be the perquisite to gain support from public institution of “Company Turnaround Aid Institution”.
2) Which turnaround strategy/option to adopt?
3 turnaround strategies/options were proposed, each with different amount or capital needed for turnaround depending on the degree and details of restructuring. The biggest issue under discussion was review of unprofitable international flights. The most drastic option was integrating international flight with ANA (All Nippon Airways), which required minimum capital investment for turnaround.
JAL having been the primary international flight company of Japan, the most drastic option was neglected and was agreed to minimize investment for turnaround by improving cost structure with measures including cutting some affiliates, flights, jobs and pensions, and replacing half the jumbo jet engine airplanes with smaller, more energy-saving airplanes.
3) Will employees, retired and currently working, agree to reduction in pension benefit?
Reduction in pension has been another hot topic for discussion. Reserved amount of JAL’s corporate pension (including post-receipt of retirement allowance by installation, interest rate much higher than average bank interest rate) is insufficient by approximately 450 billion yen at present, and has been requesting 15,700 employees and 8,900 retired employees to accept reduction in pension. If they agree to accept the reduction, the reduction of pension benefit would be 30% in average for retired employees and 50% in average for current employees. And if two-thirds or more of them do not agree, the pension system could not be revised and the reduction of pension benefit would be much greater.
Despite the critical management situation of the company, many retired employees in particular were reluctant to agree to reduction in pension benefit. This probably attributes mainly to their old, conservative mindset, believing that JAL will never go bankrupt, cannot forget the good old days of JAL and not really aware of the hard reality of today’s struggling JAL, and also how corporate pension is managed. Since corporate pension includes retirement benefit to be paid by installation, reduction in corporate pension means reduction in retirement allowance, and retired employees may well need to drastically change their family financing plan.
Employees currently working accepted the reduction relatively straightforwardly, then they made maximum efforts in persuading the retired employees to accept the reduction until the last minutes of deadline of January 11. They finally managed to win the minimum two-thirds of agreement.
4) How to overcome financing and avoid shortage of working capital?
To overcome financing (i.e. avoiding shortage of working capital), the government asked financial institutions to write-off the debts similarly to previous turnarounds initiated by IRCJ (Industrial Revitalization Corporation of Japan) and to assist in bridge financing. It was natural for the financial institutions not to easily agree on this point when the satisfactory turnaround plan had not been presented to them.
On January 12, the 3 major financial institutions (The Bank of Tokyo-Mitsubishi UFJ, Mizuho Corporate Bank and Sumitomo Mitsui Banking Corporation) finally changed their stance/policy and agreed to accept the support from public institution of “Company Turnaround Aid Institution” on condition that Corporate Reorganization Act is to be adopted, after Mr. Maehara, Minister of Land, Infrastructure, Transport and Tourism presented them with the government’s policy of supporting turnaround methodology of pre-package (coordinated beforehand).
And the government is to provide JAL of capital support, which was finalized as much as 1 trillion yen.
3. What is the business restructure framework/plan of JAL?
JAL is to accelerate developing revival action plan based on the following business restructure framework.
1) Apply Corporate Reorganization Act simultaneously with 2 affiliate business companies.
Apply for adoption of Corporate Reorganization Act simultaneously with JALI (Japan Air Lines International) and JAL Capital. The three companies will be integrated immediately after the application and other procedures for reorganization are complete and make back office etc. streamlined.
2) Request banks to support financing for refunding refinanced loans etc. that are to accrue from autumn 2010.
This is in addition to DBJ (Development Bank of Japan) is to loan 200 billion yen on January 15 in order to stop capital outflow from credit uncertainty of JAL. (With a rumour of delisting of JAL, JAL’s stock price had dropped drastically by 30 JPY from 37 JPY in a day, which recovered a little after the government announced the policy that shareholder special benefit plan and frequent flyer programme will be valid for a certain period after the application of the act).
After application of Corporate Reorganization Act、JAL is to gain bridge financing of total of 600 billion yen from the assisting organizations etc. And if the revival plan is approved, JAL is to request total of 50.6 billion yen to DBJ and the 3 major banks as capital used to refunding of refinanced loans of bridge financing. JAL also would like to raise capital of 21 billion yen in 5 years to purchase airplanes for the plan mentioned in 3) below.
3) Accelerate replacement of half the jumbo jet airplanes with smaller energy-saving airplanes.
By the end of 2012, JAL aims to own 46 jumbo jet planes, 76 middle size planes and 107 small size planes.
4) Reduce 53 affiliate companies from current 110 companies.
This includes selling out and/or liquidation of 24 affiliates.
5) Cut additional domestic and international flights, 25 in total.
13 international flights and 12 domestic flights will be additionally reduced.
6) Review of cargo flight business will include studying of closure
The operation deficit of cargo flight business is estimated to expand to 23.3 billion yen by the end of current fiscal year ending March 2010 and therefore is reviewed including option of closure of the business.
A part of affiliates that have domestic flights to isolated islands have already finalized its policy of terminating such business.
7) Cut 15,000 jobs.
This is equivalent to one-thirds of the total current employees.
8) Amortize pension liability of 100 billion yen over 5 years.
Since more than two-third of employees, retired and currently working, agreed to accept reduction in pension benefit, continuation of pension fund will be specified in the revival plan. Approximately 100 billion yen of serve for pension fund will be minus but JAL is to amortize over 5 years.
9) Turn back into black in 2011.
With drastic loss of passanges, revenue for current fiscal year is estimated to be 1.4 trillion yen, which is -27% from the previous year, with operation loss of 32.91 billion yen. However, with extreme restructuring, 2 years later (i.e. by the end of fiscal year ending March 2012), JAL aims to return to black by 23.4 billion yen and 3 years later by 85.2 billion yen.
4. Who will be driving the JAL turnaround?
Mr. Kazuo Inamori, founder and chairperson emeritus of Kyocera （77 year old）, was requested to be the new CEO of JAL from the government and Company Turnaround Aid Institution, and he accepted on January 13. Having reached advanced age and being responsible for other roles, he will be working 3 or 4 days a week with no rewards. He is expected to initiate restructuring and then the key coordinator with internal and external stakeholders. He will soon choose COO from short-listed internal candidates of 45-55 years old, to lead operation, supporting Mr. Inamoti.
Mr. Inamori has no experience in transportation business but was appointed with his management ability of having founded and made Kyocera into a global company, and entered telecommunication business by starting up another company (now KDDI）, himself balancing the two businesses to be successful in both.
Mr. Inamori has been supporting the DPJ long before it won the general election on August 30 2009 and has strong ties with key politician of the DPJ including Mr. Maehara, Minister of Land, Infrastructure, Transport and Tourism and Mr. Ozawa, Secretary-General of the DPJ.
Some experts say that Mr. Inamori is the ideal person to drive the turnaround but some others say that he is not because he has no experience of turnaround. Mr. Inamori believes that turnaround is quite possible as long as the revival plan is executed steadily. The key for execution is clarification of CEO’s authority and responsibility, and supporting organization/environment. And last but not least, change in culture, and mindset and behaviour (action) of employees determine whether JAL will succeed in its turnaround.
2010年1月17日日曜日
2009年12月28日月曜日
Japan’s Debt to Drastically Increase – What is the Effect on Economy?
Monday, December 28, 2009 – Osaka, Japan
Nikkei, Japan’s leading newspaper specialized in economy/business and politics, reported on Saturday 26th the Japanese government’s finalized 2010 budget plan, from which it became quite prominent that realizing the DPJ (Democratic Party of Japan) Manifest and acquiring its financial resources is incompatible. The government is to solve by issuing new government bond meaning drastically increasing the debt, but this is likely to have negative impact on the overall economy. It is high time for the government to develop and execute growth strategy, aligning with the Japan and worldwide current trend, and the high time for all parties (politicians and bureaucrats, academic world and all other public sector, companies and all other private sector and citizens) to change their mindset and tackle the problem of recovering the economy together.
1. What is the big picture of the finalized 2010 budget plan and how unsound is the financial condition?
General accounts totaled 9.2 trillion yen (+4.2% vs. PY), which is the biggest in the history. Looking in details, general expenditure increased from 51.7trillion yen to 53.5 trillion yen, local allocation tax etc. increased from 16.5 trillion yen to 17.5 trillion yen, and debt servicing cost increased from 20.2 trillion yen to 20.6%. Moreover, adjustment cost for settlement of 0.7 trillion yen was added.
With budgeting policy emphasizing local and family budget, the total expenditure expanded. Public projects was cut 1.3 trillion yen (-18%) and reviewing respective business and budget by task force members which was a first trial in Hatoyama administration contributed to cost reduction of 1 trillion yen. However, local tax allocation increased by 1 trillion yen, social security cost increased by 10% due to aging society, and 3 trillion yen was added as costs to realize major measures of DPJ (Democratic Party of Japan)’s Manifest such as family budget assistance*.
Regarding budget revenue, tax revenue is expected to decrease from 46.1 trillion yen to 37.4 trillion yen, so although non-tax revenue is expected to increase from 9.1 trillion yen to 10.6 trillion yen, the government decided to increase government bond from 33.3 trillion yen to 44.3 trillion yen to cover-up the insufficient financial resources. This means that dependence of the national budget on government bonds will be extremely high, almost 50%.
Major Expenditure Items by Ministries
(Source: Nikkei, translated by the author)
Ministry Name / Budget (trillion yen) / Increase/Decrease (vs PY) / Concept of Budgeting
MHLW (Ministry of Health, Labour and Welfare) / 27.56 / Increase / Drastic increase with “family budget assistance” Increase by 2.4 trillion yen attributing to “family budget assistance” including allowance for children, lower medical expense and assistance of household with single parent.
MLIT (Ministry of Land, Infrastructure, Transport and Tourism) / 5.61 / Decrease / Expenditure for FOC motorways shrunk to 0.1 trillion yen. Public projects expenditure decreased drastically. Expenditure for FOC motorways cut from original request of 0.6 trillion yen to 0.1 trillion yen.
MIC (Ministry of Internal Affairs and Communications) / 18.60 / Increase / Tax allocation increased by 1.1 trillion yen. Increase in local tax allocation received by local governments by 1.1 trillion yen, first time in 11 years. IT related budget focuses on promoting IT use.
METI (Ministry of Economy, Trade and Industry) / 0.99 / Decrease / Focuses on supporting financing of SMB businesses. Focuses on supporting financing of SMB businesses. Increase in budget for supporting technical development for global warming countermeasures.
MAFF (Ministry of Agriculture, Forestry and Fisheries of Japan) / 2.28 / Decrease / Drastic decrease in land improvement business. Full requested expenditures related to the Manifest including system to assist rice farmer households were booked. Drastic cut in expenditure for land improvement business supported by LDP.
MOFA (Ministry of Foreign Affairs of Japan) / 0.66 / Decrease / Increase in supporting Afghanistan etc. Drastic increase in supporting Afghanistan and Pakistan. Cut in grant aid for third sector facilities.
MEXT (Ministry of Education, Culture, Sports, Science and Technology) / 5.60 / Increase / To free tuition fee for public senior high school students. To free tuition fee for public senior high school students. Assist 120 thousand yen/child for private senior high schools. Increase students benefiting from interest-free scholarship by 5000. Decrease outlays for promoting science and technology for the first time.
DA (Ministry of Defense) / 4.79 / No change / To defer Futemma base relocation related cost. Drastic increase in expenditures related to realignment of U.S. forces in Japan. To defer Futemma base relocation related cost. Implement new naval escort.
MOE (Ministry of the Environment) / 0.21 / Decrease / Focus on biodiversity conference.
Focus on biodiversity conference to be held in Nagoya City in October 2010 and on natural energy proliferation.
With efforts to minimize annual spending by freezing a few minor Manifest items, major items of the DPJ’s Manifest will be implemented from 2010, but with current financial resource outlook, whether the government would be able to continue the implementation 2011 onwards is a question. Primary balance**, a barometer for soundness of the country’s financial condition, is expected to reach minus 23.65 trillion yen for 2010, with the biggest increase in deficit from the previous year in history. Combined total of outstanding debt for both central and local governments is expected to reach the biggest in history of 862 trillion yen at the end of 2010. Hatoyama administration needs to immediately get the balance sheet of annual spending and revenue in shape.
2. What is the possible effect on the economy?
The author views that the finalized budget is unlikely to contribute to improving the economy as expected, and the government’s economic policy management may well needs to be improved to meet the expectation of the citizens, economic and industry experts and the stock market.
1) 10 economy experts view differently but in general they are rather pessimistic.
According to Nikkei’s interviews to 10 economy experts, although their views varied, they agreed on the fact that the actual rate of GDP’s growth is expected to remain low. Their average outlook was 1.2%, which is below the government’s outlook of 1.4%. Effect on the economy ranged from +0.4% to -0.3%. 4 people said that there would be some positive effects because “family budget assistance” stimulates the economy, 3 people said that the total effect will be zero, and the remaining 3 people said that there would be negative effects because of the reduction of public projects.
With low GDP growth outlook and deflation to continue as mentioned in the previous article How Japan Can Get Out From 10 Year Deflation?, strong growth strategy to drive investment and stimulate consumer spending is inevitable, which requires economic policy management aligning with to the current global economy environment and Japanese competitiveness. However, many experts seem to feel that the current economic policy management is not up to date, based on the concept that was valid 20 years ago before the burst of the bubble economy (i.e. when the economy and domestic demand continued to grow), to which the author agrees.
2) The government is not taking appropriate and sufficient actions to make Japan strong and its economy grow.
Today, Japan is suffering from low GDP growth and deflation, and its financial status is one of the worst among developed countries, so what really should be focused on is, similarly to turnaround of ailing companies, eradicate unnecessary cost and debt, improve global competitiveness, and develop and execute growth strategy. However, the message of the finalized budgeting is NOT putting priority on improving environment for companies to compete in the global economy, and consequently to pass the burden to succeeding generations by issue of government bonds. The government intends to stimulate consumer spending but measures and actions to eliminate from citizens anxieties of their after-retirement life, the perquisites to stimulate consumer spending, are insufficient. The government needs to focus on expanding the total pie of the economy, i.e. growth, in order to create employment and establish sustainable social security systems.
Domestic demand expansion needs regulation revolution to promote entering industries with great needs such as healthcare, nursing care and child-care, which requires tough national coordination. Tough national coordination is also required for FTA conclusion meaning opening of agriculture market and so forth. However, with, the House of Councilors election coming up in summer 2010, it is highly unlikely that the government would take actions in these kinds of issues.
In the current economic environment in which Japan cannot possibly expect growth in domestic demand, Japan would need to rely on external demand, expanding business in emerging markets, and the prerequisites would be to create the environment in which Japanese companies improve competitiveness in the global market so that they can compete with their global counterparts. Such possible measures include decreasing corporate tax rate (currently 40%), which is far greater than other countries, and concluding FTA (Free Trade Agreement) with EU and other regions/countries similarly to what Korea is trying to do. Such measures had always been advocated by Japan Business Federation (Nippon Keidanren) and other experts but the government does not seem to take actions.
What the government needs to do is take measures strategically to attract talents, technologies, capital, information and so forth from around the globe just like what Singapore is doing, as well as taking measures to create environment and systems mentioned above and focus on education to level up the skills and competencies of its citizens to make them competitive in the global economy. Unless the government first acknowledge that the world is flat as Thomas L. Friedman depicts in his book “The World Is Flat 3.0: A Brief History of the Twenty-first Century" and change mindset to take actions accordingly, it is unlikely that the citizens acknowledge the reality and change their mindset.
3) Japanese companies and TSE started to take actions for survival at last. Are other players to follow?
Of course, Japanese companies also need to change their mindset; they seem to lack in “hungry and fighting spirit” unlike Korean counterparts who are fully aware that they need to win in the global market to survive with the small economy size of Korea. This may well be because as Mr. Toshihiko Fukui, the former Bank of Japan Governor, says in the interview with Nikkei according to the article of the newspaper dated December 27, that Japan has been enjoying the position of the second largest economy. The author fully understands what Mr. Fukui says and agrees; she worked in a Japanese electronics giant for many years until 2006 and during that time the Korean counterpart actually became more competitive in the global market, as company ranking of Forbes clearly indicated for example as well as other signs of defeat. But the position is soon likely to be replaced by China, and the global battle for survival is becoming tougher and tougher. Therefore, companies need to revive their fighting spirit to go back to the basics and strengthen product development and marketing (including branding) meeting customer needs and generate business by step by step sales, similarly to what they have done in the recovery period after the World War II.
The initiatives of Japanese FMCG (Fast Moving Consumer Good) companies mentioned in the previous article "Japanese Food and FMCG Giants to Foster "Global Brands"is a sign that they are changing their mindset and starting to take actions. TSE (Tokyo Stock Exchange) to revise listing regulation as mentioned in the previous article "With Slow Japanese Stock Market Recovery TSE to Revise Listing Regulation" is a sign that TSE also started to take their action. In order for such initiatives to bear fruit, optimum environment needs to be created by all public sector players as well as mindset change and actions from all parties including the community and citizens. They all need to acknowledge the reality, and all players, public and private, need to tackle the problem together, from total optimization perspective.
* DPJ’s “Family Budget Assistance” (Source: Nikkei, edited and translated by the author)
Key economy boosting measures that the DPJ promised as their Manifest to win the General Election held on August 30 2009. The scenario is to increase disposable income by directly providing benefits to family budget etc. and stimulate consumer spending. The DPJ intends to change from the LDP’s economic policy focusing on supporting companies to realize economic growth driven by domestic demand.
Main items of “family budget assistance” include providing allowances for children, freeing tuition fee for senior high school students, freeing motorways, abolishing temporary tariff rate etc. Their positive effects may well be converted to savings instead of being consumed unless anxieties for post-retirement lives and distrust of social security system are eliminated from citizens.
Items of “family budget assistance” / Measures to be implemented from 2010
Allowance for children / 13,000 yen/child per month to be provided.
Free tuition fee for senior high school students / Tuition fee for public senior high school students to be made free. Assistance to private senior high school students to be provided as well.
Income indemnity for farmer households / To be executed to nationwide rice farmer households.
Free motorways / Test demonstration for pilot regions.
** Primary Balance (Source: Nikkei, translated by the author)
Balance of payments calculated by subtracting new government issuance (new debt) from debt service cost (nation’s debt). If the calculation is in black (i.e. positive), fiscal condition is good, and if it is in red (i.e. negative), fiscal condition is bad. Japan has always been negative and its big challenge had always been to make a balance mid/long-term.
Nikkei, Japan’s leading newspaper specialized in economy/business and politics, reported on Saturday 26th the Japanese government’s finalized 2010 budget plan, from which it became quite prominent that realizing the DPJ (Democratic Party of Japan) Manifest and acquiring its financial resources is incompatible. The government is to solve by issuing new government bond meaning drastically increasing the debt, but this is likely to have negative impact on the overall economy. It is high time for the government to develop and execute growth strategy, aligning with the Japan and worldwide current trend, and the high time for all parties (politicians and bureaucrats, academic world and all other public sector, companies and all other private sector and citizens) to change their mindset and tackle the problem of recovering the economy together.
1. What is the big picture of the finalized 2010 budget plan and how unsound is the financial condition?
General accounts totaled 9.2 trillion yen (+4.2% vs. PY), which is the biggest in the history. Looking in details, general expenditure increased from 51.7trillion yen to 53.5 trillion yen, local allocation tax etc. increased from 16.5 trillion yen to 17.5 trillion yen, and debt servicing cost increased from 20.2 trillion yen to 20.6%. Moreover, adjustment cost for settlement of 0.7 trillion yen was added.
With budgeting policy emphasizing local and family budget, the total expenditure expanded. Public projects was cut 1.3 trillion yen (-18%) and reviewing respective business and budget by task force members which was a first trial in Hatoyama administration contributed to cost reduction of 1 trillion yen. However, local tax allocation increased by 1 trillion yen, social security cost increased by 10% due to aging society, and 3 trillion yen was added as costs to realize major measures of DPJ (Democratic Party of Japan)’s Manifest such as family budget assistance*.
Regarding budget revenue, tax revenue is expected to decrease from 46.1 trillion yen to 37.4 trillion yen, so although non-tax revenue is expected to increase from 9.1 trillion yen to 10.6 trillion yen, the government decided to increase government bond from 33.3 trillion yen to 44.3 trillion yen to cover-up the insufficient financial resources. This means that dependence of the national budget on government bonds will be extremely high, almost 50%.
Major Expenditure Items by Ministries
(Source: Nikkei, translated by the author)
Ministry Name / Budget (trillion yen) / Increase/Decrease (vs PY) / Concept of Budgeting
MHLW (Ministry of Health, Labour and Welfare) / 27.56 / Increase / Drastic increase with “family budget assistance” Increase by 2.4 trillion yen attributing to “family budget assistance” including allowance for children, lower medical expense and assistance of household with single parent.
MLIT (Ministry of Land, Infrastructure, Transport and Tourism) / 5.61 / Decrease / Expenditure for FOC motorways shrunk to 0.1 trillion yen. Public projects expenditure decreased drastically. Expenditure for FOC motorways cut from original request of 0.6 trillion yen to 0.1 trillion yen.
MIC (Ministry of Internal Affairs and Communications) / 18.60 / Increase / Tax allocation increased by 1.1 trillion yen. Increase in local tax allocation received by local governments by 1.1 trillion yen, first time in 11 years. IT related budget focuses on promoting IT use.
METI (Ministry of Economy, Trade and Industry) / 0.99 / Decrease / Focuses on supporting financing of SMB businesses. Focuses on supporting financing of SMB businesses. Increase in budget for supporting technical development for global warming countermeasures.
MAFF (Ministry of Agriculture, Forestry and Fisheries of Japan) / 2.28 / Decrease / Drastic decrease in land improvement business. Full requested expenditures related to the Manifest including system to assist rice farmer households were booked. Drastic cut in expenditure for land improvement business supported by LDP.
MOFA (Ministry of Foreign Affairs of Japan) / 0.66 / Decrease / Increase in supporting Afghanistan etc. Drastic increase in supporting Afghanistan and Pakistan. Cut in grant aid for third sector facilities.
MEXT (Ministry of Education, Culture, Sports, Science and Technology) / 5.60 / Increase / To free tuition fee for public senior high school students. To free tuition fee for public senior high school students. Assist 120 thousand yen/child for private senior high schools. Increase students benefiting from interest-free scholarship by 5000. Decrease outlays for promoting science and technology for the first time.
DA (Ministry of Defense) / 4.79 / No change / To defer Futemma base relocation related cost. Drastic increase in expenditures related to realignment of U.S. forces in Japan. To defer Futemma base relocation related cost. Implement new naval escort.
MOE (Ministry of the Environment) / 0.21 / Decrease / Focus on biodiversity conference.
Focus on biodiversity conference to be held in Nagoya City in October 2010 and on natural energy proliferation.
With efforts to minimize annual spending by freezing a few minor Manifest items, major items of the DPJ’s Manifest will be implemented from 2010, but with current financial resource outlook, whether the government would be able to continue the implementation 2011 onwards is a question. Primary balance**, a barometer for soundness of the country’s financial condition, is expected to reach minus 23.65 trillion yen for 2010, with the biggest increase in deficit from the previous year in history. Combined total of outstanding debt for both central and local governments is expected to reach the biggest in history of 862 trillion yen at the end of 2010. Hatoyama administration needs to immediately get the balance sheet of annual spending and revenue in shape.
2. What is the possible effect on the economy?
The author views that the finalized budget is unlikely to contribute to improving the economy as expected, and the government’s economic policy management may well needs to be improved to meet the expectation of the citizens, economic and industry experts and the stock market.
1) 10 economy experts view differently but in general they are rather pessimistic.
According to Nikkei’s interviews to 10 economy experts, although their views varied, they agreed on the fact that the actual rate of GDP’s growth is expected to remain low. Their average outlook was 1.2%, which is below the government’s outlook of 1.4%. Effect on the economy ranged from +0.4% to -0.3%. 4 people said that there would be some positive effects because “family budget assistance” stimulates the economy, 3 people said that the total effect will be zero, and the remaining 3 people said that there would be negative effects because of the reduction of public projects.
With low GDP growth outlook and deflation to continue as mentioned in the previous article How Japan Can Get Out From 10 Year Deflation?, strong growth strategy to drive investment and stimulate consumer spending is inevitable, which requires economic policy management aligning with to the current global economy environment and Japanese competitiveness. However, many experts seem to feel that the current economic policy management is not up to date, based on the concept that was valid 20 years ago before the burst of the bubble economy (i.e. when the economy and domestic demand continued to grow), to which the author agrees.
2) The government is not taking appropriate and sufficient actions to make Japan strong and its economy grow.
Today, Japan is suffering from low GDP growth and deflation, and its financial status is one of the worst among developed countries, so what really should be focused on is, similarly to turnaround of ailing companies, eradicate unnecessary cost and debt, improve global competitiveness, and develop and execute growth strategy. However, the message of the finalized budgeting is NOT putting priority on improving environment for companies to compete in the global economy, and consequently to pass the burden to succeeding generations by issue of government bonds. The government intends to stimulate consumer spending but measures and actions to eliminate from citizens anxieties of their after-retirement life, the perquisites to stimulate consumer spending, are insufficient. The government needs to focus on expanding the total pie of the economy, i.e. growth, in order to create employment and establish sustainable social security systems.
Domestic demand expansion needs regulation revolution to promote entering industries with great needs such as healthcare, nursing care and child-care, which requires tough national coordination. Tough national coordination is also required for FTA conclusion meaning opening of agriculture market and so forth. However, with, the House of Councilors election coming up in summer 2010, it is highly unlikely that the government would take actions in these kinds of issues.
In the current economic environment in which Japan cannot possibly expect growth in domestic demand, Japan would need to rely on external demand, expanding business in emerging markets, and the prerequisites would be to create the environment in which Japanese companies improve competitiveness in the global market so that they can compete with their global counterparts. Such possible measures include decreasing corporate tax rate (currently 40%), which is far greater than other countries, and concluding FTA (Free Trade Agreement) with EU and other regions/countries similarly to what Korea is trying to do. Such measures had always been advocated by Japan Business Federation (Nippon Keidanren) and other experts but the government does not seem to take actions.
What the government needs to do is take measures strategically to attract talents, technologies, capital, information and so forth from around the globe just like what Singapore is doing, as well as taking measures to create environment and systems mentioned above and focus on education to level up the skills and competencies of its citizens to make them competitive in the global economy. Unless the government first acknowledge that the world is flat as Thomas L. Friedman depicts in his book “The World Is Flat 3.0: A Brief History of the Twenty-first Century" and change mindset to take actions accordingly, it is unlikely that the citizens acknowledge the reality and change their mindset.
3) Japanese companies and TSE started to take actions for survival at last. Are other players to follow?
Of course, Japanese companies also need to change their mindset; they seem to lack in “hungry and fighting spirit” unlike Korean counterparts who are fully aware that they need to win in the global market to survive with the small economy size of Korea. This may well be because as Mr. Toshihiko Fukui, the former Bank of Japan Governor, says in the interview with Nikkei according to the article of the newspaper dated December 27, that Japan has been enjoying the position of the second largest economy. The author fully understands what Mr. Fukui says and agrees; she worked in a Japanese electronics giant for many years until 2006 and during that time the Korean counterpart actually became more competitive in the global market, as company ranking of Forbes clearly indicated for example as well as other signs of defeat. But the position is soon likely to be replaced by China, and the global battle for survival is becoming tougher and tougher. Therefore, companies need to revive their fighting spirit to go back to the basics and strengthen product development and marketing (including branding) meeting customer needs and generate business by step by step sales, similarly to what they have done in the recovery period after the World War II.
The initiatives of Japanese FMCG (Fast Moving Consumer Good) companies mentioned in the previous article "Japanese Food and FMCG Giants to Foster "Global Brands"is a sign that they are changing their mindset and starting to take actions. TSE (Tokyo Stock Exchange) to revise listing regulation as mentioned in the previous article "With Slow Japanese Stock Market Recovery TSE to Revise Listing Regulation" is a sign that TSE also started to take their action. In order for such initiatives to bear fruit, optimum environment needs to be created by all public sector players as well as mindset change and actions from all parties including the community and citizens. They all need to acknowledge the reality, and all players, public and private, need to tackle the problem together, from total optimization perspective.
* DPJ’s “Family Budget Assistance” (Source: Nikkei, edited and translated by the author)
Key economy boosting measures that the DPJ promised as their Manifest to win the General Election held on August 30 2009. The scenario is to increase disposable income by directly providing benefits to family budget etc. and stimulate consumer spending. The DPJ intends to change from the LDP’s economic policy focusing on supporting companies to realize economic growth driven by domestic demand.
Main items of “family budget assistance” include providing allowances for children, freeing tuition fee for senior high school students, freeing motorways, abolishing temporary tariff rate etc. Their positive effects may well be converted to savings instead of being consumed unless anxieties for post-retirement lives and distrust of social security system are eliminated from citizens.
Items of “family budget assistance” / Measures to be implemented from 2010
Allowance for children / 13,000 yen/child per month to be provided.
Free tuition fee for senior high school students / Tuition fee for public senior high school students to be made free. Assistance to private senior high school students to be provided as well.
Income indemnity for farmer households / To be executed to nationwide rice farmer households.
Free motorways / Test demonstration for pilot regions.
** Primary Balance (Source: Nikkei, translated by the author)
Balance of payments calculated by subtracting new government issuance (new debt) from debt service cost (nation’s debt). If the calculation is in black (i.e. positive), fiscal condition is good, and if it is in red (i.e. negative), fiscal condition is bad. Japan has always been negative and its big challenge had always been to make a balance mid/long-term.
2009年10月25日日曜日
JAL to be GM of Japan – Turnaround under Government’s Control
October 25, 2009 – Osaka, Japan
Today Nikkei, Japan’s leading newspaper specialized in economy and politics, reported that on October 24, the Japanese government finalized the policy of aiding turnaround of JAL (Japan Air Lines) by making JAL leverage public institution of “Company Turnaround Aid Institution”. Related ministers will discuss this issue and officially announce the policy by the end of this month, with the objective of reducing excess debt under the government’s control and develop drastic restructuring plan. The institution will execute bridge financing etc. to abolish credit uneasiness of JAL. The government will wait for the restructuring plan then study increase capital by public funding as a last resort. More drastic solution is to be studied and developed for pension debt reduction which is currently very slow in progress. Restructuring plan development under strong government’s control is to start at last.
According to Nikkei, the outlook of the JAL turnaround is as below.
Capital increase: Current restructuring plan is 300 billon yen including public funding. The government’s policy includes leveraging Company Turnaround Aid Institution to insert capital by the end of 2009.
Debt write-off: Current plan is 220 billion yen. The government’s policy is to convincing syndicates of banks to accept debt write-offs, on condition that JAL will drastically restructure with public funding.
Debt-for-equity swap: Current plan is 30 billion yen. The government’s policy is to convincing syndicates of banks to accept debt-for-equity swap, on condition that JAL will drastically restructure with public funding.
Bridge financing: Current plan is 200 billion yen. The government’s policy is to execute this by the end of November 2009.
Pension debt reduction: Current plan is reducing insufficient accumulation to 100 billion yen from 330 billion yen. The government’s policy is change to more drastic plan.
Restructuring: Current plan includes cutting almost 9000 jobs and abolishing 45-50 routes by 2014.
Capital deficit: Current estimation is up to 270 billion yen.
JAL’s turnaround has been going through a trial and error process as below.
June 30: 100 billion yen financing agreement with Development Bank of Japan etc. froze.
August 7: April-June consolidated financial result was in red by 99 billion yen.
August 21: Starting negotiation of integrating air cargo business with NYK (Nippon Yusen Kaisha) Line.
Beginning of September: Alliance negotiation with Delta and American Airlines including financing came to light.
September 15: Draft of management improvement plan with pillars of cutting 68000 jobs and abolishing total of domestic and international 50 routes proposed at blue-ribbon panel.
September 25: A task force directly controlled by Mr. Maehara, Minister of Land, Infrastructure, Transport and Tourism established, marking the start of reviewing the current turnaround plan.
October 13: The task force proposed a turnaround plan draft to financial institutes etc. requesting them to accept debt write-offs of 300 billion yen in total.
October 20: The task force made the revised draft including increase of capital of 300 billion yen by public funding etc.
The Japanese government finalized the policy of aiding turnaround of JAL (Japan Air Lines) by making JAL leverage public funding by Company Turnaround Aid Institution because of the tough reality that they would not be able to win understanding and support from syndicates of banks without strong control and interference from the government. Under a situation of extreme funding difficulties, the government decided to back-up in full scale. Hatoyama administration cannot fail this turnaround with wall at their back; as Mr. Maehara states, we cannot have a situation in which we do not have flights and allow inconvenience to travellers. However, there are many hurdles and obstacles to overcome and the outlook is not necessarily bright.
The turnaround is not only about financing and debt write-offs. It is really all about whether the mindset of current JAL employees and retired workers, and the whether the system and culture of the entire company change from the current “the government will foot the bill” culture. It is only when the company totally change from inside to an organization that it will start creating value to generate revenue with optimum cost so that financing/cash flow management will be a sound one.
Today Nikkei, Japan’s leading newspaper specialized in economy and politics, reported that on October 24, the Japanese government finalized the policy of aiding turnaround of JAL (Japan Air Lines) by making JAL leverage public institution of “Company Turnaround Aid Institution”. Related ministers will discuss this issue and officially announce the policy by the end of this month, with the objective of reducing excess debt under the government’s control and develop drastic restructuring plan. The institution will execute bridge financing etc. to abolish credit uneasiness of JAL. The government will wait for the restructuring plan then study increase capital by public funding as a last resort. More drastic solution is to be studied and developed for pension debt reduction which is currently very slow in progress. Restructuring plan development under strong government’s control is to start at last.
According to Nikkei, the outlook of the JAL turnaround is as below.
Capital increase: Current restructuring plan is 300 billon yen including public funding. The government’s policy includes leveraging Company Turnaround Aid Institution to insert capital by the end of 2009.
Debt write-off: Current plan is 220 billion yen. The government’s policy is to convincing syndicates of banks to accept debt write-offs, on condition that JAL will drastically restructure with public funding.
Debt-for-equity swap: Current plan is 30 billion yen. The government’s policy is to convincing syndicates of banks to accept debt-for-equity swap, on condition that JAL will drastically restructure with public funding.
Bridge financing: Current plan is 200 billion yen. The government’s policy is to execute this by the end of November 2009.
Pension debt reduction: Current plan is reducing insufficient accumulation to 100 billion yen from 330 billion yen. The government’s policy is change to more drastic plan.
Restructuring: Current plan includes cutting almost 9000 jobs and abolishing 45-50 routes by 2014.
Capital deficit: Current estimation is up to 270 billion yen.
JAL’s turnaround has been going through a trial and error process as below.
June 30: 100 billion yen financing agreement with Development Bank of Japan etc. froze.
August 7: April-June consolidated financial result was in red by 99 billion yen.
August 21: Starting negotiation of integrating air cargo business with NYK (Nippon Yusen Kaisha) Line.
Beginning of September: Alliance negotiation with Delta and American Airlines including financing came to light.
September 15: Draft of management improvement plan with pillars of cutting 68000 jobs and abolishing total of domestic and international 50 routes proposed at blue-ribbon panel.
September 25: A task force directly controlled by Mr. Maehara, Minister of Land, Infrastructure, Transport and Tourism established, marking the start of reviewing the current turnaround plan.
October 13: The task force proposed a turnaround plan draft to financial institutes etc. requesting them to accept debt write-offs of 300 billion yen in total.
October 20: The task force made the revised draft including increase of capital of 300 billion yen by public funding etc.
The Japanese government finalized the policy of aiding turnaround of JAL (Japan Air Lines) by making JAL leverage public funding by Company Turnaround Aid Institution because of the tough reality that they would not be able to win understanding and support from syndicates of banks without strong control and interference from the government. Under a situation of extreme funding difficulties, the government decided to back-up in full scale. Hatoyama administration cannot fail this turnaround with wall at their back; as Mr. Maehara states, we cannot have a situation in which we do not have flights and allow inconvenience to travellers. However, there are many hurdles and obstacles to overcome and the outlook is not necessarily bright.
The turnaround is not only about financing and debt write-offs. It is really all about whether the mindset of current JAL employees and retired workers, and the whether the system and culture of the entire company change from the current “the government will foot the bill” culture. It is only when the company totally change from inside to an organization that it will start creating value to generate revenue with optimum cost so that financing/cash flow management will be a sound one.
2009年9月23日水曜日
Japan Takes Lead in GHG Emission Reduction in the UN’s Climate Change Summit
Wednesday, September 23, 2009 – Osaka, Japan
Mr. Hatoyama, the new Japanese Prime Minister, made a speech pledging Japan’s mid-term target of 25% GHG (global greenhouse gas = CO2) emission reduction vs.1990 by 2020 at the United Nation’s Climate Change Summit held on September 22 in New York, his debut to the diplomatic setting. He also advocated his initiative of providing to developing and emerging countries Japan’s energy saving technologies and capital aid to help them drive global warming countermeasures. His speech in English won great applause and appreciation in the summit, and it is probably the first time that a speech made by a Japanese Prime Minister won such an applause. However, his aggressive target has not been provoking positive reactions back in Japan.
1. Facts On GHG Emission Reduction Mid-Term Target
Mid-term target of reducing GHG emission is the primary focus of the negotiation among participant countries on post Kyoto Protocol (COP3) after 2013, United Nations Framework Convention on Climate Change / UNFCCC, FCCC. The deadline of the negotiation is COP15 United Nations Climate Change Conference Copenhagen 2009 to be held in Denmark this year.
2. Background of Prime Minister Mr. Hatoyama’s Speech
The target set by the former Prime Minister, Mr. Aso, was 15% reduction vs.2005 (8% reduction vs. 1990); therefore, it is evident that Mr. Hatoyama’s target is extremely aggressive (equivalent to 30% reduction vs. 2005). He had set this target as his policy, mentioned in his speeches in Tokyo earlier this month, and announced to Japanese media on 20th this month, although he may well have been aware that there would be resistances from Japan domestic (industries and economy opinion leaders). His intention is to take the initiative in the upcoming international negotiation settings by advocating aggressive target and supporting measures in his debut diplomacy setting in his own words. (First policy he set was taking the initiative from bureaucrats in making speeches at press conferences etc. so that politicians will be delivering their message in their own words). Such a “performance” in the international community conference symbolizes and delivers strong message on the change in political administration and of his style of politics, which is “politician taking the initiative”.
- 25% Reduction of CO2, Message to be Delivered in Upcoming Diplomatic Settings by Prime Minister Mr.Hatoyama
http://megoyanagi.blogspot.com/2009/09/new-japanese-government-officially.html
- How Japanese Government to Develop New Information Disclosure System with Media, Achieving Objectives & Promoting Interactive Communication with Media
http://megoyanagi.blogspot.com/2009/09/how-japanese-government-ti-develop-new.html
The new target announced is the most aggressive among all participant countries, as is shown from the table below. (Source: September 23 Japanese article from Nikkei, Japan’s leading newspaper specialized in economy and politics; translated by the author).
GHG Emission Reduction Target by 2020 of Developed Countries
(The reason that some target is not specific is that the target is specified under specific condition such as “in the case which other countries advocate sufficient reduction target”)
Country Name / Reduction Rate (%) / Standard Year / Availability of Purchasing Emission Quotas
Japan / 25 / 1990 / yes
The U.S. / 14 / 2005 -
EU / 20 - 30 / 1990 / yes
Canada / 20 / 2006 / -
Russia / 10 - 15 / 1990 / -
Switzerland / 20 - 30 / 1990 / yes
Australia / 5 - 25 / 2000 / yes
* Composed by Nikkei based on documents on framework of the U.N. climate change agreement owned by the agreement offices
3. How Mr. Hatoyama Was Careful In Making His Speech
Prime Minister Mr. Hatoyama was careful in making his speech, not forgetting to be considerate in presenting such an aggressive target. His speech included concrete measures compared with his previous speeches made in Tokyo, Japan, but he deliberately made the expression regarding “reduction compared with which year“ not to be too specific, using the expression such as “if I would state comparing with 1990” instead of “vs. 1990”, taking into consideration of the U.S. who had set the 2005 as the standard year in setting the target. He also was careful to avoid misunderstanding from other countries that Japan is prominent in presenting such an aggressive target. He did so by encouraging major GHG emission countries including the U.S., China and India to actively join in his initiative, advocating his Hatoyama initiatives including the principles below.
Hatoyama Initiatives
1) Public and private sectors of developed countries will contribute to additional capital aid.
2) Rules for measuring the effectiveness of aid will be developed.
3) Co-existence of capital aid and preservation of intellectual property right will be fulfilled.
4. Positive Reactions From The International Community
The speech was highly evaluated, with positive comments from participants. The overall reaction from the international community is positive from each standpoint.
The U.S. gave positive reaction backed up by President Obama’s positive speech in the summit, who said that countermeasure for global warming is the U.S. focus and is resolved to take actions. Regarding the reduction target he emphasized that both developed and developing countries need to take responsibility to achieve the target. He also showed his intention of reaching international consensus on this issue at CPO15 to be held in December in Copenhagen, Denmark. He advocated the need of making consensus among all countries including emerging countries, stating hat the only solution is all major countries collaborate to take measures, while developing countries (that had been emitting global warming gasses) have responsibilities to initiate the discussion.
EU evaluated the Japanese aggressive target. EU had been positive in activating trading CO2 emission quotas among countries with the objective of reducing CO2 emission globally, and therefore they would like to deepen collaboration with Japan and lead debate on this issue in the international community. Mr. Okada, the new Minister of Foreign Affairs, had meetings with Ministers of Foreign Affairs of Sweden, the current chairperson of EU, and Spain. The EU side agreed on the importance of solving climate change issue and highly evaluated Japan’s mid-term target of 25% reduction of CO2 emission vs.1990. In addition, the Minister of Climate Change and Energy of Denmark also evaluated the aggressive target of Japan.
Reactions from developing and emerging countries are subtle but not negative at all. Emerging countries including China and India have been strengthening initiatives to reduce global warming gasses in individual sectors such as generation of electricity. One point to note is that their consistent stance is that it is the developed countries responsible for the past global warming that should commit to the aggressive reduction target to be achieved by 2020.
5. Negative Reactions from Japan Domestic Opinion Leaders
It is true that aggressive target has been triggering technological innovation and creation of new industry and employment, but the reaction from Japan so far has been rather negative. This is because Mr. Hatoyama has not yet sufficiently explained to industries and related opinion leaders that are to bear the burden in accomplishing the target. Another reason is that whether emerging countries such as China would really participate in this international initiative of GHG emission reduction is still under question.
To achieve the target, industries would need to reduce 20-30% GHG emission from manufacturing plants, which would be a big burden. It is possible that industries whose GHG emission is large such as iron and steel would be forced to reduce its production, which could lead to drastic production shift from Japan to overseas. And if sufficient CO2 emission reduction is not achieved, they would need to purchase GHG emission quotas from overseas. This is estimated to cost more than 1 trillion yen, according to a government official.
Reaction from economy and commerce associations is quite negative because the target would clearly mean increase in cost. There have been critical comments, requesting the new government to set target taking into consideration both fairness among the international community and reasonability of Japanese citizen’s burden. In fact, there are series of evidences that many Japanese industries/companies are still suffering from high cost and are negatively impacted by new government’s policy, so it is more than natural that the industry and other opinion leaders would react negatively. The break even point of many manufacturing companies has been deteriorating drastically which means that their cost competitiveness under current circumstances is tough. And the recent stock pricing trend of Japan imply that Japanese companies are already negatively impacted by new government’s policy, and it is natural that they would give negative reaction.
- Drastic Deterioration in Break Even Point Ratio of Japanese Manufacturers May Well Indicate Further Tough Job Market in Japan
http://megoyanagi.blogspot.com/2009/09/drastic-deterioration-in-break-even.html
- New Coalition Government Policy, High Yen and Supply & Demand Oppressing Japanese Companies, Being Behind Worldwide Stock Prices Trend
http://megoyanagi.blogspot.com/2009/09/new-coalition-government-policy-high.html
6. Upcoming Challenges For The New Hatoyama Administration To Overcome
Having succeeded in debut the highest-level international conference advocating an aggressive target, a practical “international commitment”, Prime Minister Hatoyama needs to tackle tough challenges upon returning to Japan. He would need to minimize domestic resistances, and draft and execute action plans to achieve the target, taking initiative of post COP3 debate in the international community.
Achieving the target is not easy even if the international community’s reaction is positive, because even internationally, the entire environment is quite tough. It was when Mr. Obama changed the U.S. policy on this issue of proactively reducing GHG emission to cooperate and make harmony with the international community that the international negotiation for GHG emission reduction started to drive. However, Mr. Obama also has health care reform issue to handle and the U.S. Diet is now focusing on this issue, so the deliberation in the Diet of bill regarding GHG is behind schedule. If there is no concrete progress in the G20 summit started 24th this month, it is quite possible that the targeted consensus to be made in December becomes rather difficult.
The feasibility of capital aid execution by developed countries is still a question. EU would like to make consensus of reduction target leveraging capital aid of a tens of billions of dollars. However, discussions among developed countries, that are to raise funds for the capital aid, are still ongoing, far behind the original timeline.
And, even if Mr. Hatoyama manages to convince Japanese industries, related associations, opinion leaders and citizens, the hurdle is still quite high. According to the estimation developed during the former Aso administration, it is vital to increase the solar cell implementation by 5500% (55 times the current implementation) and shift 90% of new car sales to EV cars in order to achieve 25% reduction in GHG emission vs.1990.
Achieving an extremely aggressive target would require something very drastic, some kind of breakthrough. It is passive and conservative target that people tend to agree to easily but they are usually not so much energized by such target, not coming up with innovative ideas, thus often failing to achieve the target. But history teaches us that although at first people are negative at first because it seems absolutely unrealistic, they finally agree and support extremely aggressive target set under tough environment. Such a target delivered by a leader with passion energizes and wins support from followers and related stakeholders. They will then get united to exert maximum effort, leading to creation of innovation and break through, and as a result being successful in achieving the target.
Reduction in GHG emission is an issue that each one of us on this planet is required to take action for the sustainability of human kind, and it is possible to convert this issue to business opportunities as well. It has potential to drive innovations and creation of new industry and employment, meaning growth in world economy and sustainable growth. It is highly hoped that the international community and all stakeholders in each country come in consensus and take their own responsibility to achieve their respective goal.
* The information on the summit is based on series of articles in Nikkei, Japanese leading newspaper specialized in economy and politics, dated September 23, 2009.
Mr. Hatoyama, the new Japanese Prime Minister, made a speech pledging Japan’s mid-term target of 25% GHG (global greenhouse gas = CO2) emission reduction vs.1990 by 2020 at the United Nation’s Climate Change Summit held on September 22 in New York, his debut to the diplomatic setting. He also advocated his initiative of providing to developing and emerging countries Japan’s energy saving technologies and capital aid to help them drive global warming countermeasures. His speech in English won great applause and appreciation in the summit, and it is probably the first time that a speech made by a Japanese Prime Minister won such an applause. However, his aggressive target has not been provoking positive reactions back in Japan.
1. Facts On GHG Emission Reduction Mid-Term Target
Mid-term target of reducing GHG emission is the primary focus of the negotiation among participant countries on post Kyoto Protocol (COP3) after 2013, United Nations Framework Convention on Climate Change / UNFCCC, FCCC. The deadline of the negotiation is COP15 United Nations Climate Change Conference Copenhagen 2009 to be held in Denmark this year.
2. Background of Prime Minister Mr. Hatoyama’s Speech
The target set by the former Prime Minister, Mr. Aso, was 15% reduction vs.2005 (8% reduction vs. 1990); therefore, it is evident that Mr. Hatoyama’s target is extremely aggressive (equivalent to 30% reduction vs. 2005). He had set this target as his policy, mentioned in his speeches in Tokyo earlier this month, and announced to Japanese media on 20th this month, although he may well have been aware that there would be resistances from Japan domestic (industries and economy opinion leaders). His intention is to take the initiative in the upcoming international negotiation settings by advocating aggressive target and supporting measures in his debut diplomacy setting in his own words. (First policy he set was taking the initiative from bureaucrats in making speeches at press conferences etc. so that politicians will be delivering their message in their own words). Such a “performance” in the international community conference symbolizes and delivers strong message on the change in political administration and of his style of politics, which is “politician taking the initiative”.
- 25% Reduction of CO2, Message to be Delivered in Upcoming Diplomatic Settings by Prime Minister Mr.Hatoyama
http://megoyanagi.blogspot.com/2009/09/new-japanese-government-officially.html
- How Japanese Government to Develop New Information Disclosure System with Media, Achieving Objectives & Promoting Interactive Communication with Media
http://megoyanagi.blogspot.com/2009/09/how-japanese-government-ti-develop-new.html
The new target announced is the most aggressive among all participant countries, as is shown from the table below. (Source: September 23 Japanese article from Nikkei, Japan’s leading newspaper specialized in economy and politics; translated by the author).
GHG Emission Reduction Target by 2020 of Developed Countries
(The reason that some target is not specific is that the target is specified under specific condition such as “in the case which other countries advocate sufficient reduction target”)
Country Name / Reduction Rate (%) / Standard Year / Availability of Purchasing Emission Quotas
Japan / 25 / 1990 / yes
The U.S. / 14 / 2005 -
EU / 20 - 30 / 1990 / yes
Canada / 20 / 2006 / -
Russia / 10 - 15 / 1990 / -
Switzerland / 20 - 30 / 1990 / yes
Australia / 5 - 25 / 2000 / yes
* Composed by Nikkei based on documents on framework of the U.N. climate change agreement owned by the agreement offices
3. How Mr. Hatoyama Was Careful In Making His Speech
Prime Minister Mr. Hatoyama was careful in making his speech, not forgetting to be considerate in presenting such an aggressive target. His speech included concrete measures compared with his previous speeches made in Tokyo, Japan, but he deliberately made the expression regarding “reduction compared with which year“ not to be too specific, using the expression such as “if I would state comparing with 1990” instead of “vs. 1990”, taking into consideration of the U.S. who had set the 2005 as the standard year in setting the target. He also was careful to avoid misunderstanding from other countries that Japan is prominent in presenting such an aggressive target. He did so by encouraging major GHG emission countries including the U.S., China and India to actively join in his initiative, advocating his Hatoyama initiatives including the principles below.
Hatoyama Initiatives
1) Public and private sectors of developed countries will contribute to additional capital aid.
2) Rules for measuring the effectiveness of aid will be developed.
3) Co-existence of capital aid and preservation of intellectual property right will be fulfilled.
4. Positive Reactions From The International Community
The speech was highly evaluated, with positive comments from participants. The overall reaction from the international community is positive from each standpoint.
The U.S. gave positive reaction backed up by President Obama’s positive speech in the summit, who said that countermeasure for global warming is the U.S. focus and is resolved to take actions. Regarding the reduction target he emphasized that both developed and developing countries need to take responsibility to achieve the target. He also showed his intention of reaching international consensus on this issue at CPO15 to be held in December in Copenhagen, Denmark. He advocated the need of making consensus among all countries including emerging countries, stating hat the only solution is all major countries collaborate to take measures, while developing countries (that had been emitting global warming gasses) have responsibilities to initiate the discussion.
EU evaluated the Japanese aggressive target. EU had been positive in activating trading CO2 emission quotas among countries with the objective of reducing CO2 emission globally, and therefore they would like to deepen collaboration with Japan and lead debate on this issue in the international community. Mr. Okada, the new Minister of Foreign Affairs, had meetings with Ministers of Foreign Affairs of Sweden, the current chairperson of EU, and Spain. The EU side agreed on the importance of solving climate change issue and highly evaluated Japan’s mid-term target of 25% reduction of CO2 emission vs.1990. In addition, the Minister of Climate Change and Energy of Denmark also evaluated the aggressive target of Japan.
Reactions from developing and emerging countries are subtle but not negative at all. Emerging countries including China and India have been strengthening initiatives to reduce global warming gasses in individual sectors such as generation of electricity. One point to note is that their consistent stance is that it is the developed countries responsible for the past global warming that should commit to the aggressive reduction target to be achieved by 2020.
5. Negative Reactions from Japan Domestic Opinion Leaders
It is true that aggressive target has been triggering technological innovation and creation of new industry and employment, but the reaction from Japan so far has been rather negative. This is because Mr. Hatoyama has not yet sufficiently explained to industries and related opinion leaders that are to bear the burden in accomplishing the target. Another reason is that whether emerging countries such as China would really participate in this international initiative of GHG emission reduction is still under question.
To achieve the target, industries would need to reduce 20-30% GHG emission from manufacturing plants, which would be a big burden. It is possible that industries whose GHG emission is large such as iron and steel would be forced to reduce its production, which could lead to drastic production shift from Japan to overseas. And if sufficient CO2 emission reduction is not achieved, they would need to purchase GHG emission quotas from overseas. This is estimated to cost more than 1 trillion yen, according to a government official.
Reaction from economy and commerce associations is quite negative because the target would clearly mean increase in cost. There have been critical comments, requesting the new government to set target taking into consideration both fairness among the international community and reasonability of Japanese citizen’s burden. In fact, there are series of evidences that many Japanese industries/companies are still suffering from high cost and are negatively impacted by new government’s policy, so it is more than natural that the industry and other opinion leaders would react negatively. The break even point of many manufacturing companies has been deteriorating drastically which means that their cost competitiveness under current circumstances is tough. And the recent stock pricing trend of Japan imply that Japanese companies are already negatively impacted by new government’s policy, and it is natural that they would give negative reaction.
- Drastic Deterioration in Break Even Point Ratio of Japanese Manufacturers May Well Indicate Further Tough Job Market in Japan
http://megoyanagi.blogspot.com/2009/09/drastic-deterioration-in-break-even.html
- New Coalition Government Policy, High Yen and Supply & Demand Oppressing Japanese Companies, Being Behind Worldwide Stock Prices Trend
http://megoyanagi.blogspot.com/2009/09/new-coalition-government-policy-high.html
6. Upcoming Challenges For The New Hatoyama Administration To Overcome
Having succeeded in debut the highest-level international conference advocating an aggressive target, a practical “international commitment”, Prime Minister Hatoyama needs to tackle tough challenges upon returning to Japan. He would need to minimize domestic resistances, and draft and execute action plans to achieve the target, taking initiative of post COP3 debate in the international community.
Achieving the target is not easy even if the international community’s reaction is positive, because even internationally, the entire environment is quite tough. It was when Mr. Obama changed the U.S. policy on this issue of proactively reducing GHG emission to cooperate and make harmony with the international community that the international negotiation for GHG emission reduction started to drive. However, Mr. Obama also has health care reform issue to handle and the U.S. Diet is now focusing on this issue, so the deliberation in the Diet of bill regarding GHG is behind schedule. If there is no concrete progress in the G20 summit started 24th this month, it is quite possible that the targeted consensus to be made in December becomes rather difficult.
The feasibility of capital aid execution by developed countries is still a question. EU would like to make consensus of reduction target leveraging capital aid of a tens of billions of dollars. However, discussions among developed countries, that are to raise funds for the capital aid, are still ongoing, far behind the original timeline.
And, even if Mr. Hatoyama manages to convince Japanese industries, related associations, opinion leaders and citizens, the hurdle is still quite high. According to the estimation developed during the former Aso administration, it is vital to increase the solar cell implementation by 5500% (55 times the current implementation) and shift 90% of new car sales to EV cars in order to achieve 25% reduction in GHG emission vs.1990.
Achieving an extremely aggressive target would require something very drastic, some kind of breakthrough. It is passive and conservative target that people tend to agree to easily but they are usually not so much energized by such target, not coming up with innovative ideas, thus often failing to achieve the target. But history teaches us that although at first people are negative at first because it seems absolutely unrealistic, they finally agree and support extremely aggressive target set under tough environment. Such a target delivered by a leader with passion energizes and wins support from followers and related stakeholders. They will then get united to exert maximum effort, leading to creation of innovation and break through, and as a result being successful in achieving the target.
Reduction in GHG emission is an issue that each one of us on this planet is required to take action for the sustainability of human kind, and it is possible to convert this issue to business opportunities as well. It has potential to drive innovations and creation of new industry and employment, meaning growth in world economy and sustainable growth. It is highly hoped that the international community and all stakeholders in each country come in consensus and take their own responsibility to achieve their respective goal.
* The information on the summit is based on series of articles in Nikkei, Japanese leading newspaper specialized in economy and politics, dated September 23, 2009.
New Press Conference Policy of Japanese Government
Wednesday, September 23, 2009 – Osaka, Japan
The first issue tackled by the new Japanese government led by new Prime Minister, Mr. Hatoyama, upon kick-off his new administration, was announcing the change in press announcement policy at the night of September 16, the first day of the new administration. The objective is to take initiatives from the bureaucrats. This has provoked hot debate among journalists and media.
1. How the press announcement was done and how government information used to be delivered to media
Press conference spoken by the head of ministries are held regularly and ad-hoc basis (e.g. emergency announcement), and it was bureaucrats that composed speeches; the spokespersons simply read the script. Also, major ministries had been regularly holding press conferences, speakers being administrative vice minister, assistant vice minister and chief of bureau, i.e. bureaucrats. Such press conferences can be covered specifying the speaker. Major ministries had also been regularly holding round-table conference by the same speakers. With this system, the news is covered by not specifying the speaker so usually such expression as “executive of so so ministry” as the speaker is used.
In addition, that some reporters regularly rode with administrative vice minister on his way to work to “communicate” and inform the essence to other reporters because they cannot possibly have enough time to communicate with administrative vice ministers even though they visit their house before going to work.
This system may seem “collusion” between the bureaucrats and the media, but it is true that this system was established as a result of long-year coordination of public (i.e. government) and media. Government has accountability and responsibility of information disclosure. Media has responsibility of answering to citizen’s right to know about the government. And “press club” exists as the interaction of the responsibility of the two parties.
The existence of press club is valid even though there has been some criticism, and what is critical question was bureaucrats had 100% control over information disclosure to the media and citizens.
2. The objective of new policy of press announcement and communication with media is to exclude bureaucrats
In the night of September 16, Mr. Hirano, the Chief Secretary Cabinet, announced the policy that “under the new government, no more press conferences by bureaucrats will be held”. This means that in the future, press conference will be only by politicians, i.e. ministers, deputy ministers and ministerial aids, with the objective of the new press conference policy is to take initiative from the bureaucrats. Briefing such as background explanation will not be included in this regulation. With this announcement, some ministries actually decided to abolish regular press conference spoken by the minister. Media’s reaction to the policy was negative, with such comments as “news control”.
The biggest merit of the policy is fulfillment of the objective, i.e. politicians taking the initiative to change Japan. Japanese government faced this challenge for many years and had been one of the biggest issues and therefore the new policy can be highly evaluated and appreciated. In addition, the politicians will be speaking in their own words to deliver their own strong message with passion. Speech in the speaker’s own words would also enhance speaker’s ownership, accountability and commitment. So speeches would surely be convincing, unlike most previous speakers of the press conference who read the script in monotone, even incorrectly in a few cases.
The demerits of the policy are the increase in the workload of politicians (speakers), question of whether they are capable of explaining details the bureaucrats had been explaining to the media, and communication to the media being non-interactive and less intensive compared to what it had been. Bureaucrats had been communicating intensively on the daily basis, so too much control of communication between bureaucrats and media could refrain two parties from communicating frankly, interactively and intensively. This could lead to between the two parties may well lead to possible decrease in the quantity and quality (including background and nuance) of information disclosed to the media compared to what it had been.
3. Ideal information disclosure system is expected to be created and developed by both the new government and media
Strategic and effective information disclosure of the government to communicate interactively with the media and citizens would greatly contribute to driving change, the objective and mission of the new government. From that perspective, it seems evident that the old press conference system needs review and improvement, and it is quite logical that this issue of press announcement policy, one of the most important and symbolic issue, was handled first.
There is no “the only correct solution” as in all issues, and it is highly desired that the new government and media collaborate to develop an ideal total information closure system including official press conference and unofficial settings on the daily basis. Such a new system would fulfill the responsibilities of both two parties (government and media), and achieve the new government’s objectives of the new policy announcement while accepting maximum freedom of research, reporting and expressing oneself of media.
* Information on the past press announcement and how the government communicated with the media is from a Japanese column which was posted on Nikkei PB web site on September 17
http://www.nikkeibp.co.jp/article/column/20090917/182230/
The first issue tackled by the new Japanese government led by new Prime Minister, Mr. Hatoyama, upon kick-off his new administration, was announcing the change in press announcement policy at the night of September 16, the first day of the new administration. The objective is to take initiatives from the bureaucrats. This has provoked hot debate among journalists and media.
1. How the press announcement was done and how government information used to be delivered to media
Press conference spoken by the head of ministries are held regularly and ad-hoc basis (e.g. emergency announcement), and it was bureaucrats that composed speeches; the spokespersons simply read the script. Also, major ministries had been regularly holding press conferences, speakers being administrative vice minister, assistant vice minister and chief of bureau, i.e. bureaucrats. Such press conferences can be covered specifying the speaker. Major ministries had also been regularly holding round-table conference by the same speakers. With this system, the news is covered by not specifying the speaker so usually such expression as “executive of so so ministry” as the speaker is used.
In addition, that some reporters regularly rode with administrative vice minister on his way to work to “communicate” and inform the essence to other reporters because they cannot possibly have enough time to communicate with administrative vice ministers even though they visit their house before going to work.
This system may seem “collusion” between the bureaucrats and the media, but it is true that this system was established as a result of long-year coordination of public (i.e. government) and media. Government has accountability and responsibility of information disclosure. Media has responsibility of answering to citizen’s right to know about the government. And “press club” exists as the interaction of the responsibility of the two parties.
The existence of press club is valid even though there has been some criticism, and what is critical question was bureaucrats had 100% control over information disclosure to the media and citizens.
2. The objective of new policy of press announcement and communication with media is to exclude bureaucrats
In the night of September 16, Mr. Hirano, the Chief Secretary Cabinet, announced the policy that “under the new government, no more press conferences by bureaucrats will be held”. This means that in the future, press conference will be only by politicians, i.e. ministers, deputy ministers and ministerial aids, with the objective of the new press conference policy is to take initiative from the bureaucrats. Briefing such as background explanation will not be included in this regulation. With this announcement, some ministries actually decided to abolish regular press conference spoken by the minister. Media’s reaction to the policy was negative, with such comments as “news control”.
The biggest merit of the policy is fulfillment of the objective, i.e. politicians taking the initiative to change Japan. Japanese government faced this challenge for many years and had been one of the biggest issues and therefore the new policy can be highly evaluated and appreciated. In addition, the politicians will be speaking in their own words to deliver their own strong message with passion. Speech in the speaker’s own words would also enhance speaker’s ownership, accountability and commitment. So speeches would surely be convincing, unlike most previous speakers of the press conference who read the script in monotone, even incorrectly in a few cases.
The demerits of the policy are the increase in the workload of politicians (speakers), question of whether they are capable of explaining details the bureaucrats had been explaining to the media, and communication to the media being non-interactive and less intensive compared to what it had been. Bureaucrats had been communicating intensively on the daily basis, so too much control of communication between bureaucrats and media could refrain two parties from communicating frankly, interactively and intensively. This could lead to between the two parties may well lead to possible decrease in the quantity and quality (including background and nuance) of information disclosed to the media compared to what it had been.
3. Ideal information disclosure system is expected to be created and developed by both the new government and media
Strategic and effective information disclosure of the government to communicate interactively with the media and citizens would greatly contribute to driving change, the objective and mission of the new government. From that perspective, it seems evident that the old press conference system needs review and improvement, and it is quite logical that this issue of press announcement policy, one of the most important and symbolic issue, was handled first.
There is no “the only correct solution” as in all issues, and it is highly desired that the new government and media collaborate to develop an ideal total information closure system including official press conference and unofficial settings on the daily basis. Such a new system would fulfill the responsibilities of both two parties (government and media), and achieve the new government’s objectives of the new policy announcement while accepting maximum freedom of research, reporting and expressing oneself of media.
* Information on the past press announcement and how the government communicated with the media is from a Japanese column which was posted on Nikkei PB web site on September 17
http://www.nikkeibp.co.jp/article/column/20090917/182230/
2009年9月22日火曜日
New Budgeting Policy of Japanese Government
Tuesday, September 22, 2009 – Osaka, Japan
Nikkei, Japan’s leading newspaper specialized in economy and politics, reported on September 21 that the new Japanese government established a new budgeting policy of practically implementing multiple-year appropriation from 2010. The framework of the policy will be developed by a committed to be established within the National Strategy Bureau headed by Mr. Kan, and is planned to be submitted in the middle or end of October. There would be no legislative problem in “practical” implementation of the new budgeting system. There are three main budgeting revisions, all of which are designed to improve the effective use of budget.
First revision is practical implementation of multiple-year appropriation. The long custom has been forcing to use up the budget for the fiscal year because of one-fiscal year budget system. This system led to long-year custom of unnecessary road work performed only to use up the fiscal year budget so that the budget can be acquired the following fiscal year. What the government is trying to do is implementing a multiple-year appropriation concept and framework of the U.K., that enables the remaining fiscal budget to be carried over to the following year. In line with this, the government is also planning to establish a foundation and/or revising law(s).
Second revision is abolition of “ceiling” system that started in 1961 as budget request framework. Currently each ministry requests budget by each related expenses such as public work projects and social security according to budgetary request guideline. Instead, the National Strategy Bureau is to prioritize business. The Bureau will compose revenue framework from sources including the government’s economic forecast, and business whose budget exceed this framework could be carried over to the following year.
Third revision is improving budget inspection system. Currently Ministries of Finance and General Affairs and Board of Audit inspect the waste and validity of budget. The inspection will be changed to politics-driven, and achievement progress of the numbers based on the policy set at the beginning of the fiscal year will be monitored. And in the future, the government is to study to implement a system linking this inspection and monitoring with personnel evaluation of government officials. An example is comparing number of prospect users of airport and roads before construction and the actual number of users after the construction, and should a big gap between the two be found, it would be reflected to the personnel evaluation of government officials concerned.
To the author, in short, the three revisions are implementing systems proliferating in many private companies. In many companies, Corporate Planning or Business Plan Analysis department (equivalent to the National Strategy Bureau in the new government) prioritizes business and leads budgeting, although how the top-down and bottom-up are mixed depends on the company.
Mid-term and/or long-term strategy, road map and plan is developed first aligning with the company’s mission and vision, which is then broken down to annual business plan, and quarterly/monthly plan. Performance is monitored regularly and together with the latest forecast, adjustment is made flexibly. And usually MBO (Management by Objectives) is used, linking the goal of company/organization and individual, and reviewing what extent the team and individual target is achieved as well as processes (value & behaviour) of achievement.
The new budgeting system is a solving problem of root cause of such issue as the recent interdiction of additional appropriation for 2009 that do not contribute to business environment improvement. The interdiction has triggered big debate and confusion which is not a surprise and its feasibility is question. With the new revised budgeting system, this kind of issue should not occur.
The long-year systems and customs of public sector are unbelievable for people in the private sector. The new policy and system may have negative impact on some industries and companies such as construction, but in general, it should have positive impact from total optimization perspective. It is highly desired that the new policy is implemented without fail for effective use of budget and higher productivity of the government, meaning growth of the nation and better life of all citizens.
Nikkei, Japan’s leading newspaper specialized in economy and politics, reported on September 21 that the new Japanese government established a new budgeting policy of practically implementing multiple-year appropriation from 2010. The framework of the policy will be developed by a committed to be established within the National Strategy Bureau headed by Mr. Kan, and is planned to be submitted in the middle or end of October. There would be no legislative problem in “practical” implementation of the new budgeting system. There are three main budgeting revisions, all of which are designed to improve the effective use of budget.
First revision is practical implementation of multiple-year appropriation. The long custom has been forcing to use up the budget for the fiscal year because of one-fiscal year budget system. This system led to long-year custom of unnecessary road work performed only to use up the fiscal year budget so that the budget can be acquired the following fiscal year. What the government is trying to do is implementing a multiple-year appropriation concept and framework of the U.K., that enables the remaining fiscal budget to be carried over to the following year. In line with this, the government is also planning to establish a foundation and/or revising law(s).
Second revision is abolition of “ceiling” system that started in 1961 as budget request framework. Currently each ministry requests budget by each related expenses such as public work projects and social security according to budgetary request guideline. Instead, the National Strategy Bureau is to prioritize business. The Bureau will compose revenue framework from sources including the government’s economic forecast, and business whose budget exceed this framework could be carried over to the following year.
Third revision is improving budget inspection system. Currently Ministries of Finance and General Affairs and Board of Audit inspect the waste and validity of budget. The inspection will be changed to politics-driven, and achievement progress of the numbers based on the policy set at the beginning of the fiscal year will be monitored. And in the future, the government is to study to implement a system linking this inspection and monitoring with personnel evaluation of government officials. An example is comparing number of prospect users of airport and roads before construction and the actual number of users after the construction, and should a big gap between the two be found, it would be reflected to the personnel evaluation of government officials concerned.
To the author, in short, the three revisions are implementing systems proliferating in many private companies. In many companies, Corporate Planning or Business Plan Analysis department (equivalent to the National Strategy Bureau in the new government) prioritizes business and leads budgeting, although how the top-down and bottom-up are mixed depends on the company.
Mid-term and/or long-term strategy, road map and plan is developed first aligning with the company’s mission and vision, which is then broken down to annual business plan, and quarterly/monthly plan. Performance is monitored regularly and together with the latest forecast, adjustment is made flexibly. And usually MBO (Management by Objectives) is used, linking the goal of company/organization and individual, and reviewing what extent the team and individual target is achieved as well as processes (value & behaviour) of achievement.
The new budgeting system is a solving problem of root cause of such issue as the recent interdiction of additional appropriation for 2009 that do not contribute to business environment improvement. The interdiction has triggered big debate and confusion which is not a surprise and its feasibility is question. With the new revised budgeting system, this kind of issue should not occur.
The long-year systems and customs of public sector are unbelievable for people in the private sector. The new policy and system may have negative impact on some industries and companies such as construction, but in general, it should have positive impact from total optimization perspective. It is highly desired that the new policy is implemented without fail for effective use of budget and higher productivity of the government, meaning growth of the nation and better life of all citizens.
Japan Postal Administration – Drastic Policy Change from Former Koizumi Administration
Japan Postal Administration Business to be Revised – The Government Expected to Successfully Coordinate with Related Parties and Overcome Challenges
Tuesday, September 22, 2009 – Osaka, Japan
Nikkei, Japan's leading newspaper specialized in economy and politics, reported on September 21 that the new Hatoyama Administration earnestly started to revise Postal Administration Business that former Koizumi Administration had been aggressively initiating, and it is clear that this would give direct and extreme impact on related industries/companies operating in Japan.
Mr. Kamei, the new Minister of Posts and Telecommunications as well as Finance explicitly said his policy that bill of freezing selling stocks of Postal Administration Business will be submitted in the upcoming ad-hoc Diet to be held this autumn. This means that the future direction of the business revision will be composed as “Fundamental Law of Postal Administration Business Reform”, including how divisional companies are to be formed and how the government is to hold stocks.
Postal Administration Business of Japan, consisting of 4 businesses of post offices, postal business, banking/finance, and insurance, had been privatized in October 2008, and the selling of stocks held by the government is to start as soon as the latter half of 2010 and to complete in the end of September 2017 (government to remain holding 1/3 of stocks for post offices and postal business).
This was the biggest topic and initiative under Koizumi Administration. It is because of this timeline that Mr. Kamei is in a hurry to submit the bill. And the reason for freezing the selling of stocks is anxiety of maintaining post office network. Post office management is dependent on banking/finance and insurance business because their revenue is generated from commission fee of contract business from the two businesses. This means that if relationship in capital is abolished, it is possible that business contract is cancelled. The new government is also to review services of postal administration business.
There are many possible options regarding how divisional companies are to be formed and how the government is to hold stocks, which are the discussion points in drafting the bill. It may well take time to come to an optimum option with consensus with all related parties; in fact, it is not clear whether related parties can really discuss in detail to come to concrete action plan in limited time. Having said that, what is quite possible is that the government is to invest 50%+ of stocks in order to maintain control of the management.
With the above, it is quite possible that freedom of Postal Administration management such as business alliance and starting new business shrinks, and it would become more difficult to a develop sustainable business model while successfully coordinating with industries that are to be directly impacted. Such industries/companies are of course banking/finance, insurance, postal and telecommunication industries/companies, the most impacted being banking/finance industry/companies. This is because the banking/finance branch network and business of Postal Administration is as big as the total of all Japanese major financial institutions of private sector, and although at present the limit of saving at Postal Administration banking/finance is 10 million yen (no limit for private sector) to control the power of Postal Administration.
However, government’s control over Postal Administration would imply unbalanced power between public sector of Postal Administration and private sector. For this reason, successful coordination of competition requirements with private institutions would be the key.
To the author, this issue is closely linked with the complicated issue of Mr. Nishikawa, who became the head of the privatized Postal Administration Business in October 2008, and whether he should resign or not had been a big issue, leading to resignation of Mr. Hatoyama, the former Minister of General Affairs (brother of the new Prime Minister), and still is under hot discussion by the new government members. It is quite possible that the new policy intends also to solve this problem.
It is highly desired that the government drafts the policy and action plan that would lead to sustainable growth for all parties thus building Win-Win relationship with all related parties with fair process; i.e. through discussion and coordination with related parties. The bill drafted with such process would surely be successfully passed in the ad-hoc Diet to become an official law, and executed smoothly.
Tuesday, September 22, 2009 – Osaka, Japan
Nikkei, Japan's leading newspaper specialized in economy and politics, reported on September 21 that the new Hatoyama Administration earnestly started to revise Postal Administration Business that former Koizumi Administration had been aggressively initiating, and it is clear that this would give direct and extreme impact on related industries/companies operating in Japan.
Mr. Kamei, the new Minister of Posts and Telecommunications as well as Finance explicitly said his policy that bill of freezing selling stocks of Postal Administration Business will be submitted in the upcoming ad-hoc Diet to be held this autumn. This means that the future direction of the business revision will be composed as “Fundamental Law of Postal Administration Business Reform”, including how divisional companies are to be formed and how the government is to hold stocks.
Postal Administration Business of Japan, consisting of 4 businesses of post offices, postal business, banking/finance, and insurance, had been privatized in October 2008, and the selling of stocks held by the government is to start as soon as the latter half of 2010 and to complete in the end of September 2017 (government to remain holding 1/3 of stocks for post offices and postal business).
This was the biggest topic and initiative under Koizumi Administration. It is because of this timeline that Mr. Kamei is in a hurry to submit the bill. And the reason for freezing the selling of stocks is anxiety of maintaining post office network. Post office management is dependent on banking/finance and insurance business because their revenue is generated from commission fee of contract business from the two businesses. This means that if relationship in capital is abolished, it is possible that business contract is cancelled. The new government is also to review services of postal administration business.
There are many possible options regarding how divisional companies are to be formed and how the government is to hold stocks, which are the discussion points in drafting the bill. It may well take time to come to an optimum option with consensus with all related parties; in fact, it is not clear whether related parties can really discuss in detail to come to concrete action plan in limited time. Having said that, what is quite possible is that the government is to invest 50%+ of stocks in order to maintain control of the management.
With the above, it is quite possible that freedom of Postal Administration management such as business alliance and starting new business shrinks, and it would become more difficult to a develop sustainable business model while successfully coordinating with industries that are to be directly impacted. Such industries/companies are of course banking/finance, insurance, postal and telecommunication industries/companies, the most impacted being banking/finance industry/companies. This is because the banking/finance branch network and business of Postal Administration is as big as the total of all Japanese major financial institutions of private sector, and although at present the limit of saving at Postal Administration banking/finance is 10 million yen (no limit for private sector) to control the power of Postal Administration.
However, government’s control over Postal Administration would imply unbalanced power between public sector of Postal Administration and private sector. For this reason, successful coordination of competition requirements with private institutions would be the key.
To the author, this issue is closely linked with the complicated issue of Mr. Nishikawa, who became the head of the privatized Postal Administration Business in October 2008, and whether he should resign or not had been a big issue, leading to resignation of Mr. Hatoyama, the former Minister of General Affairs (brother of the new Prime Minister), and still is under hot discussion by the new government members. It is quite possible that the new policy intends also to solve this problem.
It is highly desired that the government drafts the policy and action plan that would lead to sustainable growth for all parties thus building Win-Win relationship with all related parties with fair process; i.e. through discussion and coordination with related parties. The bill drafted with such process would surely be successfully passed in the ad-hoc Diet to become an official law, and executed smoothly.
2009年9月20日日曜日
25% CO2 Reduction, Message to be Delivered in Upcoming Diplomacic Settings by Prime Minister Mr.Hatoyama - What Does This Mean?
Sunday, September 20, 2009 – Osaka, Japan
The Chief Cabinet Secretary of the new Japanese government, Mr. Hirano, announced today which was just broadcasted in the 9 o’clock evening news, that 25% reduction of CO2 emission vs. 1990 is to be fulfilled by 2020. Mr. Hirano also said that this message will be strongly delivered by Mr. Hatoyama, the new prime minister of Japan, in his diplomacy debut, his first visit to the U.S. to meet President Obama, and at the United Nations General Assembly.
This policy was clearly stated in the manifest of the DPJ, the current ruling party, and although it is in line with the global trend of co-existence with the global environment, it is possible that this policy will provoke hot discussions and resistance from the industry world and Japanese citizens.
This policy would mean possible severe regulation and allocation of reduction in CO2 emission to each industry sector and companies operating in Japan (including Japan branch of foreign capital companies). Automobile companies have already taken this trend as a business opportunity and started aggressively to develop and market EV cars. And electronics companies are focusing on environmentally friendly energy and battery business and on developing and marketing eco (environmentally friendly, energy saving and economic) electric appliances. Such automobile and electronic companies had been recently benefiting from the old ruling party’s policy of “Eco Point”, leading to increase in sales. However, in general, severe regulation and allocation of reduction in CO2 emission would be a burden and negatively impact from cost perspective. This negative impact has already been seen reflected in the stock price, as stated in the article posted on September 19.
New Coalition Government Policy, High Yen and Supply & Demand Oppressing Japanese Companies Resulting in Behind Worldwide High Stock Prices Trend
This policy should drive energy saving in all settings (public and private; work place, public places and home settings), and therefore minimum use of electricity including further warm and cool biz is likely to be promoted. This kind of promotion at workplace may well encourage employees to improve productivity and go home as early as possible which also may mean work-life balance and further driving energy saving at public places and home settings. But too much promotion could lead to negative impact, such as debate leading to refraining illumination at amusement and shopping quarters and people would be deprived of entertainment at night and the town would lose “vigour”.
The Japanese new government needs to come into consensus on this policy with the industry world opinion leaders and win the positive public opinion. The government surely would not want to drop its supporting rate with this issue; from Mr. Koizumi’s reform, it is apparent that the “life line” of the Hatoyama government to successfully solve many problems to change Japan. As in the previous article posted on September 6,
The DPJ Expected to Lead Japan to Change Similarly to Turnaround of Ailing Companies but with More Dynamism and Complexity
this policy is not highly evaluated by the governor and citizen so it may well be tough for the new government to convince key members, but this process cannot be ignored, similarly to turnaround and change management of global companies.
The Chief Cabinet Secretary of the new Japanese government, Mr. Hirano, announced today which was just broadcasted in the 9 o’clock evening news, that 25% reduction of CO2 emission vs. 1990 is to be fulfilled by 2020. Mr. Hirano also said that this message will be strongly delivered by Mr. Hatoyama, the new prime minister of Japan, in his diplomacy debut, his first visit to the U.S. to meet President Obama, and at the United Nations General Assembly.
This policy was clearly stated in the manifest of the DPJ, the current ruling party, and although it is in line with the global trend of co-existence with the global environment, it is possible that this policy will provoke hot discussions and resistance from the industry world and Japanese citizens.
This policy would mean possible severe regulation and allocation of reduction in CO2 emission to each industry sector and companies operating in Japan (including Japan branch of foreign capital companies). Automobile companies have already taken this trend as a business opportunity and started aggressively to develop and market EV cars. And electronics companies are focusing on environmentally friendly energy and battery business and on developing and marketing eco (environmentally friendly, energy saving and economic) electric appliances. Such automobile and electronic companies had been recently benefiting from the old ruling party’s policy of “Eco Point”, leading to increase in sales. However, in general, severe regulation and allocation of reduction in CO2 emission would be a burden and negatively impact from cost perspective. This negative impact has already been seen reflected in the stock price, as stated in the article posted on September 19.
New Coalition Government Policy, High Yen and Supply & Demand Oppressing Japanese Companies Resulting in Behind Worldwide High Stock Prices Trend
This policy should drive energy saving in all settings (public and private; work place, public places and home settings), and therefore minimum use of electricity including further warm and cool biz is likely to be promoted. This kind of promotion at workplace may well encourage employees to improve productivity and go home as early as possible which also may mean work-life balance and further driving energy saving at public places and home settings. But too much promotion could lead to negative impact, such as debate leading to refraining illumination at amusement and shopping quarters and people would be deprived of entertainment at night and the town would lose “vigour”.
The Japanese new government needs to come into consensus on this policy with the industry world opinion leaders and win the positive public opinion. The government surely would not want to drop its supporting rate with this issue; from Mr. Koizumi’s reform, it is apparent that the “life line” of the Hatoyama government to successfully solve many problems to change Japan. As in the previous article posted on September 6,
The DPJ Expected to Lead Japan to Change Similarly to Turnaround of Ailing Companies but with More Dynamism and Complexity
this policy is not highly evaluated by the governor and citizen so it may well be tough for the new government to convince key members, but this process cannot be ignored, similarly to turnaround and change management of global companies.
2009年9月6日日曜日
The DPJ Expected to Lead Japan to Change Similarly to Turnaround of Ailing Companies but with More Dynamism and Complexity
Sunday, September 6, 2009 – Osaka, Japan
Japanese governors evaluate social security policies the DPJ’s manifest, Nikkei, the Japan’s leading newspaper specialized in economy and politics, reported yesterday as the survey result Nikkei implemented lately. The result is in line with what Japanese citizens are requesting to the new Japanese government for them to lead better lives.
According to Nikkei, the survey was implemented to 46 governors excluding Aichi prefecture governor who was on a business trip. The question was which policies of the DPJ’s manifest do they evaluate and think is/are the first priority to be implemented. Multiple answers were accepted.
From the survey result, it is apparent that healthcare and social security are the vital items the governors highly evaluate. Top of the list was increase in developing doctors with 19 people, followed by withdrawal of policy of restraining social security expense growth with 11 people. Others such as a certain amount of financial incentives per child and 25% reduction in CO2 emission followed with only 4 people. Making motorway free similarly to the U.K. which has been a hot debate was evaluated by only 3 governors but on the contrary 16 answered that they do not evaluate this policy.
These results overlap with the voices of Japanese citizens interviewed and broadcasted in TV news to make comments on what they expect to the new leading party to improve their lives. Many said that healthcare including increase in doctors and other healthcare experts plus hospitals is vital, and that social welfare including pension issues needs to be solved. Regarding measures to increase children to solve the aging society problem, many said that more “fundamental and systematic” measures to change the society and infrastructure are required.
Japanese citizens also request to the new leading party to stimulate business to improve the economy and employment situation, which is quite natural because they are all directly affected financially by the bad economy. This is a requirement to stimulate the consumer spending and expand domestic market demand. However, domestic market demand expansion alone is limited and something else to stimulate the business and economy is required such as reconstructing the total social infrastructure and fostering to develop new promising industries especially in the area of energy and environment, agriculture, healthcare and IT, and as incentives to attract direct (and indirect) investment to Japan. The reason this kind of issue was not mentioned in the survey to governors could be that there are so many other issues that are more critical, and that it is the companies that are the main players for this issues.
Free comments in the survey as “request and expectation” included clear vision and strategy for growth at an early stage from Mr. Hashimoto of Osaka, and freeing Japanese politics from bureaucratic-oriented style from Mr. Ishihara of Tokyo. Both are “must” of many turnarounds of ailing companies.
The DPJ are expected to lead change the “Japan Corporation” in very much the same way as many turnaround of companies that achieved V-shared recovery leveraging change management. With its size and complexity, this is indeed a big challenge but must be fulfilled for the country and its citizens of today and tomorrow.
Japanese governors evaluate social security policies the DPJ’s manifest, Nikkei, the Japan’s leading newspaper specialized in economy and politics, reported yesterday as the survey result Nikkei implemented lately. The result is in line with what Japanese citizens are requesting to the new Japanese government for them to lead better lives.
According to Nikkei, the survey was implemented to 46 governors excluding Aichi prefecture governor who was on a business trip. The question was which policies of the DPJ’s manifest do they evaluate and think is/are the first priority to be implemented. Multiple answers were accepted.
From the survey result, it is apparent that healthcare and social security are the vital items the governors highly evaluate. Top of the list was increase in developing doctors with 19 people, followed by withdrawal of policy of restraining social security expense growth with 11 people. Others such as a certain amount of financial incentives per child and 25% reduction in CO2 emission followed with only 4 people. Making motorway free similarly to the U.K. which has been a hot debate was evaluated by only 3 governors but on the contrary 16 answered that they do not evaluate this policy.
These results overlap with the voices of Japanese citizens interviewed and broadcasted in TV news to make comments on what they expect to the new leading party to improve their lives. Many said that healthcare including increase in doctors and other healthcare experts plus hospitals is vital, and that social welfare including pension issues needs to be solved. Regarding measures to increase children to solve the aging society problem, many said that more “fundamental and systematic” measures to change the society and infrastructure are required.
Japanese citizens also request to the new leading party to stimulate business to improve the economy and employment situation, which is quite natural because they are all directly affected financially by the bad economy. This is a requirement to stimulate the consumer spending and expand domestic market demand. However, domestic market demand expansion alone is limited and something else to stimulate the business and economy is required such as reconstructing the total social infrastructure and fostering to develop new promising industries especially in the area of energy and environment, agriculture, healthcare and IT, and as incentives to attract direct (and indirect) investment to Japan. The reason this kind of issue was not mentioned in the survey to governors could be that there are so many other issues that are more critical, and that it is the companies that are the main players for this issues.
Free comments in the survey as “request and expectation” included clear vision and strategy for growth at an early stage from Mr. Hashimoto of Osaka, and freeing Japanese politics from bureaucratic-oriented style from Mr. Ishihara of Tokyo. Both are “must” of many turnarounds of ailing companies.
The DPJ are expected to lead change the “Japan Corporation” in very much the same way as many turnaround of companies that achieved V-shared recovery leveraging change management. With its size and complexity, this is indeed a big challenge but must be fulfilled for the country and its citizens of today and tomorrow.
2009年9月1日火曜日
Is Diversity Coming to Japanese Politics to Penetrate Throughout the Nation?
Tuesday, September 1, 2009 - Osaka, Japan
What Japanese media named “Ozawa Girls” (vs. “Koizumi Children” in the previous election) played an important role in the DPJ’s historic victory in the general election held on August 30. This seems to imply that diversity is coming into Japanese political world at last, which may have positive impact on Japan, to drive diversity throughout the nation.
The main player of the DPJ’s strategy were “Ozawa Girls”, are new female candidates, mostly in 30s, allocated as rival candidates of LDP veterans with the intention of Mr. Ozawa, the former DPJ representative. They are mostly of younger generation compared to “Koizumi Children”. Quite a few already have been engaged in social activities, including an candidate who had been a serious advocate in solving a medical/healthcare issue from her own experience, herself suffering from a disease.
The DPJ’s strategy was a big success. The mass media and the general public were extremely attentive to “Ozawa Girls” although they were absolutely new with no experience nor achievement in the political world. The strategy also forced LDP veteran candidates to focus on their own election, stopping them to visit around Japan to make back-up speeches for other new and/or younger LDP candidates.
“Ozawa Girls” need to learn from “Koizumi Children” to be truly succeed as positicians. They have not really gone through preparatory training as politicians. They have not worked their way up the food chain to become politicians. They benefited much from public criticism of LDP. Now that they have been elected to serve to improve the country, they will be tested and evaluated by the citizens whether they really deserve the position they won by the election. They would need to achieve tangible results if they are to be re-elected in the next election, which would not be like the August 30 election but is assumed to be much more tough one for DPJ.
In conclusion, “Ozawa Girls” have potential to positively impact Japanese society, which is behind many other countries on Diversity in general. “Ozawa Girls “ could become a break through in the Japanese politics with their vitality, competence, clear mission/belief and strong will. With strong leadership and sponsorship, favourable environment and support, they would be able to unleash their potential and through experience, pickup quickly to grow as good politicians and contribute to change and improve the country. If that do become a reality, it is possible that they become the role model to drive diversity throughout the nation.
Megumi Oyanagi
What Japanese media named “Ozawa Girls” (vs. “Koizumi Children” in the previous election) played an important role in the DPJ’s historic victory in the general election held on August 30. This seems to imply that diversity is coming into Japanese political world at last, which may have positive impact on Japan, to drive diversity throughout the nation.
The main player of the DPJ’s strategy were “Ozawa Girls”, are new female candidates, mostly in 30s, allocated as rival candidates of LDP veterans with the intention of Mr. Ozawa, the former DPJ representative. They are mostly of younger generation compared to “Koizumi Children”. Quite a few already have been engaged in social activities, including an candidate who had been a serious advocate in solving a medical/healthcare issue from her own experience, herself suffering from a disease.
The DPJ’s strategy was a big success. The mass media and the general public were extremely attentive to “Ozawa Girls” although they were absolutely new with no experience nor achievement in the political world. The strategy also forced LDP veteran candidates to focus on their own election, stopping them to visit around Japan to make back-up speeches for other new and/or younger LDP candidates.
“Ozawa Girls” need to learn from “Koizumi Children” to be truly succeed as positicians. They have not really gone through preparatory training as politicians. They have not worked their way up the food chain to become politicians. They benefited much from public criticism of LDP. Now that they have been elected to serve to improve the country, they will be tested and evaluated by the citizens whether they really deserve the position they won by the election. They would need to achieve tangible results if they are to be re-elected in the next election, which would not be like the August 30 election but is assumed to be much more tough one for DPJ.
In conclusion, “Ozawa Girls” have potential to positively impact Japanese society, which is behind many other countries on Diversity in general. “Ozawa Girls “ could become a break through in the Japanese politics with their vitality, competence, clear mission/belief and strong will. With strong leadership and sponsorship, favourable environment and support, they would be able to unleash their potential and through experience, pickup quickly to grow as good politicians and contribute to change and improve the country. If that do become a reality, it is possible that they become the role model to drive diversity throughout the nation.
Megumi Oyanagi
2009年8月31日月曜日
Japanese Voters Explicitly Expressed Their Opinion For Decision Making; How About Japanese Shareholders?
Monday, August 31, 2009 - Osaka, Japan
Taking the opportunity of the general election held yesterday, Japanese voters explicitly said “no” to the more than half a century of almost uninterrupted rule by the LDP (the Liberal Democratic Party). Their saying led to the DPJ (Democratic Party of Japan) winning over 300 seats in the 480-seat chamber in an election of almost 70% voting rate which is probably the highest in Japanese election history, opening the door to potential changes in Japan. Indeed, general election had long been mere façade but the years of unhealthy Japanese politics change voters’ minds and behaviours.
If Japan is considered as a publicly-quoted company, public opinion is equivalent to stock market, the general election is equivalent to shareholder meeting and Japanese voters to Japanese shareholders. Unless he/she is a top shareholder (usually financial institute), Japanese shareholders are usually quiet, rarely outspoken, and many shareholder meetings are mere façade, just like what the election had been. But with many companies suffering from poor performance, shareholders may change their mind to be outspoken similarly to voters of the election.
Excluding some exceptions, Japanese companies are in general under-valued in the stock market, and many are suffering from poor performance, not necessarily because of the worldwide economic crisis started last year. As some experts point out, the real reason for this may well lie in the fundamental issue of their management system and structure and/or business model that is no longer adapting to the business environment we live in today (e.g. dependent to export and/or high-end products thus likely to be affected by negative impact of world economy and currency trend, weak cost structure).
Taking all the above into account, it would not be a surprise that some Japanese shareholders start to become more outspoken and truly participate in decision making of the company they invest in. Responsibility of voters and shareholders is not only participation in the general election and shareholders meeting. The voters and shareholders are expected continuously to be attentive to and to check how their “company” is managed, together with its performance.
Taking the opportunity of the general election held yesterday, Japanese voters explicitly said “no” to the more than half a century of almost uninterrupted rule by the LDP (the Liberal Democratic Party). Their saying led to the DPJ (Democratic Party of Japan) winning over 300 seats in the 480-seat chamber in an election of almost 70% voting rate which is probably the highest in Japanese election history, opening the door to potential changes in Japan. Indeed, general election had long been mere façade but the years of unhealthy Japanese politics change voters’ minds and behaviours.
If Japan is considered as a publicly-quoted company, public opinion is equivalent to stock market, the general election is equivalent to shareholder meeting and Japanese voters to Japanese shareholders. Unless he/she is a top shareholder (usually financial institute), Japanese shareholders are usually quiet, rarely outspoken, and many shareholder meetings are mere façade, just like what the election had been. But with many companies suffering from poor performance, shareholders may change their mind to be outspoken similarly to voters of the election.
Excluding some exceptions, Japanese companies are in general under-valued in the stock market, and many are suffering from poor performance, not necessarily because of the worldwide economic crisis started last year. As some experts point out, the real reason for this may well lie in the fundamental issue of their management system and structure and/or business model that is no longer adapting to the business environment we live in today (e.g. dependent to export and/or high-end products thus likely to be affected by negative impact of world economy and currency trend, weak cost structure).
Taking all the above into account, it would not be a surprise that some Japanese shareholders start to become more outspoken and truly participate in decision making of the company they invest in. Responsibility of voters and shareholders is not only participation in the general election and shareholders meeting. The voters and shareholders are expected continuously to be attentive to and to check how their “company” is managed, together with its performance.
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