Osaka – Sunday, November 28, 2010
In one of the previous article "Negative Effects of High Yen on Japan – The Reality" the author explained the mechanism of how high yen leads to profitability decrease of export-oriented Japanese companies, which constitutes the majority of Japanese companies operating globally such as of automobiles and consumer electronics.
In this article, the author would like to introduce such cases in more depth, based on a recent article of Nikkei, Japanese leading newspaper specialized in business and economy, to prove that high yen has significance negative effect on Japanese companies of the industries that are usually regarded as being globally competitive.
1. How high yen has cut profitability of Japanese manufacturers?
1) Automobile
The profitability decrease for fiscal year ending March 2011 of leading 7 automobile companies (including Toyota, Nissan and Honda), is estimated to total as much as 81.6 billion yen, when compared with total profit calculated with the exchange rate of 85 yen per USD, which was the rate used in their original estimation. This amount is equivalent to one third of the profit that should have been generated if there had not been deterioration in the exchange rate.
2) Rubber (Yokoyama Rubber Co. Ltd.)
Yokoyama Rubber business in Russia suffered from more than 1 billion exchange-rate loss despite their strong business in Russia. Their winter tires of Yokohama Rubber is popular in Russia and their business in Russia has been growing steadily in the first half of fiscal year 2010 in local currency base. However, with high yen and low ruble, their revenue decreased when converted to yen, resulting in over 1 billion exchange-rate loss.
3) Mechatronics (Shibaura Mechatronics Corporation)
In the case of Shibaura Mechatroonics Corporation, the financial performance deteriorated due to high yen verses low won. Low won made their Korea competitors strong in price competitiveness and deprived of their business and market share. As a result, the order that Shibaura Mechatronics received in the first half of 2010 was 40% less that their original plan.
2. To what degree the yen appreciated this year?
The yen appreciated by over 10% in only a year. It was around 93 yen per USD in average in fiscal year 2009. However, in the first has of this year the yen drastically appreciated against almost all currencies, and the yen has been hovering 80-83 yen per USD this year, which is around 10 yen or more per USD higher this year than last year. This is the primary factor for profitability reduction of Japanese companies.
3. At which high yen level would make Japanese companies in the red?
A Japanese research institute estimates that overall manufacturers would turn to red when the yen gets as high as 65 yen per USD. However, even in the current level (i.e. 80-83 yen per USD), many companies are suffering from balancing revenue and employment in Japan.
Net profit for the latter half of 2010 of Shinko Electric Industrial, would be almost zero at the level of 80 yen per USD. IC package for MPU (Micro Processing Unit), their major product, is of high value added products of many SKUs each with little volume. For this reason, it is difficult for them to shift their production to overseas, which is the first solution adopted by Japanese companies to overcome high yen.
4. What would be the primary factor that determines where the Japanese companies invest in the future?
It would be the foreign exchange rage, i.e. how yen is high or low against other major currencies. The fact that more companies including Nissan have decided to shift their production to overseas is the evidence.
Even Tokyo Electron Ltd. that had kept to their policy of manufacturing in Japan to avoid outflow of their technologies, decided to shift their production to overseas this October at last, because of the high yen. They will construct a production plant for producing LCD panel manufacturing equipment in China with the objective of cost reduction and of benefiting from growing China demand.
Asia is now not only production site but also has grown to a major consumption market. Investment environment also has improved and thus the hurdle for Japanese companies to decide shifting to Asia has drastically lowered.
5. How many people would become unemployed in Japan when production is shifted to overseas?
If Tokyo Electron mentioned above should shift their production to overseas, their current employment of their 4000 factory workers in Japan would become unemployed.
And, Toyota estimates that total of 120,000 people (inside and outside Toyota) in Japan would lose their job if their production of 1 million cars per year, which is equivalent to approximately one third of their total Japan domestic production, is to be shifted to overseas. This is equivalent to approximately 1.7 times that of Toyota employees (non-consolidated). A Toyota executive said in their recent financial performance announcement that the present currency level is above the competitiveness of Japan economy, at least of Toyota.
2010年11月23日火曜日
Positive Effects of High Yen on Japan – Theory and Reality
Osaka – Tuesday, November 23, 2010
Yen had been hovering at the level of 80-82 yen per USD for quite a while, has depreciated a little hovering 83-83.5 yen per USD since the recent G20 held in Korea, but is still a serious issue in Japan. Taking this opportunity, the author discussed possible negatives effects of high yen on Japan in the previous article
Negative Effects of High Yen on Japan – The Reality
In this article, she would like to discuss on the positive ones in theory and the reality.
The conclusion is that there seem to be more negative effectives than the positive ones. Also, the possible positive effects have not all resulted in positive effects as expected/in theory because of the characteristics of the positive effects and other negative factors such as worldwide abnormal weather. As a result, the limited positive effects have been traded off with such negative factors. Therefore in total, negative effects exceed positive effects, and thus the result is ongoing sluggish economy.
1. Decrease in price of imported products
1) Theory
In theory, price of imported products should drop unless the wholesalers and/or retailers increase their margin. This is why in high yen times, there are usually bargains reducing benefits of high yen by retailers, with the objective of stimulating consumer spending leading to boost in their sales and growth in their businesses.
Also, since Japan depends most of its agricultural products and other household goods on import, high yen should mean decrease in total household expense.
2) Reality
(1) As theory
Recently in a TV programme, bargains reducing high yen were featured. A case of Nitori Co. Ltd, a company that does business in student desks, Japanese traditional school bags etc. imports 90% or more of their products from overseas and therefore additional 900 million yen profit is generated for every appreciated 1 yen per USD. Taking the opportunity of the recent high yen, Nitori has been slashing the retail price of their products by 10-30% to boost their sales. Moreover, according to their TVCF that went on the air this morning they have been additionally slashing their prices since October 30 by 15-40% to further boost their business, together with launching new products for Christmas business.
Another case featured was of a department store. Most of their products are imported and they also were trying to boost their sales by bargains reducing benefits of high yen.
(2) Not as theory
The overall household spending does not seem to have decreased and most household do not truly realize the benefit of high yen. Possible reasons for this are the following:-
a) Imported products with lower price in high yen targets limited customer segment
Most imported products whose price has dropped are of luxury products (e.g. branded products such as of Chanel, Louis Vuitton, Tiffany) and products that are not of daily necessities like that of Nitori.
This means it is mostly the rich people who can afford luxury products that benefit from high yen. Other possible people who benefit from high yen are those who need to buy products of Nitori business because their children have reached such an age, and who can afford to additionally buy non-daily necessities. Such people are minority of the total Japanese citizens. For this reason, bargains reducing benefits of high yen on total consumer spending is limited.
b) Prices of agricultural products has not dropped under high yen
Prices of imported daily necessities such as agricultural products have not dropped despite the high yen. This is because of poor harvesting due to abnormal climate worldwide, such as poor harvesting of wheat in Russia, vegetables in Australia and the U.S. Thus, decrease in yield of such products has traded off the benefits of high yen.
2. Boost in tourism business (tourists from Japan to overseas)
(1) Theory
In theory, more Japanese people would travel abroad leveraging the benefits of high yen, meaning boost in overseas tourism business. This is because under high yen, with the same amount of money in yen, people can buy more products abroad so high yen would be an incentive for them to travel abroad, buy products and bring them back to Japan and/or spend money abroad in other ways such as enjoying services.
(2) Reality
Tourism industry revenue has not increased as much as expected. This can be due to the fact that with ongoing sluggish economy and decrease in average income, it is only the limited rich people who can truly enjoy the benefit of high hen in tourism, and the majority of the Japanese cannot afford to travel abroad as in strong economy.
Yen had been hovering at the level of 80-82 yen per USD for quite a while, has depreciated a little hovering 83-83.5 yen per USD since the recent G20 held in Korea, but is still a serious issue in Japan. Taking this opportunity, the author discussed possible negatives effects of high yen on Japan in the previous article
Negative Effects of High Yen on Japan – The Reality
In this article, she would like to discuss on the positive ones in theory and the reality.
The conclusion is that there seem to be more negative effectives than the positive ones. Also, the possible positive effects have not all resulted in positive effects as expected/in theory because of the characteristics of the positive effects and other negative factors such as worldwide abnormal weather. As a result, the limited positive effects have been traded off with such negative factors. Therefore in total, negative effects exceed positive effects, and thus the result is ongoing sluggish economy.
1. Decrease in price of imported products
1) Theory
In theory, price of imported products should drop unless the wholesalers and/or retailers increase their margin. This is why in high yen times, there are usually bargains reducing benefits of high yen by retailers, with the objective of stimulating consumer spending leading to boost in their sales and growth in their businesses.
Also, since Japan depends most of its agricultural products and other household goods on import, high yen should mean decrease in total household expense.
2) Reality
(1) As theory
Recently in a TV programme, bargains reducing high yen were featured. A case of Nitori Co. Ltd, a company that does business in student desks, Japanese traditional school bags etc. imports 90% or more of their products from overseas and therefore additional 900 million yen profit is generated for every appreciated 1 yen per USD. Taking the opportunity of the recent high yen, Nitori has been slashing the retail price of their products by 10-30% to boost their sales. Moreover, according to their TVCF that went on the air this morning they have been additionally slashing their prices since October 30 by 15-40% to further boost their business, together with launching new products for Christmas business.
Another case featured was of a department store. Most of their products are imported and they also were trying to boost their sales by bargains reducing benefits of high yen.
(2) Not as theory
The overall household spending does not seem to have decreased and most household do not truly realize the benefit of high yen. Possible reasons for this are the following:-
a) Imported products with lower price in high yen targets limited customer segment
Most imported products whose price has dropped are of luxury products (e.g. branded products such as of Chanel, Louis Vuitton, Tiffany) and products that are not of daily necessities like that of Nitori.
This means it is mostly the rich people who can afford luxury products that benefit from high yen. Other possible people who benefit from high yen are those who need to buy products of Nitori business because their children have reached such an age, and who can afford to additionally buy non-daily necessities. Such people are minority of the total Japanese citizens. For this reason, bargains reducing benefits of high yen on total consumer spending is limited.
b) Prices of agricultural products has not dropped under high yen
Prices of imported daily necessities such as agricultural products have not dropped despite the high yen. This is because of poor harvesting due to abnormal climate worldwide, such as poor harvesting of wheat in Russia, vegetables in Australia and the U.S. Thus, decrease in yield of such products has traded off the benefits of high yen.
2. Boost in tourism business (tourists from Japan to overseas)
(1) Theory
In theory, more Japanese people would travel abroad leveraging the benefits of high yen, meaning boost in overseas tourism business. This is because under high yen, with the same amount of money in yen, people can buy more products abroad so high yen would be an incentive for them to travel abroad, buy products and bring them back to Japan and/or spend money abroad in other ways such as enjoying services.
(2) Reality
Tourism industry revenue has not increased as much as expected. This can be due to the fact that with ongoing sluggish economy and decrease in average income, it is only the limited rich people who can truly enjoy the benefit of high hen in tourism, and the majority of the Japanese cannot afford to travel abroad as in strong economy.
2010年11月14日日曜日
Negative Effects of High Yen on Japan – The Reality
Osaka – Sunday, November 13, 2010
High yen, hovering at the level of 80 – 85 yen per USD, was what export-oriented Japanese companies suffered from around 1995, and what made many of them shift some of their production to other countries of Asia. Yen has been hovering again at the level of 80-82 yen per USD for quite a while now when many of the Japanese companies are said to have originally made their made business plan at the exchange rate 87 – 95 yen per USD and therefore has been a serious issue in Japan.
Taking this opportunity, the author would like to discuss to clarify possible effects of high yen on Japan, focusing on the negative ones in this article, and positive ones in the upcoming article.
1. Profitability decrease of export-oriented Japanese companies
High yen directly hit profitability of export-oriented Japanese companies, when majority of the major Japanese companies such as Toyota, Sony and Panasonic to name just a few are such companies.
In the case of “made in Japan” products that are exported, high yen means decrease in gross margin because the total cost remains almost the same while the sales price in the market would be cut when converted to yen. If raw materials are imported their cost would be lower but it is the production cost accrued in Japan verses the sales price that is the primary determinant of gross margin.
For this reason, high yen is one of the reasons for slow in revenue and profit recovery of many of the Japanese companies compared to their western and Korean counterparts, as mentioned in the previous article "Japan Stagnates in Stock Market Recovery Unlike Worldwide – Why?"
According to the articles dated November 6 by Nikkei, Japanese leading newspaper specialized in business economy, the recovery rate for major Japanese companies fall behind those of western counterparts. Even Mitsubishi Trading that is #1 in the profit recovery, profit is 90% of that of pre-worldwide crisis. Panasonic is just below 50% and for Komatsu strong in Asia business is 60%.
Toyota’s case is probably one of the good examples to understand how high yen is negatively affective company’s profitability, whose profit remains as little as less than 20% of that of pre-worldwide crisis. According to Nikkei, for Apr-Sep 2010, Toyota, that was in negative by 137 billion yen for Apr-Sept 2009, has managed to turn back go black being in positive by 323 billion yen. This attributes to positive factors including sales increase (+570 billion yen) and improvement in cost competitiveness (+90 billion yen). But negative effect on currency (= high yen, which is higher by 7 yen per USD compared to last year) was 120 billion yen and therefore the total profit was only 323 billion yen
2. Shift in production of export-oriented Japanese companies to overseas
The first measures taken in many cases for cost reduction in high yen situation is cutting production cost by shifting production from Japan to countries of lower labour cost such as ASEAN and China. This is why production shift took place in many manufacturing companies especially consumer electronics and automobile companies in mid 1990s.
The recent high yen is triggering further production shift to overseas. Nissan was one of the first companies that explicitly said they will shift more production sites to Asia, followed by other companies. Others that have not yet announced the production shift but they say that if the high yen continues they also would consider production shift to overseas.
There is no sign of the yen to get lower and some view that it is quite possible that it will get higher than 80 yen per USD. Experts and people of the industry say that if the yen should get as high as 75 yen 100% of the production of automobiles need to be shifted to overseas for the companies to make ends meet.
3. Economy remaining sluggish
In addition, high yen would be a big factor for sluggish economy, because of decrease in consumer spending and slow tourism business. Low consumer spending is one of the primary factors for sluggish economy.
Shift in production to overseas drives restructuring and job cuts. As a result, employment rate goes up. In such a situation, consumer spending would unlikely be stimulated unless the government gives incentives/execute economy stimulation measures that trades off such negative factors.
Also, high yen would likely to keep away tourists coming to Japan because it would cost them more to enjoy their visit to Japan, meaning less consumer spending. This is because even if the number of tourists visiting Japan remains the same, they are more unlikely be able to purchase same amount of products and services as low yen time unless they can afford to bring more money with them.
High yen, hovering at the level of 80 – 85 yen per USD, was what export-oriented Japanese companies suffered from around 1995, and what made many of them shift some of their production to other countries of Asia. Yen has been hovering again at the level of 80-82 yen per USD for quite a while now when many of the Japanese companies are said to have originally made their made business plan at the exchange rate 87 – 95 yen per USD and therefore has been a serious issue in Japan.
Taking this opportunity, the author would like to discuss to clarify possible effects of high yen on Japan, focusing on the negative ones in this article, and positive ones in the upcoming article.
1. Profitability decrease of export-oriented Japanese companies
High yen directly hit profitability of export-oriented Japanese companies, when majority of the major Japanese companies such as Toyota, Sony and Panasonic to name just a few are such companies.
In the case of “made in Japan” products that are exported, high yen means decrease in gross margin because the total cost remains almost the same while the sales price in the market would be cut when converted to yen. If raw materials are imported their cost would be lower but it is the production cost accrued in Japan verses the sales price that is the primary determinant of gross margin.
For this reason, high yen is one of the reasons for slow in revenue and profit recovery of many of the Japanese companies compared to their western and Korean counterparts, as mentioned in the previous article "Japan Stagnates in Stock Market Recovery Unlike Worldwide – Why?"
According to the articles dated November 6 by Nikkei, Japanese leading newspaper specialized in business economy, the recovery rate for major Japanese companies fall behind those of western counterparts. Even Mitsubishi Trading that is #1 in the profit recovery, profit is 90% of that of pre-worldwide crisis. Panasonic is just below 50% and for Komatsu strong in Asia business is 60%.
Toyota’s case is probably one of the good examples to understand how high yen is negatively affective company’s profitability, whose profit remains as little as less than 20% of that of pre-worldwide crisis. According to Nikkei, for Apr-Sep 2010, Toyota, that was in negative by 137 billion yen for Apr-Sept 2009, has managed to turn back go black being in positive by 323 billion yen. This attributes to positive factors including sales increase (+570 billion yen) and improvement in cost competitiveness (+90 billion yen). But negative effect on currency (= high yen, which is higher by 7 yen per USD compared to last year) was 120 billion yen and therefore the total profit was only 323 billion yen
2. Shift in production of export-oriented Japanese companies to overseas
The first measures taken in many cases for cost reduction in high yen situation is cutting production cost by shifting production from Japan to countries of lower labour cost such as ASEAN and China. This is why production shift took place in many manufacturing companies especially consumer electronics and automobile companies in mid 1990s.
The recent high yen is triggering further production shift to overseas. Nissan was one of the first companies that explicitly said they will shift more production sites to Asia, followed by other companies. Others that have not yet announced the production shift but they say that if the high yen continues they also would consider production shift to overseas.
There is no sign of the yen to get lower and some view that it is quite possible that it will get higher than 80 yen per USD. Experts and people of the industry say that if the yen should get as high as 75 yen 100% of the production of automobiles need to be shifted to overseas for the companies to make ends meet.
3. Economy remaining sluggish
In addition, high yen would be a big factor for sluggish economy, because of decrease in consumer spending and slow tourism business. Low consumer spending is one of the primary factors for sluggish economy.
Shift in production to overseas drives restructuring and job cuts. As a result, employment rate goes up. In such a situation, consumer spending would unlikely be stimulated unless the government gives incentives/execute economy stimulation measures that trades off such negative factors.
Also, high yen would likely to keep away tourists coming to Japan because it would cost them more to enjoy their visit to Japan, meaning less consumer spending. This is because even if the number of tourists visiting Japan remains the same, they are more unlikely be able to purchase same amount of products and services as low yen time unless they can afford to bring more money with them.
2010年11月7日日曜日
Japan Stagnates in Stock Market Recovery Unlike Worldwide – Why?
Osaka – Sunday, November 7, 2010
Nikkei, Japanese leading newspaper specialized in business and economy reported on November 6 that 70% of the worldwide stock market/share price (14 among 20 major markets including the U.S.) has recovered to the level of the pre-worldwide economic crisis of 2008 driven by additional credit ease by FRB (Federal Reserve Bank), while that of Japan stagnates. The worldwide recovery attributes to investment money generated by the easy money flowing into the stock market. Average share price of Japan stock market is still minus 20% from the level of the pre-worldwide economic crisis and its slow recovery stands out.
1. Which countries have been recovering the most?
It is the emerging markets, whose growth expectation is high. As shown in the table below, no.1 is Argentina (+103% from the level before the worldwide economic crisis), which is followed by China (+50%) and India (49%). These countries are all in upward trend.
Worldwide Main Stock Index Compared to the Level of Pre-Worldwide Economic Crisis
(Source: Nikkei, translated by the author)
Country / Advance/Decline Ratio vs Pre-Worldwide Crisis (%)
Argentina / 102.7
China / 50.5
India / 49.2
Brazil / 39.3
Taiwan / 33.9
South Korea / 31.2
Hong Kong / 28.5
Singapore / 26.0
Russia / 19.4
South Africa / 16.4
The U.K. / 8.2
Germany / 8.0
Canada / 0.9
The U.S. / 0.1
Australia / -1.7
Spain / -7.1
Switzerland / -8.6
France / -9.6
Japan / -21.6
Italy / -24.3
Majority of developed countries also recovered with capital inflow into their stock market. Dow index has recovered to the level of pre-worldwide crisis on November 4. Recovery rate of the U.K. and Germany is especially large with +8%. The reason is said to be the fact that with easy interest rate of the U.S. and Japan, yield of government bonds went down and therefore comparatively the stocks of the developed countries became attractive to investors.
2. Which countries stagnate in recovery?
It is the countries with structural problems, such as Italy, Spain and Japan. The amount of government bond of such countries is large but high growth cannot be expected; therefore, only limited capital has been flowing into their stock market. Average share price of Japan is -21.2 from the pre-worldwide crisis level, which is above only Italy i.e. second from the bottom of the 20 countries.
3. Why Japan’s recovery stagnates?
It is because the revenue recovery of Japanese companies is much slower than their overseas counterparts, due to the following.
1) High yen that seems to continue
Yen has been hovering around 80 yen per USD, the same level as the previous high yen level of around 1995 when Japanese companies suffered so much from high yen. The high yen trend seems to continue for some time, and some experts say it could reach as high as 75 yen per USD.
This is the contrary of South Korea and German companies, whose recovery have been accelerated, leveraging their low their currency. Ratio of net profit for July-Sep of Posco (South Korea) has recovered to 86% of July-Sep of 2008 while that of Nippon Steel (Japan) is only 56%. Net profit of for July-Sep of Volkswagen (Germany) is almost twice of July-Sep of 2008, when that of Toyota (Japan) is only 70%.
2) Unclear policy of the government unable to support recovery of the companies
As experts point out, with politics in chaos, the government has not been able to support improvement of global competitiveness of Japanese companies. This is another obstacle for money inflow into the Japan stock market.
Bank of Japan has started to take comprehensive easing measures including purchasing of risk assets such as ETF (Exchange Trade Fund) but many experts view that such measures are behind those of FRB.
In the upcoming article, the author would like to focus on the effects on high yen on Japan.
Nikkei, Japanese leading newspaper specialized in business and economy reported on November 6 that 70% of the worldwide stock market/share price (14 among 20 major markets including the U.S.) has recovered to the level of the pre-worldwide economic crisis of 2008 driven by additional credit ease by FRB (Federal Reserve Bank), while that of Japan stagnates. The worldwide recovery attributes to investment money generated by the easy money flowing into the stock market. Average share price of Japan stock market is still minus 20% from the level of the pre-worldwide economic crisis and its slow recovery stands out.
1. Which countries have been recovering the most?
It is the emerging markets, whose growth expectation is high. As shown in the table below, no.1 is Argentina (+103% from the level before the worldwide economic crisis), which is followed by China (+50%) and India (49%). These countries are all in upward trend.
Worldwide Main Stock Index Compared to the Level of Pre-Worldwide Economic Crisis
(Source: Nikkei, translated by the author)
Country / Advance/Decline Ratio vs Pre-Worldwide Crisis (%)
Argentina / 102.7
China / 50.5
India / 49.2
Brazil / 39.3
Taiwan / 33.9
South Korea / 31.2
Hong Kong / 28.5
Singapore / 26.0
Russia / 19.4
South Africa / 16.4
The U.K. / 8.2
Germany / 8.0
Canada / 0.9
The U.S. / 0.1
Australia / -1.7
Spain / -7.1
Switzerland / -8.6
France / -9.6
Japan / -21.6
Italy / -24.3
Majority of developed countries also recovered with capital inflow into their stock market. Dow index has recovered to the level of pre-worldwide crisis on November 4. Recovery rate of the U.K. and Germany is especially large with +8%. The reason is said to be the fact that with easy interest rate of the U.S. and Japan, yield of government bonds went down and therefore comparatively the stocks of the developed countries became attractive to investors.
2. Which countries stagnate in recovery?
It is the countries with structural problems, such as Italy, Spain and Japan. The amount of government bond of such countries is large but high growth cannot be expected; therefore, only limited capital has been flowing into their stock market. Average share price of Japan is -21.2 from the pre-worldwide crisis level, which is above only Italy i.e. second from the bottom of the 20 countries.
3. Why Japan’s recovery stagnates?
It is because the revenue recovery of Japanese companies is much slower than their overseas counterparts, due to the following.
1) High yen that seems to continue
Yen has been hovering around 80 yen per USD, the same level as the previous high yen level of around 1995 when Japanese companies suffered so much from high yen. The high yen trend seems to continue for some time, and some experts say it could reach as high as 75 yen per USD.
This is the contrary of South Korea and German companies, whose recovery have been accelerated, leveraging their low their currency. Ratio of net profit for July-Sep of Posco (South Korea) has recovered to 86% of July-Sep of 2008 while that of Nippon Steel (Japan) is only 56%. Net profit of for July-Sep of Volkswagen (Germany) is almost twice of July-Sep of 2008, when that of Toyota (Japan) is only 70%.
2) Unclear policy of the government unable to support recovery of the companies
As experts point out, with politics in chaos, the government has not been able to support improvement of global competitiveness of Japanese companies. This is another obstacle for money inflow into the Japan stock market.
Bank of Japan has started to take comprehensive easing measures including purchasing of risk assets such as ETF (Exchange Trade Fund) but many experts view that such measures are behind those of FRB.
In the upcoming article, the author would like to focus on the effects on high yen on Japan.
2010年10月24日日曜日
A Typical Japanese Marketing Example from1300th Anniversary of Nara
The year 2010 marks the 1,300th anniversary of the establishment of Japan's old capital, Nara Heijo-kyo and therefore Nara is celebrating 1300th anniversary this year. On October 10 the author visited Nara, utilizing a one-day ticket issued as a campaign to promote the anniversary. Having thoroughly enjoyed the day she realized there are some factors that, to her, are “very Japanese” about the campaign/promotion, which could be shared as a best practice example worldwide.
1. What are the anniversary and the campaign?
1) The anniversary
Although Kyoto had long been the Capital of Japan and now Tokyo is, Nara, with many historic temples and national treasures of Zen culture, was the Capital of Japan 710 – 794, i.e. it became the capital of Japan 1300 years ago. In contrast “Heian-Kyo”, a word used to describe Kyoto being the capital, “Heijo-Kyo” is used to describe Nara being the capital (Kyo = capital). The anniversary is named “Heijyo-Sento” 1300th anniversary (sento = capital relocation) http://www.1300.jp, and is celebrated throughout 2010.
2) The campaign
As part of the celebrations, a special device has been exhibited at the Heijo Palace site, the main venue for the anniversary events in Yamato-Saidaij in Nara. Variety of events and exhibitions are held for visitors to enjoy and learn histories and experience the facts and lives of people 1300 year ago.
All the campaign is planned, executed and promoted by Nara City, with supports from 498 companies/organizations and 69 individuals (as of August 31), with the objective of attracting tourists/visitors nationwide and abroad. For this reason, 1-1/2 (fee = 300 yen) or 2-1/2 (fee = 500 yen) hour guided tour in Japanese is available (fee necessary), and 1 hour guided tour in English, Chinese and Korean is also available (free of charge). Checking out of self guide system is also available in Japanese, English, Chinese, Korean and French (fee = 500 yen).
2. How is the campaign promoted and in what is it unique and Japanese?
1) An image character called “Sento-kun”
An image character called “Sento-kun” was created, that symbolizes the anniversary. The name “Sento-kun” comes from “Heijyo-Sento” 1300th anniversary (sento = capital relocation) http://www.1300.jp mentioned earlier in the article, and “kun” is the word added at the end of a name “usually of boys” in Japanese. The idea of creating such a character is a typical marketing methodology in Japan, and the naming is very Japanese.
Parts constituting Sent-kun are all related to symbols of Nara. The total figure is of Buddhist monk including the monk featured in “Monkey Magic” who travelled Silk Road to bring back Buddhist scriptures in Nara period. Horns on the head symbolize deer, many of which are found in Nara Park, a historic spot of Nara. And, the total touch is made cute, more of an animation character, which are common and popular in Japan.
Sento-kun is used in all advertising and promotions (TV, magazine, online, prints and collaterals including catalogues and flyers etc.). There was also a doll of Sento-kun shown in the photo, which is about 1 meter high in the station near the house of the author, which is about 1 hour ride on the train, and the pamphlet/flyer holder of the campaign was next to Sento-kun doll. The author had seen advertising in the trains about the campaign but it was with the doll that she found the pamphlet with more details.
2) Sento-kun Heijo-kyo one-day train ticket
14 public and private railway companies and a nearby bus company collaborated to develop one-day train ticket called “Sento-kun Heijo-kyo” to help visitors from Kansai/Kinki area to travel to the place. The fee is fixed according to from which line the visitor travels from.
With this pass, visitors can travel from the station of his/her residence to the transfer station to change to Kintetsu Line and then to the nearest station of the event venue and go back the same route. He/she can also ride on a shuttle bus to and from the nearest station to the event venue or Nara station to the event venue.
Moreover, he/she can also ride as many times as possible the specified zone of Kintetsu Line including the nearest station to the event venue and of some others with good access to historic sightseeing spots including national treasure temples and Nara Park. The author utilized the pass to visit 2 national treasure temples called Yakushiji Temple http://www/nara-yakushiji.com and Toshodaiji Temple http://www.toshodaiji.jp near Nishino-kyo station after the event. (She could have visited Todaiji Temple famous for the Big Buddha and Nara Park near Nara Station but she had been there a few times and wanted to visit somewhere she had not yet visited).
One-day (or few days) pass of trains including Shinkansen bullet train is a popular marketing and promotion methodology in Japan because train is a popular transportation for many Japanese. What is unique about the Sento-kun Heijyo-kyo one-day train ticket is the fact that so many companies collaborated. The many other one-day ticket/pass are of one railway companies.
3) Complimentary ticket, a tie-up promotion of the one-day train ticket
Complimentary ticket, a series of coupons that can be used in specified restaurants and cafes (about 30 altogether) near Nishino-kyo and Nara, was included in the one-day train ticket. With the complimentary ticket valid for one day, the author benefited 10% discount for her lunch and 50 yen discount for her coffee.
Coupons are probably popular in many countries but this kind of coupon system developed with collaboration with many shops might not be so popular. This tie-up campaign turned out to generate synergy, and is extremely effective in Japan.
1. What are the anniversary and the campaign?
1) The anniversary
Although Kyoto had long been the Capital of Japan and now Tokyo is, Nara, with many historic temples and national treasures of Zen culture, was the Capital of Japan 710 – 794, i.e. it became the capital of Japan 1300 years ago. In contrast “Heian-Kyo”, a word used to describe Kyoto being the capital, “Heijo-Kyo” is used to describe Nara being the capital (Kyo = capital). The anniversary is named “Heijyo-Sento” 1300th anniversary (sento = capital relocation) http://www.1300.jp, and is celebrated throughout 2010.
2) The campaign
As part of the celebrations, a special device has been exhibited at the Heijo Palace site, the main venue for the anniversary events in Yamato-Saidaij in Nara. Variety of events and exhibitions are held for visitors to enjoy and learn histories and experience the facts and lives of people 1300 year ago.
All the campaign is planned, executed and promoted by Nara City, with supports from 498 companies/organizations and 69 individuals (as of August 31), with the objective of attracting tourists/visitors nationwide and abroad. For this reason, 1-1/2 (fee = 300 yen) or 2-1/2 (fee = 500 yen) hour guided tour in Japanese is available (fee necessary), and 1 hour guided tour in English, Chinese and Korean is also available (free of charge). Checking out of self guide system is also available in Japanese, English, Chinese, Korean and French (fee = 500 yen).
2. How is the campaign promoted and in what is it unique and Japanese?
1) An image character called “Sento-kun”
An image character called “Sento-kun” was created, that symbolizes the anniversary. The name “Sento-kun” comes from “Heijyo-Sento” 1300th anniversary (sento = capital relocation) http://www.1300.jp mentioned earlier in the article, and “kun” is the word added at the end of a name “usually of boys” in Japanese. The idea of creating such a character is a typical marketing methodology in Japan, and the naming is very Japanese.
Parts constituting Sent-kun are all related to symbols of Nara. The total figure is of Buddhist monk including the monk featured in “Monkey Magic” who travelled Silk Road to bring back Buddhist scriptures in Nara period. Horns on the head symbolize deer, many of which are found in Nara Park, a historic spot of Nara. And, the total touch is made cute, more of an animation character, which are common and popular in Japan.
Sento-kun is used in all advertising and promotions (TV, magazine, online, prints and collaterals including catalogues and flyers etc.). There was also a doll of Sento-kun shown in the photo, which is about 1 meter high in the station near the house of the author, which is about 1 hour ride on the train, and the pamphlet/flyer holder of the campaign was next to Sento-kun doll. The author had seen advertising in the trains about the campaign but it was with the doll that she found the pamphlet with more details.
2) Sento-kun Heijo-kyo one-day train ticket
14 public and private railway companies and a nearby bus company collaborated to develop one-day train ticket called “Sento-kun Heijo-kyo” to help visitors from Kansai/Kinki area to travel to the place. The fee is fixed according to from which line the visitor travels from.
With this pass, visitors can travel from the station of his/her residence to the transfer station to change to Kintetsu Line and then to the nearest station of the event venue and go back the same route. He/she can also ride on a shuttle bus to and from the nearest station to the event venue or Nara station to the event venue.
Moreover, he/she can also ride as many times as possible the specified zone of Kintetsu Line including the nearest station to the event venue and of some others with good access to historic sightseeing spots including national treasure temples and Nara Park. The author utilized the pass to visit 2 national treasure temples called Yakushiji Temple http://www/nara-yakushiji.com and Toshodaiji Temple http://www.toshodaiji.jp near Nishino-kyo station after the event. (She could have visited Todaiji Temple famous for the Big Buddha and Nara Park near Nara Station but she had been there a few times and wanted to visit somewhere she had not yet visited).
One-day (or few days) pass of trains including Shinkansen bullet train is a popular marketing and promotion methodology in Japan because train is a popular transportation for many Japanese. What is unique about the Sento-kun Heijyo-kyo one-day train ticket is the fact that so many companies collaborated. The many other one-day ticket/pass are of one railway companies.
3) Complimentary ticket, a tie-up promotion of the one-day train ticket
Complimentary ticket, a series of coupons that can be used in specified restaurants and cafes (about 30 altogether) near Nishino-kyo and Nara, was included in the one-day train ticket. With the complimentary ticket valid for one day, the author benefited 10% discount for her lunch and 50 yen discount for her coffee.
Coupons are probably popular in many countries but this kind of coupon system developed with collaboration with many shops might not be so popular. This tie-up campaign turned out to generate synergy, and is extremely effective in Japan.
2010年10月23日土曜日
Japan Corporate Tax Reduction to Attract Foreign Investment
Osaka – Saturday, October 23, 2010
Nikkei, Japanese leading newspaper specialized in business and economy reported on October 21 that the Japanese government started to study corporate tax reduction for foreign capitals entering Japanese market. Effective tax ratio which is currently 40% including local tax is being studied to be lowered by 10 – 15 % exclusively for the first 5 years.
The ruling party has already started studying to cut by 5% to activate businesses in Japan, and this will be the additional measure targeting foreign capitals as incentive to attract their investment in Japan. The government is shortly to develop action plan, targeting to implement from 2011.
1. What is the background of corporate tax reduction of new foreign capitals?
It is the fact that the government had stated that “promoting foreign capitals doing business in Japan” in the new growth strategy developed in June this year. Based on this policy, discussion on how to promote investment in Japan among government, public and private sectors (chairperson = Economy, Trade and Industry Minister) has been ongoing and comprehensive “Programme to promote investment in Japan” will be announced in the middle of November. The pillar of the programme is to be preferential treatment of corporate tax.
2. What is the detail of the preferential treatment of corporate tax?
Effective corporate tax rate for foreign capitals that newly establish Asia Pacific headquarter and R&D site will be reduced to 25 – 30 %, which would be on par with those of China, Korea and other Asian countries for the first 5 years in operation. The Japanese government has already started studying cutting corporate tax by 5%, but aims to implement additional preferential treatment to decrease burden of foreign investment in Japan.
Details such as what kind of preferential treatment is to be applied in a M&A case in which a foreign capital has acquired a Japanese company will be discussed and decided.
3. What other incentives are being studied?
1) Give subsidy for a plant construction
Subsidy is to be given to assist environment-related investment in constructing a plant/factory.
2) Promote mobility of human resources
Procedure of executives and engineers with high level skills obtaining visa is to be simplified. Also, requirement of accepting domestic servants will be made less strict.
3) Give subsidy to development sites for overhaul
Subsidy is to be given to large scale equipment overhaul involving mock-ups and mass production trials.
4) Simplify administrative procedure
Speed-up audits of new medicine and medical devices.
4. What kind of companies does the Japanese government want to attract?
The government would like to attract companies with high level technologies and skills in high tech, healthcare and bio that wants to enter Japan market for the first time or to transfer site(s) from abroad to Japan.
5. How are Asian counterparts?
Other countries have been competing to attract foreign capitals to their country. Korea exempts income tax of non-Korean engineers. China has established an exclusive preferential taxation system to manufactures with high level technologies.
Nikkei, Japanese leading newspaper specialized in business and economy reported on October 21 that the Japanese government started to study corporate tax reduction for foreign capitals entering Japanese market. Effective tax ratio which is currently 40% including local tax is being studied to be lowered by 10 – 15 % exclusively for the first 5 years.
The ruling party has already started studying to cut by 5% to activate businesses in Japan, and this will be the additional measure targeting foreign capitals as incentive to attract their investment in Japan. The government is shortly to develop action plan, targeting to implement from 2011.
1. What is the background of corporate tax reduction of new foreign capitals?
It is the fact that the government had stated that “promoting foreign capitals doing business in Japan” in the new growth strategy developed in June this year. Based on this policy, discussion on how to promote investment in Japan among government, public and private sectors (chairperson = Economy, Trade and Industry Minister) has been ongoing and comprehensive “Programme to promote investment in Japan” will be announced in the middle of November. The pillar of the programme is to be preferential treatment of corporate tax.
2. What is the detail of the preferential treatment of corporate tax?
Effective corporate tax rate for foreign capitals that newly establish Asia Pacific headquarter and R&D site will be reduced to 25 – 30 %, which would be on par with those of China, Korea and other Asian countries for the first 5 years in operation. The Japanese government has already started studying cutting corporate tax by 5%, but aims to implement additional preferential treatment to decrease burden of foreign investment in Japan.
Details such as what kind of preferential treatment is to be applied in a M&A case in which a foreign capital has acquired a Japanese company will be discussed and decided.
3. What other incentives are being studied?
1) Give subsidy for a plant construction
Subsidy is to be given to assist environment-related investment in constructing a plant/factory.
2) Promote mobility of human resources
Procedure of executives and engineers with high level skills obtaining visa is to be simplified. Also, requirement of accepting domestic servants will be made less strict.
3) Give subsidy to development sites for overhaul
Subsidy is to be given to large scale equipment overhaul involving mock-ups and mass production trials.
4) Simplify administrative procedure
Speed-up audits of new medicine and medical devices.
4. What kind of companies does the Japanese government want to attract?
The government would like to attract companies with high level technologies and skills in high tech, healthcare and bio that wants to enter Japan market for the first time or to transfer site(s) from abroad to Japan.
5. How are Asian counterparts?
Other countries have been competing to attract foreign capitals to their country. Korea exempts income tax of non-Korean engineers. China has established an exclusive preferential taxation system to manufactures with high level technologies.
2010年10月11日月曜日
Message to Japan from the Two Japanese Nobel Prize Winners
Osaka – Monday, October 11, 2010
Many Japanese media have been reporting the great news that two Japanese scientists, Dr Eiichi Negishi, a professor with authority of Purdue University in the U.S. and Dr Akira Suzuki, professor emeritus of Hokkaido University in Japan, were awarded Nobel Prize in Chemistry for their development of cross-coupling reaction technology since the announcement of the winners by the committee on September 6. Their research led to Japanese companies such as Chisso Corporation and Tosoh Corporation immediately putting the technology into practical use. The technology is now applied in wide a range of fields such as pharmaceuticals, electronics materials, reagents, agricultural chemicals and solar batteries.
The news is an extremely welcome incident; however, some comments by the two winners imply that Japan cannot simply be happy about it. There are warning signs that cannot be missed if Japan is to continue being leader in science, technology and economy.
1. What are warning that Japan cannot miss?
1) Japan may not be a leader in science in the near future.
This has been pointed out by experts from while ago because less and less students study sciences in university, described as “rika-banare” in Japanese. This is critical because it is scientists/engineers that perform research and development and create technologies for innovation that often determines global competitiveness. Possible factors leading to this include the following:-
(1) Education without cramming degraded quantity and quality of education especially in sciences and mathematics
With fewer hours for education especially mathematics and sciences in elementary schools and junior high schools with implementation of education without cramming, many items including basics were excluded in the new curriculum. As a result, knowledge in mathematics and sciences acquired by Japanese students degraded overall, as pointed out with warning by professors at universities and people in companies.
(2) Systems and environment in Japan do not let scientists devote themselves in research
As Dr Suzuki mentioned, universities in Japan are short of capital for sound management and research, especially after national universities were privatized a few year ago.
In such a situation, employment and making a living is a critical issue for scientists at universities thus they cannot devote themselves in their research. Moreover, as pointed out in a TV programme that featured the two Nobel Prize winners, under the current systems, scientists in Japanese universities will not sufficiently be able to drive academic results and be promoted to create a successful career. This is a big negative factor in attracting talents majoring sciences for universities in Japan.
(3) Fewer Japanese students studying sciences in world top class universities
Fewer Japanese students study in world top class universities and students from other countries such as China, India and other Asian countries have been replacing Japanese students. Dr Negishi, who been teaching in Purdue University in the U.S. for many years, insists that he used to teach many Japanese students but not lately. He says that he teaches 6 students and there are no Japanese, and 3 or more are from other Asian countries. This indicates the shift of world class brain in sciences.
2) Japan’s weak growth in economy drives weakening position as leader in sciences and technologies
There are correlation between “impetus of a country” and number of Nobel Prize winners in sciences of that particular country, which can be paraphrased as technological innovations. This implies that Japan’s weak economic growth and stagnation may well drive its weakening position as a leader in sciences and technologies.
This was explained in a recent TV programme with a chart that showed that Japan created many technological innovations and breakthroughs that led to winning Nobel Prizes when it was enjoying economic growth until 1990 when the bubble economy collapsed. It is difficult to say which come first, economic growth or technological innovations, but it cannot be denied that Japan’s weak economy (impetus of a country) since 1990 would be a negative factor for technological innovations and breakthroughs including financial support to R&D.
2. What are possible challenges for Japan?
1) Review educational systems to develop and attract talent
This includes reviewing education without cramming to upgrade quantity and quality of the curriculum of elementary and high schools. This would up-level knowledge of majority of Japanese students and make more students interested in sciences to decide to study in university.
Another issue is to review systems in universities so that scientists who have studied abroad are warmly welcomed and accepted, and can continue their research to drive results and create successful career in Japan. In fact, media have reported Dr Negishi’s message encouraging Japanese young people to study/work abroad. This is all about globalization and D&I (Diversity & Inclusion) of Japan.
2) Give necessary and sufficient support from the government to academia
This includes financial and other support, both long-term and short-term. ROI (return on investment) is critical but scientific research requires time; both winners mentioned above say that the award they won is of culmination of their 50 year study.
Also, possibilities of “seeds” in scientific research that bears fruit so that the technology will be developed to commercialized are extremely low (e.g. only 1 in 10000 organic compound developed in the initial stage of R&D is said to be commercialized into innovative pharmaceuticals) and slashing the investment would reduce the number of researches at an early stage which may well mean slashing possibilities of innovation. The author strongly feels that this is the essence of Dr Suzuki’s comment that was reported widely by media: “question of ‘Does it really must be first? Is second no good at all?’ in last year’s screening process to reduce the national budget is of someone ignorant of science”.
Many Japanese media have been reporting the great news that two Japanese scientists, Dr Eiichi Negishi, a professor with authority of Purdue University in the U.S. and Dr Akira Suzuki, professor emeritus of Hokkaido University in Japan, were awarded Nobel Prize in Chemistry for their development of cross-coupling reaction technology since the announcement of the winners by the committee on September 6. Their research led to Japanese companies such as Chisso Corporation and Tosoh Corporation immediately putting the technology into practical use. The technology is now applied in wide a range of fields such as pharmaceuticals, electronics materials, reagents, agricultural chemicals and solar batteries.
The news is an extremely welcome incident; however, some comments by the two winners imply that Japan cannot simply be happy about it. There are warning signs that cannot be missed if Japan is to continue being leader in science, technology and economy.
1. What are warning that Japan cannot miss?
1) Japan may not be a leader in science in the near future.
This has been pointed out by experts from while ago because less and less students study sciences in university, described as “rika-banare” in Japanese. This is critical because it is scientists/engineers that perform research and development and create technologies for innovation that often determines global competitiveness. Possible factors leading to this include the following:-
(1) Education without cramming degraded quantity and quality of education especially in sciences and mathematics
With fewer hours for education especially mathematics and sciences in elementary schools and junior high schools with implementation of education without cramming, many items including basics were excluded in the new curriculum. As a result, knowledge in mathematics and sciences acquired by Japanese students degraded overall, as pointed out with warning by professors at universities and people in companies.
(2) Systems and environment in Japan do not let scientists devote themselves in research
As Dr Suzuki mentioned, universities in Japan are short of capital for sound management and research, especially after national universities were privatized a few year ago.
In such a situation, employment and making a living is a critical issue for scientists at universities thus they cannot devote themselves in their research. Moreover, as pointed out in a TV programme that featured the two Nobel Prize winners, under the current systems, scientists in Japanese universities will not sufficiently be able to drive academic results and be promoted to create a successful career. This is a big negative factor in attracting talents majoring sciences for universities in Japan.
(3) Fewer Japanese students studying sciences in world top class universities
Fewer Japanese students study in world top class universities and students from other countries such as China, India and other Asian countries have been replacing Japanese students. Dr Negishi, who been teaching in Purdue University in the U.S. for many years, insists that he used to teach many Japanese students but not lately. He says that he teaches 6 students and there are no Japanese, and 3 or more are from other Asian countries. This indicates the shift of world class brain in sciences.
2) Japan’s weak growth in economy drives weakening position as leader in sciences and technologies
There are correlation between “impetus of a country” and number of Nobel Prize winners in sciences of that particular country, which can be paraphrased as technological innovations. This implies that Japan’s weak economic growth and stagnation may well drive its weakening position as a leader in sciences and technologies.
This was explained in a recent TV programme with a chart that showed that Japan created many technological innovations and breakthroughs that led to winning Nobel Prizes when it was enjoying economic growth until 1990 when the bubble economy collapsed. It is difficult to say which come first, economic growth or technological innovations, but it cannot be denied that Japan’s weak economy (impetus of a country) since 1990 would be a negative factor for technological innovations and breakthroughs including financial support to R&D.
2. What are possible challenges for Japan?
1) Review educational systems to develop and attract talent
This includes reviewing education without cramming to upgrade quantity and quality of the curriculum of elementary and high schools. This would up-level knowledge of majority of Japanese students and make more students interested in sciences to decide to study in university.
Another issue is to review systems in universities so that scientists who have studied abroad are warmly welcomed and accepted, and can continue their research to drive results and create successful career in Japan. In fact, media have reported Dr Negishi’s message encouraging Japanese young people to study/work abroad. This is all about globalization and D&I (Diversity & Inclusion) of Japan.
2) Give necessary and sufficient support from the government to academia
This includes financial and other support, both long-term and short-term. ROI (return on investment) is critical but scientific research requires time; both winners mentioned above say that the award they won is of culmination of their 50 year study.
Also, possibilities of “seeds” in scientific research that bears fruit so that the technology will be developed to commercialized are extremely low (e.g. only 1 in 10000 organic compound developed in the initial stage of R&D is said to be commercialized into innovative pharmaceuticals) and slashing the investment would reduce the number of researches at an early stage which may well mean slashing possibilities of innovation. The author strongly feels that this is the essence of Dr Suzuki’s comment that was reported widely by media: “question of ‘Does it really must be first? Is second no good at all?’ in last year’s screening process to reduce the national budget is of someone ignorant of science”.
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