Osaka - Thursday, December 23, 2010
Countries around the globe were effected by abnormal weather this year around July, and many countries in northern hemisphere including Japan suffered from extreme heat, as explained in the previous article Abnormal Weather Worldwide – Why and Effects. It is surprising to know from recent TV programmes in Japan that the negative effect still prevails which are likely to increase. This is about Japan but the same phenomenon may well apply to other countries worldwide as well.
1. How has the weather been since September in Japan?
The temperature has been higher than previous years in general, and in December there have been days that are much warmer and days that are much colder than normally in this time of the year. The warm days are assumed to be due to the global warming and extreme heat in summer of northern hemisphere, and the cold days are due to unusually strong cold air that occasionally covers Japan this time of the year. The drastic up and down of temperature is similar to what it was in spring, and people are having difficulties to cope with the drastic temperature fluctuation.
2. What are some specific negative effects of mid-year abnormal weather at this time of the year?
1) Increase in egg price
Egg price has gone up by almost 20% in the last few months for 2 reasons. One is the fact that many chickens have been killed with break out of pandemic bird flu earlier this year (around May) in Miyazaki prefecture and recent outbreak in Tottori prefecture. The other is the mid-year extreme heat.
The extreme heat in summer was a great stress to chickens that survived the pandemic flu outbreak as well as to humans. This made them bearing fewer eggs than usual even if they did bear (e.g. chickens that usually bear 2 eggs bear only 1 this year), and the eggs they bore are all smaller than the ones they usually bear.
Thus, extreme heat led to egg shortage and increase in egg price, as much as by 20% in the last few months, negatively impacting Christmas and Japanese New Year necessity businesses as well as the overall Japanese citizens. Christmas cake manufacturers are severely hit by the egg price increase because egg is inevitable in making cakes. Companies that make and sell “dashimaki”, a Japanese food made from egg always included in “osechi”, the Japanese traditional New Year cuisine, are also severely hit.
2) Increase in red salmon price and negative effect on local employment
The price of red salmon, another inevitable ingredient for “osechi”, also increased drastically as much as by 50%. This is because due to mid-year extreme heat the average sea temperature from September to December has been 1-2℃ higher than previous years, and therefore red salmons that prefer lower sea temperature do not come to coastal shore, the usual fishing zone.
Similar phenomenon has been pointed out for many other fisheries, all attributing to global warming; however, the case of red salmon for this year is prominent. Red salmons caught this year are only 60% of previous year level even when fishermen have been working longer hours.
Decrease in yield of red salmons has not only led to increase in price but also started to negatively affect employment of local fishing cities, where their economy and employment rely on fishery.
3. The author’s final thoughts
The TV programmes reported the above 2 cases as negative effects of mid-year extreme heat but the author feels it is also the result of the long year global warming. It is just that the phenomenon is prominent this year because of the mid-year extreme heat we had this year, and that the ingredients whose price have gone up rapidly this time of the year are of cuisines essential for winter seasonal greetings in Japan. Therefore focusing on businesses of such hard-hit winter seasonal cuisines, saying that they are all due to mid-year extreme was an effective tactic for mass media because it was timely and newsworthy, being able to attract interest and attention of audience.
From everyday shopping, the author has realized that prices of other foods are also above previous year level, higher than normal inflation rate. This is mentioned occasionally, reason being abnormal weather, and some experts estimate that the total cost of foods per household in Japan would likely to go up by as much as 50% after New Year. The true negative effects of mid-year extreme heat of 2010 are yet to come, and it would directly affect lives of people in Japan and possibly worldwide.
2010年12月23日木曜日
2010年12月19日日曜日
Japanese New Graduates Struggle Finding Jobs
Osaka – Sunday, December 19, 2010
Many Japanese mass media reported around November 21 that new graduates in Japan are struggling to get a job to start their career, and since then public and private sectors and universities have taken measures supporting as many new graduates finding a job. However, whether majority of new graduates manage to find a job by the end of March 2011 upon graduation to start working on April 1 is a question.
1. What is the usual process and timeline of recruiting new graduates?
In Japan, companies would start recruiting new graduates more than one year they start working (e.g. in autumn 2010 for new graduates who are to start working from April 2012; this is because in Japan school year starts from April), and it is a rule in Japan that on October 1 every year, companies hold a ceremony to officially give offer to the new graduates who are to start working 6 months later in April.
This means that recruiting companies and supporting universities usually switch their target of new graduate recruitment/support in October. For example, they would have been supporting job hunting of students who are to graduate in March 2011 until September 2010, but from October finish supporting them and start supporting students who are to graduate in March 2012.
2. How successful is job hunting of new graduates who should be start working in April 2011?
Many new graduates are struggling to find a job. The percentage of new graduates who were successful in officially offered a job this October was the lowest in history, 57.6%, which was minus 4.9% from last year. Approximately 410,000 students who are to graduate in March 2011 are estimated to want to find a job in private sector; however, as many as 170,000 of them have not yet found a job.
With this pace, it is quite possible that the percentage of students who managed to find a job upon graduation would be lower than the current lowest history of 91.1%, recorded in 1999.
3. What countermeasures are taken so that more new graduates can find a job?
This year, private and public sectors and universities would continue supporting students with upmost efforts who are to graduates in March 2011 after September 2010 as well, with the objective of maximizing the percentage of students who have managed to find a job by the time they graduation in March 2011.
For example, one of a leading company that provides job hunting information and services started to hosted employment fairs from December that will be held until February in 7 major cities nationwide including Tokyo, Osaka and Nagoya. Small and mid-sized companies can participate in the fairs for free. It is expected that total of 380 companies and 7800 students to participate in the fairs. It is extremely exceptional that such a large employment fairs are held this time of the year. In the fair interviewing booths are to be made to help companies give the offer on the day.
Other leading companies of the same/similar industry started a new business of introducing internship opportunities to 10,000 students in October. This will be held until March 2011 and the students will be sent as interns to workplaces such as factories of small and mid-sized companies. Such business can benefit from subsidiary of Small and Medium Enterprise Agency. 7000 yen/day will be given to an intern and 3500 yen/day will be given to a company that accepts interns. Small and Medium Enterprise Agency will also collaborate with regional association/organizations of small and mid-sized companies, and plan to send total of 10,000 students, including those who have graduated but have not managed to find a job, to small and mid-sized companies from October 2010 to March 2011.
The government has allocated with urgency total of 2.5 billion yen to make as many new graduates as possible employed, and subsidiaries are to be given to each company such as the mentioned above will from this budget. In addition, the government increased the number of universities with career counselors from 250 to 500, and introduced a system in which incentives will be given to companies that have hired people who have graduated within 3 years.
4. The author’s final thoughts
The issue is not simply about the imbalance of the number of job hunters and number of jobs available in the labour market. The issue is also about mismatch of multiple factors.
Many students who graduated 1999 – 2004 (employment ice age) could not find a job and has not been able to find a full time job even after the economy recovered in 2005, and this became a critical social issue. And with the recent worldwide recession, large companies have been holding back recruiting and hiring. So to some extent it is true that the issue attributes to decrease in number of jobs available in the labour market.
However, it is a reality that quite a few small and mid-sized companies are still short of workers. Thus, eliminating mismatch by connecting small and mid-sized companies and students has started to emerge as a new business/market for recruiting related companies. The countermeasures mentioned above are a few examples of such new businesses.
Another mismatch factor is the mismatch between the type of job the job seekers expect and the skills and competencies the hiring companies expects. This applies to job seekers who are not new graduates as well. The author would like to discuss this in one of the upcoming article.
Many Japanese mass media reported around November 21 that new graduates in Japan are struggling to get a job to start their career, and since then public and private sectors and universities have taken measures supporting as many new graduates finding a job. However, whether majority of new graduates manage to find a job by the end of March 2011 upon graduation to start working on April 1 is a question.
1. What is the usual process and timeline of recruiting new graduates?
In Japan, companies would start recruiting new graduates more than one year they start working (e.g. in autumn 2010 for new graduates who are to start working from April 2012; this is because in Japan school year starts from April), and it is a rule in Japan that on October 1 every year, companies hold a ceremony to officially give offer to the new graduates who are to start working 6 months later in April.
This means that recruiting companies and supporting universities usually switch their target of new graduate recruitment/support in October. For example, they would have been supporting job hunting of students who are to graduate in March 2011 until September 2010, but from October finish supporting them and start supporting students who are to graduate in March 2012.
2. How successful is job hunting of new graduates who should be start working in April 2011?
Many new graduates are struggling to find a job. The percentage of new graduates who were successful in officially offered a job this October was the lowest in history, 57.6%, which was minus 4.9% from last year. Approximately 410,000 students who are to graduate in March 2011 are estimated to want to find a job in private sector; however, as many as 170,000 of them have not yet found a job.
With this pace, it is quite possible that the percentage of students who managed to find a job upon graduation would be lower than the current lowest history of 91.1%, recorded in 1999.
3. What countermeasures are taken so that more new graduates can find a job?
This year, private and public sectors and universities would continue supporting students with upmost efforts who are to graduates in March 2011 after September 2010 as well, with the objective of maximizing the percentage of students who have managed to find a job by the time they graduation in March 2011.
For example, one of a leading company that provides job hunting information and services started to hosted employment fairs from December that will be held until February in 7 major cities nationwide including Tokyo, Osaka and Nagoya. Small and mid-sized companies can participate in the fairs for free. It is expected that total of 380 companies and 7800 students to participate in the fairs. It is extremely exceptional that such a large employment fairs are held this time of the year. In the fair interviewing booths are to be made to help companies give the offer on the day.
Other leading companies of the same/similar industry started a new business of introducing internship opportunities to 10,000 students in October. This will be held until March 2011 and the students will be sent as interns to workplaces such as factories of small and mid-sized companies. Such business can benefit from subsidiary of Small and Medium Enterprise Agency. 7000 yen/day will be given to an intern and 3500 yen/day will be given to a company that accepts interns. Small and Medium Enterprise Agency will also collaborate with regional association/organizations of small and mid-sized companies, and plan to send total of 10,000 students, including those who have graduated but have not managed to find a job, to small and mid-sized companies from October 2010 to March 2011.
The government has allocated with urgency total of 2.5 billion yen to make as many new graduates as possible employed, and subsidiaries are to be given to each company such as the mentioned above will from this budget. In addition, the government increased the number of universities with career counselors from 250 to 500, and introduced a system in which incentives will be given to companies that have hired people who have graduated within 3 years.
4. The author’s final thoughts
The issue is not simply about the imbalance of the number of job hunters and number of jobs available in the labour market. The issue is also about mismatch of multiple factors.
Many students who graduated 1999 – 2004 (employment ice age) could not find a job and has not been able to find a full time job even after the economy recovered in 2005, and this became a critical social issue. And with the recent worldwide recession, large companies have been holding back recruiting and hiring. So to some extent it is true that the issue attributes to decrease in number of jobs available in the labour market.
However, it is a reality that quite a few small and mid-sized companies are still short of workers. Thus, eliminating mismatch by connecting small and mid-sized companies and students has started to emerge as a new business/market for recruiting related companies. The countermeasures mentioned above are a few examples of such new businesses.
Another mismatch factor is the mismatch between the type of job the job seekers expect and the skills and competencies the hiring companies expects. This applies to job seekers who are not new graduates as well. The author would like to discuss this in one of the upcoming article.
2010年12月12日日曜日
Japanese Companies Leverage China/Asia Capital for Survival
Osaka – Sunday, December 12, 2010
A recent article by Nikkei, Japanese newspaper specialized in business and economy, introduced an interesting way in which some Japanese companies leverage China and Asia capital to survive in the turbulent global economy.
The author feels that this can be a clue to many other Japanese companies in creating their own strategy to survive in the today’s global economy, although there is a risk of outflow of technologies. It is because this is an option of out-of-the-box thinking that is not chosen by many major Japanese companies yet this can be an extremely effective one, leveraging the strength of Japan.
1. What is the recent phenomenon in which Japanese companies leverage Asian capital? Why such phenomenon started to emerge?
1) Phenomenon
It is, so to speak, “Made in Chapan (‘China’ and ‘Japan’ coined together)”, convergence of China’s capital and Japan’s technology and brand. Asia (China) capital acquires underperforming Japanese companies, hotels, consumer electronics and apparel in particular, and creates new value and business to provide to worldwide market.
2) Background
(1) China and Asia are promising, growing markets.
(2) China in particular has abundant capital.
(3) “Made in Japan” is an excellent weapon (brand) in global business yet Japanese companies have not been able to leverage it sufficiently.
(4) Not many Japanese companies are financially capable of entering Asia/China market from scratch on their own.
2. What are concrete, successful cases of “made in Chapan”?
1) Hotel
(1) Phenomenon
Among 10 hotels/real estate etc. that needs restructuring, as many as 8 are recently acquired by China and Asia funds. Such funds calculate acquisition cost on condition that they will market go China and other Asian countries i.e. market of 1.3 billion population or more, which would be far competitive price calculated by Japanese funds that calculate their acquisition cost based on only Japan domestic market. Moreover, even if they are failing companies, they are uncut diamonds in the eyes of Chinese and other Asian funds.
(2) In the case of Chikusenso Mt. Zao Resort & Spa
Chikusenso Mt. Zao Resort & Spa, located in Zao National Park in Miyagi prefecture, that had failed due to decrease in skiers in this area in the recession, was acquired by Osbert International, based in Hong Kong. The fund invested total of more than 3 billion yen to acquire and revitalized the hotel and re-opened in April this year. The fund also made effort and succeeded to start flight (first limited time) between Hong Kong and Sendai by Hong Kong Dragon Airlines.
The main target of the luxurious resort hotel with spa is the rich people of China and other countries in Asia, whose evaluation of the Japanese culture is quite high. The concept of the hotel is “Japanese modern”, and the price is over 66,000 yen per person (twin room).
2) Consumer Electronics
(1) Phenomenon
Japanese mid-sized consumer electronics makers visit everyday a long-established consumer electronics mass merchandiser that have been in the red for years, requesting to start trading with them. This is because the long-established consumer electronics mass merchandiser has the access to the distribution channel in China.
(2) In the case of Laox Co., Ltd
Laox Co., Ltd, a long-established mass merchandiser, was acquired by a China consumer electronics mass merchandiser leader last year. This opened an access to approximately 1300 stores in China, a promising and growing market, owned by the China mass merchandiser. Since then, business partners of Laox doubled or more because the partners have requested to trade with Laox, expecting to benefit from the access to China that Laox possesses in entering the promising market of China.
For this reason, Matsuzakaya, a department store in Ginza (area in Tokyo where many department stores are located) opened a Laox franchise in their department store on November 20 this year. Matsuzakaya is said to have negotiated with other companies in opening a new franchise but chose Laox with the objectives of attracting tourists from China, in addition to competitive financial requirements presented by Laox.
3) Apparel
(1) Phenomenon
Japanese long-established apparel maker acquired by a Chinese company, and expand distribution channel in China.
(2) In the case of Renown, Inc.
Renown, Inc., a Japanese long-established apparel maker, plans to open 2000 stores in China in the next 10 years, which became feasible after being acquired by the Chinese company. The strategy of the Chinese company is to penetrate the China market with high quality product made in Japan.
For this reason, the top executive of the company says that made in Japan products are of longing of Chinese customers and therefore is determined to make all Renown products made in Japan. This is not easy because of the limited equipment/production capacities in Japan. The top executive of Renown comments that this incident is a good opportunity for them to re-acknowledge their value.
To the author, the fact that Chinese companies evaluate highly of “producing in Japan” is extremely meaningful when Japanese companies shift their production to overseas (China in particular) as mentioned in many of her previous articles including "High Yen Slashes Profitability of Japanese Companies – The Reality".
A recent article by Nikkei, Japanese newspaper specialized in business and economy, introduced an interesting way in which some Japanese companies leverage China and Asia capital to survive in the turbulent global economy.
The author feels that this can be a clue to many other Japanese companies in creating their own strategy to survive in the today’s global economy, although there is a risk of outflow of technologies. It is because this is an option of out-of-the-box thinking that is not chosen by many major Japanese companies yet this can be an extremely effective one, leveraging the strength of Japan.
1. What is the recent phenomenon in which Japanese companies leverage Asian capital? Why such phenomenon started to emerge?
1) Phenomenon
It is, so to speak, “Made in Chapan (‘China’ and ‘Japan’ coined together)”, convergence of China’s capital and Japan’s technology and brand. Asia (China) capital acquires underperforming Japanese companies, hotels, consumer electronics and apparel in particular, and creates new value and business to provide to worldwide market.
2) Background
(1) China and Asia are promising, growing markets.
(2) China in particular has abundant capital.
(3) “Made in Japan” is an excellent weapon (brand) in global business yet Japanese companies have not been able to leverage it sufficiently.
(4) Not many Japanese companies are financially capable of entering Asia/China market from scratch on their own.
2. What are concrete, successful cases of “made in Chapan”?
1) Hotel
(1) Phenomenon
Among 10 hotels/real estate etc. that needs restructuring, as many as 8 are recently acquired by China and Asia funds. Such funds calculate acquisition cost on condition that they will market go China and other Asian countries i.e. market of 1.3 billion population or more, which would be far competitive price calculated by Japanese funds that calculate their acquisition cost based on only Japan domestic market. Moreover, even if they are failing companies, they are uncut diamonds in the eyes of Chinese and other Asian funds.
(2) In the case of Chikusenso Mt. Zao Resort & Spa
Chikusenso Mt. Zao Resort & Spa, located in Zao National Park in Miyagi prefecture, that had failed due to decrease in skiers in this area in the recession, was acquired by Osbert International, based in Hong Kong. The fund invested total of more than 3 billion yen to acquire and revitalized the hotel and re-opened in April this year. The fund also made effort and succeeded to start flight (first limited time) between Hong Kong and Sendai by Hong Kong Dragon Airlines.
The main target of the luxurious resort hotel with spa is the rich people of China and other countries in Asia, whose evaluation of the Japanese culture is quite high. The concept of the hotel is “Japanese modern”, and the price is over 66,000 yen per person (twin room).
2) Consumer Electronics
(1) Phenomenon
Japanese mid-sized consumer electronics makers visit everyday a long-established consumer electronics mass merchandiser that have been in the red for years, requesting to start trading with them. This is because the long-established consumer electronics mass merchandiser has the access to the distribution channel in China.
(2) In the case of Laox Co., Ltd
Laox Co., Ltd, a long-established mass merchandiser, was acquired by a China consumer electronics mass merchandiser leader last year. This opened an access to approximately 1300 stores in China, a promising and growing market, owned by the China mass merchandiser. Since then, business partners of Laox doubled or more because the partners have requested to trade with Laox, expecting to benefit from the access to China that Laox possesses in entering the promising market of China.
For this reason, Matsuzakaya, a department store in Ginza (area in Tokyo where many department stores are located) opened a Laox franchise in their department store on November 20 this year. Matsuzakaya is said to have negotiated with other companies in opening a new franchise but chose Laox with the objectives of attracting tourists from China, in addition to competitive financial requirements presented by Laox.
3) Apparel
(1) Phenomenon
Japanese long-established apparel maker acquired by a Chinese company, and expand distribution channel in China.
(2) In the case of Renown, Inc.
Renown, Inc., a Japanese long-established apparel maker, plans to open 2000 stores in China in the next 10 years, which became feasible after being acquired by the Chinese company. The strategy of the Chinese company is to penetrate the China market with high quality product made in Japan.
For this reason, the top executive of the company says that made in Japan products are of longing of Chinese customers and therefore is determined to make all Renown products made in Japan. This is not easy because of the limited equipment/production capacities in Japan. The top executive of Renown comments that this incident is a good opportunity for them to re-acknowledge their value.
To the author, the fact that Chinese companies evaluate highly of “producing in Japan” is extremely meaningful when Japanese companies shift their production to overseas (China in particular) as mentioned in many of her previous articles including "High Yen Slashes Profitability of Japanese Companies – The Reality".
2010年12月5日日曜日
Profitability Recovery of Japanese Companies Under High Yen
Osaka – Sunday, December 5, 2010
In the previous article "High Yen Slashes Profitability of Japanese Companies – The Reality" the author introduced some cases of how Japanese companies including those that are usually regarded as globally competitive have been suffering from the recent high yen.
In this article, the author would like to introduce some cases of how other companies have managed to recover their revenue and profitability despite the recent high yen.
1. How much Japanese listed companies recovered their performance in Apr-Sep 2010 despite extreme high yen?
1) Overall
The increase rate of consolidated operating profit was 2.4 times that of the previous year, which was much more than the original estimation of 70% increase from the previous year. The profit level recovered to 98% of Apr-Sep 2008 (i.e. before the worldwide economic crisis), and to 80% of Apr-Sep 2007 (i.e. the peak).
2) Specific examples
(1) Ushio, Inc.
Business of Ushio, Inc., whose business supports 3D movie boom with 3D film projector for theatres, continues to be strong even in high yen situation. They could only sell 3 products 10 years ago but their business is expected to grow as much as 7500 units, with global market share of 60%.
(2) Ricoh
Ricoh’s business in Americas that had been sluggish started to recover despite the recent high yen. They had thoroughly transferred sales know-how to the U.S. companies they had acquired, and their America business is expected to become positive soon in 2011, first time after 14 quarters.
2. How did Japanese companies manage to recover profitability despite the recent high yen?
1) Cost reduction
Primary reason for the profitability recovery is extreme cost reduction measures since the worldwide recession, which is sometimes said as practically the biggest post-war restructuring. Manufacturers drastically reduced cost (personnel etc.) last year to lower break even point by 13%. This decrease percentage is the biggest in the past 25 years (i.e. statistics is available and thus can compare).
Companies have been continuing their efforts to cut costs and improve productivity. For example, the reason for increase in Hitachi’s operating profit for Apr-Sep 2010 was increase in revenue and cost reduction (50% each).
Positive effects of such of their efforts have been conspicuous; operating profit of Japanese companies in total increased by 2.8% to reach 5.6%. The increase rate is the biggest since the economic bubble collapsed. The operating profit of 5.6% is almost 5.8% or Apr-Sep 2007, which was the peak.
2) Demand growth of emerging markets
Much of their sales and business growth came from growing demand of emerging market, Asia in particular. For example, increase of revenue of Komatsu in total was 33% when it was 58% for China. Increase of revenue of Nissan in total was 28% when it was 64% for Asia.
Some others were especially successful in business of emerging markets with launching products meeting local needs. For example, Sony developed and launched low cost flat panel TVs with limited functions in India and deprived the top market share position in India of Samsung.
3) Countermeasures to the high yen
This includes production shift to overseas as mentioned in the previous article, leveraging low cost components supplied from overseas, and owning both receivables and payables in foreign currencies.
For example, Hitachi Construction Machinery Co., Ltd. increased their production in Europe to raise their overseas production rate. Kawasaki Kisen Kaisha, Ltd. started to study accepting some portion of their receivables of their newly supplied products in USD instead of in Japanese yen. NEC separated their export-oriented semiconductor business and as a result they are no longer affected by foreign exchange fluctuation against USD. Toshiba, with similar measure, had positive effect with high yen, benefiting also with production outsourcing expansion to overseas contractors.
3. What is the outlook for the latter fiscal year of 2010?
1) Overall
Anxiety psychology proliferates among Japanese companies due to continuing high yen, termination of government’s economy stimulation incentives and slow recovery of economy of developed countries; however, there are some possible solutions of overcoming such anxiety factors. One is cultivating and harvesting the “new revenue seed” that was planted and came out in the first half of 2010. Another is flexibly adapting to external and internal environmental changes to upgrade available technologies and open/create new market.
2) Specific examples
(1) Ozu Corporation
Ozu Corporation, a leading paper distributor in Japan, started new business, operating their new factory of plants. With decreasing paper demand, they aim to benefit the recent trend of “security of foods”.
(2) NHK Spring Co., Ltd.
NHK Spring Co., Ltd started production and supply of new suspension that supports magnetic head of HDD (Hard Disk Drive). They already enjoy global market share of 45% but aim to further get ahead of their competitors with next generation products whose control accuracy has more than doubled.
In the previous article "High Yen Slashes Profitability of Japanese Companies – The Reality" the author introduced some cases of how Japanese companies including those that are usually regarded as globally competitive have been suffering from the recent high yen.
In this article, the author would like to introduce some cases of how other companies have managed to recover their revenue and profitability despite the recent high yen.
1. How much Japanese listed companies recovered their performance in Apr-Sep 2010 despite extreme high yen?
1) Overall
The increase rate of consolidated operating profit was 2.4 times that of the previous year, which was much more than the original estimation of 70% increase from the previous year. The profit level recovered to 98% of Apr-Sep 2008 (i.e. before the worldwide economic crisis), and to 80% of Apr-Sep 2007 (i.e. the peak).
2) Specific examples
(1) Ushio, Inc.
Business of Ushio, Inc., whose business supports 3D movie boom with 3D film projector for theatres, continues to be strong even in high yen situation. They could only sell 3 products 10 years ago but their business is expected to grow as much as 7500 units, with global market share of 60%.
(2) Ricoh
Ricoh’s business in Americas that had been sluggish started to recover despite the recent high yen. They had thoroughly transferred sales know-how to the U.S. companies they had acquired, and their America business is expected to become positive soon in 2011, first time after 14 quarters.
2. How did Japanese companies manage to recover profitability despite the recent high yen?
1) Cost reduction
Primary reason for the profitability recovery is extreme cost reduction measures since the worldwide recession, which is sometimes said as practically the biggest post-war restructuring. Manufacturers drastically reduced cost (personnel etc.) last year to lower break even point by 13%. This decrease percentage is the biggest in the past 25 years (i.e. statistics is available and thus can compare).
Companies have been continuing their efforts to cut costs and improve productivity. For example, the reason for increase in Hitachi’s operating profit for Apr-Sep 2010 was increase in revenue and cost reduction (50% each).
Positive effects of such of their efforts have been conspicuous; operating profit of Japanese companies in total increased by 2.8% to reach 5.6%. The increase rate is the biggest since the economic bubble collapsed. The operating profit of 5.6% is almost 5.8% or Apr-Sep 2007, which was the peak.
2) Demand growth of emerging markets
Much of their sales and business growth came from growing demand of emerging market, Asia in particular. For example, increase of revenue of Komatsu in total was 33% when it was 58% for China. Increase of revenue of Nissan in total was 28% when it was 64% for Asia.
Some others were especially successful in business of emerging markets with launching products meeting local needs. For example, Sony developed and launched low cost flat panel TVs with limited functions in India and deprived the top market share position in India of Samsung.
3) Countermeasures to the high yen
This includes production shift to overseas as mentioned in the previous article, leveraging low cost components supplied from overseas, and owning both receivables and payables in foreign currencies.
For example, Hitachi Construction Machinery Co., Ltd. increased their production in Europe to raise their overseas production rate. Kawasaki Kisen Kaisha, Ltd. started to study accepting some portion of their receivables of their newly supplied products in USD instead of in Japanese yen. NEC separated their export-oriented semiconductor business and as a result they are no longer affected by foreign exchange fluctuation against USD. Toshiba, with similar measure, had positive effect with high yen, benefiting also with production outsourcing expansion to overseas contractors.
3. What is the outlook for the latter fiscal year of 2010?
1) Overall
Anxiety psychology proliferates among Japanese companies due to continuing high yen, termination of government’s economy stimulation incentives and slow recovery of economy of developed countries; however, there are some possible solutions of overcoming such anxiety factors. One is cultivating and harvesting the “new revenue seed” that was planted and came out in the first half of 2010. Another is flexibly adapting to external and internal environmental changes to upgrade available technologies and open/create new market.
2) Specific examples
(1) Ozu Corporation
Ozu Corporation, a leading paper distributor in Japan, started new business, operating their new factory of plants. With decreasing paper demand, they aim to benefit the recent trend of “security of foods”.
(2) NHK Spring Co., Ltd.
NHK Spring Co., Ltd started production and supply of new suspension that supports magnetic head of HDD (Hard Disk Drive). They already enjoy global market share of 45% but aim to further get ahead of their competitors with next generation products whose control accuracy has more than doubled.
2010年11月28日日曜日
High Yen Slashes Profitability of Japanese Companies - The Reality
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.
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”.
2010年10月3日日曜日
“Made in Japan” Products Coming Back to Japanese Retailers
Osaka – Sunday, October 3, 2010
Nikkei, Japanese leading newspaper specialized in business and economy, reported on September 2 that Japanese retailers trading clothes and sundries are expanding their made in Japan product line-up. Such retailers are promoting this with the objective of appealing ”obsessiveness to manufacturing” to grow business in high price range products with value added to consumers, instead of focusing their business on low price range products. Background of such of their change in strategy includes cost increase of China, one of major production site country, which means it is now easier for them to utilize production sites in Japan.
1. How have Japanese retailers training clothes and sundries expanding made in Japan product line up?
Major Japan domestic production expansion of clothes
(Source: Nikkei, translated and edited by the author)
Company Name / Products / Production Expansion Plan
Itoyokado / Shirts, bags, etc. / Develop products with leading production sites. Expand SKUs to 50 by next spring.
AOKI / Suits, shirts, shoes etc. / New made in Japan brand launch. Leverage high tech such as 3D sewing.
Sanyo Shokai / Coats / Obsessiveness to details by its own factory located in Aomori Prefecture.
UNIQLO / Jeans / High end product at 9,990 yen with obsessiveness in processing.
Right-on / Jeans / First made in Japan product launch with its unique brand this autumn.
Sanrio / Towels with character illustrations / Launch as souvenirs targeting travelers from abroad.
SRI Sports / Golf clubs / New product launch in November this year leveraging made in Japan shafts.
1) AOKI
AOKI, a leading retailer in Japan specialized in men’s suit, launched a new original brand of made in Japan products of suit, shirt and shoes and started selling them in their 85 stores (equivalent to approximately 20% of total stores) from October. Fabrics are not made in Japan but sewing is done in Japan leveraging Japan’s high technologies such as 3D sewing to enhance wear comfort. The price range of such suit is between 108,000 yen and 128,000 yen, which is high-end range of their product line up. They target sales of 5,000 suits as a start.
2) Aoyama Shouji
Aoyama Shouji, another leading retailer in Japan specialized in men’s suit, is also increasing stores trading made in Japan suits. It started pilot sales in 6 stores this spring and will increase to 10 to 15 stores from the end of October to November this year, to target selling 1,000 suits. Made in Japan suit is sell accepted to travelers from abroad so if their sales turns out to be strong they will study to further expand their business of made in Japan suit.
3) Sanyo Shokai
Sanyo Shokai,a leading retailer in Japan specialized in men’s coat, plans to launch this month a new brand for their main product of men’s coat planned and designed by a well known designer and sewn in its own factory located in Aomori Prefecture. The fact that such coats are made in Japan with much care from cutting of fabrics to sewing will be introduced by showing video at sales floor in order to appeal obsessiveness to details to consumers.
4) Itoyokado
Itoyokado, a leading retailer (super market) in Japan, is also strengthening their line up of clothes and sundries by joint-development with leading production sites in Japan, and appeal “made in Japan”. It launched 36 SKUs of polo shirts and bags etc. made in 10 prefectures in Japan in 160 stores. It targets to achieve sales of 10 billion yen in the first year and 15 billion yen in the second year.
2. Why are Japanese retailers expanding made in Japan product line up?
1) Meeting needs of Japanese consumers
Japanese consumers are not necessarily after low price products or rather some of them are getting tired of low price products so Japanese retailers need to take measures to meet such needs. Expanding and strengthening made in Japan high quality, line-up of high end products and appealing such line up with effective marketing is one effective strategy/option for Japanese retailers.
2) Counter measure to increase in production cost in China
According to the Ministry of Economy, Trade and Industry (METI), approximately 95% of clothes in Japan are imported from China due to low production cost in China; however, with increase in production costing China, it is quite natural for Japanese retailers to review their business strategy. One option for them is pursue possibilities of production in other countries which they already have started. And strengthening made in Japan products line up to grow high-end products is another option they started to pursue and implement, and this was the topic of this article.
In addition, some retailers started to establish their new factory in Japan. Maker’s Shirt, a Japanese retailer with main products of shirts made in Japan, plans to jointly establish a new factory in Japan with a company that they outsource their production.
3. What are possible upcoming challenges?
In order to leverage Japanese production sites, supports such as re-investment by companies with sufficient capital would be vital. This is because most factories in Japan that produces clothes are have not been invested for a long time because currently most clothes retailed in Japan are imported from countries with low production cost.
Nikkei, Japanese leading newspaper specialized in business and economy, reported on September 2 that Japanese retailers trading clothes and sundries are expanding their made in Japan product line-up. Such retailers are promoting this with the objective of appealing ”obsessiveness to manufacturing” to grow business in high price range products with value added to consumers, instead of focusing their business on low price range products. Background of such of their change in strategy includes cost increase of China, one of major production site country, which means it is now easier for them to utilize production sites in Japan.
1. How have Japanese retailers training clothes and sundries expanding made in Japan product line up?
Major Japan domestic production expansion of clothes
(Source: Nikkei, translated and edited by the author)
Company Name / Products / Production Expansion Plan
Itoyokado / Shirts, bags, etc. / Develop products with leading production sites. Expand SKUs to 50 by next spring.
AOKI / Suits, shirts, shoes etc. / New made in Japan brand launch. Leverage high tech such as 3D sewing.
Sanyo Shokai / Coats / Obsessiveness to details by its own factory located in Aomori Prefecture.
UNIQLO / Jeans / High end product at 9,990 yen with obsessiveness in processing.
Right-on / Jeans / First made in Japan product launch with its unique brand this autumn.
Sanrio / Towels with character illustrations / Launch as souvenirs targeting travelers from abroad.
SRI Sports / Golf clubs / New product launch in November this year leveraging made in Japan shafts.
1) AOKI
AOKI, a leading retailer in Japan specialized in men’s suit, launched a new original brand of made in Japan products of suit, shirt and shoes and started selling them in their 85 stores (equivalent to approximately 20% of total stores) from October. Fabrics are not made in Japan but sewing is done in Japan leveraging Japan’s high technologies such as 3D sewing to enhance wear comfort. The price range of such suit is between 108,000 yen and 128,000 yen, which is high-end range of their product line up. They target sales of 5,000 suits as a start.
2) Aoyama Shouji
Aoyama Shouji, another leading retailer in Japan specialized in men’s suit, is also increasing stores trading made in Japan suits. It started pilot sales in 6 stores this spring and will increase to 10 to 15 stores from the end of October to November this year, to target selling 1,000 suits. Made in Japan suit is sell accepted to travelers from abroad so if their sales turns out to be strong they will study to further expand their business of made in Japan suit.
3) Sanyo Shokai
Sanyo Shokai,a leading retailer in Japan specialized in men’s coat, plans to launch this month a new brand for their main product of men’s coat planned and designed by a well known designer and sewn in its own factory located in Aomori Prefecture. The fact that such coats are made in Japan with much care from cutting of fabrics to sewing will be introduced by showing video at sales floor in order to appeal obsessiveness to details to consumers.
4) Itoyokado
Itoyokado, a leading retailer (super market) in Japan, is also strengthening their line up of clothes and sundries by joint-development with leading production sites in Japan, and appeal “made in Japan”. It launched 36 SKUs of polo shirts and bags etc. made in 10 prefectures in Japan in 160 stores. It targets to achieve sales of 10 billion yen in the first year and 15 billion yen in the second year.
2. Why are Japanese retailers expanding made in Japan product line up?
1) Meeting needs of Japanese consumers
Japanese consumers are not necessarily after low price products or rather some of them are getting tired of low price products so Japanese retailers need to take measures to meet such needs. Expanding and strengthening made in Japan high quality, line-up of high end products and appealing such line up with effective marketing is one effective strategy/option for Japanese retailers.
2) Counter measure to increase in production cost in China
According to the Ministry of Economy, Trade and Industry (METI), approximately 95% of clothes in Japan are imported from China due to low production cost in China; however, with increase in production costing China, it is quite natural for Japanese retailers to review their business strategy. One option for them is pursue possibilities of production in other countries which they already have started. And strengthening made in Japan products line up to grow high-end products is another option they started to pursue and implement, and this was the topic of this article.
In addition, some retailers started to establish their new factory in Japan. Maker’s Shirt, a Japanese retailer with main products of shirts made in Japan, plans to jointly establish a new factory in Japan with a company that they outsource their production.
3. What are possible upcoming challenges?
In order to leverage Japanese production sites, supports such as re-investment by companies with sufficient capital would be vital. This is because most factories in Japan that produces clothes are have not been invested for a long time because currently most clothes retailed in Japan are imported from countries with low production cost.
Risk Management and Interdependence in Today’s Global Economy
Osaka – Sunday, October 3, 2010
Various Japanese media such as The Japan Times have been reporting since September 29 that Japanese companies started to rethink their risk management strategy and take measure for dispersion of risk of importing rare earth elements, since the China government reportedly banned exporting them to Japan as part of its diplomatic spat with Japan over the disputed Senkaku Islands. (The U.S. recently insisted clearly that the islands were returned to Japan from the U.S. in 1972 together with Okinawa mainland, and that Japan’s recent actions have been appropriate and sufficient). Report also includes the fact that the U.S. started to take measures in its own ways with similar concept.
1. How Japan has been rethinking rare earth sourcing and its risk management strategy?
1) Companies (sourcing)
Japanese companies, who had already been concerned about rare earth shortages as early as July, when China cut its export quotas to bolster prices and ensure domestic supplies, immediately started to take concrete actions such as sourcing rare earth metals from other countries such as Kazakhstan to disperse risk. China produces and supplies over 90% of the world’s rare earth metals but their reserves is only around 30% of the world total. This means remaining 70% are available in other countries.
As reported by The Japan Times and other media, Sumitomo Corp. signed a deal with Kazakhstan's national nuclear power company Kazatomprom to establish a joint venture and produce rare earth metals in the country, including neodymium and dysprosium, which are crucial to building motors for electric vehicles. And, Toshiba Corp. said it signed up with the same Kazakhstan firm in June to establish a joint venture to produce rare earth metals coming out of uranium mines in which Toshiba has a financial interest. The electronics maker said it hopes to set up the venture by the end of the year and start producing rare earth elements used in motor magnets.
2) Companies (R&D and others)
Research of technologies to reduce use of rare earth elements has been in progress as reported in a recent Japanese TV news programme. Honda Motor Co. has been conducting research and development to find alternatives for the rare earths. Toyota Motor Corp., the world's largest maker of hybrid cars, has set up a task force on rare earths metals earlier this year to explore new sources for rare earth elements and ways to recycle used parts, the Nikkan Kogyo newspaper reported Wednesday, according to The Japan Times..
3) Government
It was reported in a recent Japanese TV news programme that the Japanese government signed a memorandum with Kazakhstan of supporting Kazakhstan extraction of rare earth metals.
2. How about the U.S.?
With sense of crisis, the U.S. also started to take measures for risk diversification such as restarting mining of rare earth metals in California. The U.S. used to mine and supply approximately 50% of worldwide rare earth metals but with emergence of cheap products from China, the U.S. lost their global competitiveness and its worldwide market share dropped dramatically. As a result, the U.S. rely their rare earth sourcing from China. Rare earth metals are used in their nation’s “critical” equipments and systems such as military communication systems. For this reason, the U.S. also started to rethink their rare earth sourcing strategy and take measures in earnest.
3. What is the final thought of the author?
Being a marketing versatilist with management literacy and not an expert in politics and diplomacy, the author has nothing to say about politics. To the author, it seems that what China has executed (i.e. banning rare earth metal export to Japan as a part of diplomatic spat) triggered Japan and the U.S. (at least) to rethink rare earth sourcing and risk management strategy and take concrete measures, to be less dependent on China, although risk diversification does take time. This means decrease in China’s rare earth business in the long run.
Nikkei, Japan’s leading newspaper specialized in business and economy, reported today that in an APEC meeting held on October 2 in Gifu Prefecture in Japan, Japan’s Minister of the Ministry of Economy, Trade and Industry (METI) requested to his China counterpart to proceed smoothly to re-start rare earth export to Japan, to which China answered “would like to make effort to solve the problem. Economic interaction with Japan is important also for China”. This is a step forward because China simply has been insisting that “the Chinese government have never banned exporting rare earth metal to Japan”.
It seems that this incident delivers a strong message that an economic sanction by a country as a part of diplomatic spat is never effective in a global economic world in which countries are interdependent. It would lead to negative effect to the country executing the sanction in the long run. After all, countries need to diversify their risk while be cooperative for sustainability and co-prosperity.
References:-
Hiroko, Nakata (2010), Firms Rethink Rare Earth Sourcing
http://search.japantimes.co.jp/cgi-bin/nb20101002a1.html
Various Japanese media such as The Japan Times have been reporting since September 29 that Japanese companies started to rethink their risk management strategy and take measure for dispersion of risk of importing rare earth elements, since the China government reportedly banned exporting them to Japan as part of its diplomatic spat with Japan over the disputed Senkaku Islands. (The U.S. recently insisted clearly that the islands were returned to Japan from the U.S. in 1972 together with Okinawa mainland, and that Japan’s recent actions have been appropriate and sufficient). Report also includes the fact that the U.S. started to take measures in its own ways with similar concept.
1. How Japan has been rethinking rare earth sourcing and its risk management strategy?
1) Companies (sourcing)
Japanese companies, who had already been concerned about rare earth shortages as early as July, when China cut its export quotas to bolster prices and ensure domestic supplies, immediately started to take concrete actions such as sourcing rare earth metals from other countries such as Kazakhstan to disperse risk. China produces and supplies over 90% of the world’s rare earth metals but their reserves is only around 30% of the world total. This means remaining 70% are available in other countries.
As reported by The Japan Times and other media, Sumitomo Corp. signed a deal with Kazakhstan's national nuclear power company Kazatomprom to establish a joint venture and produce rare earth metals in the country, including neodymium and dysprosium, which are crucial to building motors for electric vehicles. And, Toshiba Corp. said it signed up with the same Kazakhstan firm in June to establish a joint venture to produce rare earth metals coming out of uranium mines in which Toshiba has a financial interest. The electronics maker said it hopes to set up the venture by the end of the year and start producing rare earth elements used in motor magnets.
2) Companies (R&D and others)
Research of technologies to reduce use of rare earth elements has been in progress as reported in a recent Japanese TV news programme. Honda Motor Co. has been conducting research and development to find alternatives for the rare earths. Toyota Motor Corp., the world's largest maker of hybrid cars, has set up a task force on rare earths metals earlier this year to explore new sources for rare earth elements and ways to recycle used parts, the Nikkan Kogyo newspaper reported Wednesday, according to The Japan Times..
3) Government
It was reported in a recent Japanese TV news programme that the Japanese government signed a memorandum with Kazakhstan of supporting Kazakhstan extraction of rare earth metals.
2. How about the U.S.?
With sense of crisis, the U.S. also started to take measures for risk diversification such as restarting mining of rare earth metals in California. The U.S. used to mine and supply approximately 50% of worldwide rare earth metals but with emergence of cheap products from China, the U.S. lost their global competitiveness and its worldwide market share dropped dramatically. As a result, the U.S. rely their rare earth sourcing from China. Rare earth metals are used in their nation’s “critical” equipments and systems such as military communication systems. For this reason, the U.S. also started to rethink their rare earth sourcing strategy and take measures in earnest.
3. What is the final thought of the author?
Being a marketing versatilist with management literacy and not an expert in politics and diplomacy, the author has nothing to say about politics. To the author, it seems that what China has executed (i.e. banning rare earth metal export to Japan as a part of diplomatic spat) triggered Japan and the U.S. (at least) to rethink rare earth sourcing and risk management strategy and take concrete measures, to be less dependent on China, although risk diversification does take time. This means decrease in China’s rare earth business in the long run.
Nikkei, Japan’s leading newspaper specialized in business and economy, reported today that in an APEC meeting held on October 2 in Gifu Prefecture in Japan, Japan’s Minister of the Ministry of Economy, Trade and Industry (METI) requested to his China counterpart to proceed smoothly to re-start rare earth export to Japan, to which China answered “would like to make effort to solve the problem. Economic interaction with Japan is important also for China”. This is a step forward because China simply has been insisting that “the Chinese government have never banned exporting rare earth metal to Japan”.
It seems that this incident delivers a strong message that an economic sanction by a country as a part of diplomatic spat is never effective in a global economic world in which countries are interdependent. It would lead to negative effect to the country executing the sanction in the long run. After all, countries need to diversify their risk while be cooperative for sustainability and co-prosperity.
References:-
Hiroko, Nakata (2010), Firms Rethink Rare Earth Sourcing
http://search.japantimes.co.jp/cgi-bin/nb20101002a1.html
2010年9月12日日曜日
What Does EPA Between Japan and India Mean?
Osaka – Sunday, September 12, 2010
Nikkei, Japanese newspaper specialized in business and economy, reported on September 10 that the governments of Japan and India reached a broad agreement to conclude EPA (economic partnership agreement), as mentioned in the article Japan and India Reach a Broad EPA. This has much significance to the both countries while at the same time challenges lie ahead.
Top 5 international trade items in 2009
(Source: Nikkei that acquired the information from JETRO (Japan External Trade Organization), translated and edited by the author)
From Japan to India
Item / % of total trade
Iron and steel / 13.0
Components of automobiles / 6.4
Metal working machinery / 4.3
Power engines / 4.1
Organic processed products / 4.0
From India to Japan
Item / % of total trade
Petroleum products / 24.4
Iron ore / 12.1
Non-metal mineral manufacture / 7.5
Sea foods / 7.5
Organic processed products 5.8
1. What does the EPA mean to Japan?
The EPA means that that Japan is closing the gap between Korean in terms of condition of international trade. Korea has already concluded FTA (Free Trade Agreement) with India in January this year; therefore, opinion leaders of Japan such as Mr. Suzuki, CEO/Chairman and President of Suzuki Motors, were extremely worried that Japan has handicap in global competition. With the EPA between Japan and India, they assume that competitive condition for Japanese automobile and consumer electronics compared with their Korean counterparts will improve.
Lowering/minimizing of tariff means so much and should be beneficial to Japanese automobile and consumer electronics. This is because they rely control component and high-precision processing components on import from Japan although they has been making efforts in increasing use of local components to reduce cost because such components are extremely difficult to source locally. Local sourcing to reduce cost is vital to grow business in India where the price range of volume zone is below 1 million yen and price competition is extremely severe.
2. What does the EPA mean to India?
The EPA means that India has made a progress in expanding their business in pharmaceutical (generic drugs). This is because Japan seems to have compromised to study to accelerate approval procedure of generic drugs in Japan. Currently it is difficult for Indian pharmaceutical companies to expand their business in Japan because of the slow speed of approval, which partially attributes to the fact that Japanese doctors and patients request high standard of quality. Some experts expect that cases in which Indian pharmaceutical companies acquire Japanese counterparts will increase in the future.
3. What are the challenges for Japan?
Japan needs to further negotiate with larger countries for EPA agreement such as China, Korea and Australia and catch up with Korea in developing and executing EPA strategy. Japan has only concluded EPA with countries and regions covering 16.5% of the total trade, and it is only 36.5% even if countries and regions in negotiation are included. On the other hand, Korea has already signed FTA with the U.S. and EU, and if countries and regions in negotiation are included it would be as much as over 60%.
The country that Japan seems to be able to agree to conclude EPA in the near future is Peru, whose negotiation is in progress. Mr. Okada, Minister of Foreign Affairs, said that Japan would like to start negotiation with EU and Korea and conclude EPA following agreement with India; however, there is no concrete EPA strategy.
4. Why Japan is behind in FTA / EPA?
It is because Japan has not been able to take bold step for market liberalization in agriculture. This is why in the EPA agreed with India main agriculture products such as rice have been excluded from items whose tariff will be abolished. However, lowering tariff of agriculture products would be inevitable if the Japanese government is to set a target of concluding EPA with the agriculture giants such as the U.S., China and Australia in the basic EPA policy to be drafted by November this year.
Scope of discussion topic of liberalization may expand beyond agriculture. Recently there have been some cases in which liberalization in items of non-tariff barriers such as standardization of safety criteria of products. What is required to initiate EPA is strong leadership of the government (ruling party) to convince stakeholders.
Nikkei, Japanese newspaper specialized in business and economy, reported on September 10 that the governments of Japan and India reached a broad agreement to conclude EPA (economic partnership agreement), as mentioned in the article Japan and India Reach a Broad EPA. This has much significance to the both countries while at the same time challenges lie ahead.
Top 5 international trade items in 2009
(Source: Nikkei that acquired the information from JETRO (Japan External Trade Organization), translated and edited by the author)
From Japan to India
Item / % of total trade
Iron and steel / 13.0
Components of automobiles / 6.4
Metal working machinery / 4.3
Power engines / 4.1
Organic processed products / 4.0
From India to Japan
Item / % of total trade
Petroleum products / 24.4
Iron ore / 12.1
Non-metal mineral manufacture / 7.5
Sea foods / 7.5
Organic processed products 5.8
1. What does the EPA mean to Japan?
The EPA means that that Japan is closing the gap between Korean in terms of condition of international trade. Korea has already concluded FTA (Free Trade Agreement) with India in January this year; therefore, opinion leaders of Japan such as Mr. Suzuki, CEO/Chairman and President of Suzuki Motors, were extremely worried that Japan has handicap in global competition. With the EPA between Japan and India, they assume that competitive condition for Japanese automobile and consumer electronics compared with their Korean counterparts will improve.
Lowering/minimizing of tariff means so much and should be beneficial to Japanese automobile and consumer electronics. This is because they rely control component and high-precision processing components on import from Japan although they has been making efforts in increasing use of local components to reduce cost because such components are extremely difficult to source locally. Local sourcing to reduce cost is vital to grow business in India where the price range of volume zone is below 1 million yen and price competition is extremely severe.
2. What does the EPA mean to India?
The EPA means that India has made a progress in expanding their business in pharmaceutical (generic drugs). This is because Japan seems to have compromised to study to accelerate approval procedure of generic drugs in Japan. Currently it is difficult for Indian pharmaceutical companies to expand their business in Japan because of the slow speed of approval, which partially attributes to the fact that Japanese doctors and patients request high standard of quality. Some experts expect that cases in which Indian pharmaceutical companies acquire Japanese counterparts will increase in the future.
3. What are the challenges for Japan?
Japan needs to further negotiate with larger countries for EPA agreement such as China, Korea and Australia and catch up with Korea in developing and executing EPA strategy. Japan has only concluded EPA with countries and regions covering 16.5% of the total trade, and it is only 36.5% even if countries and regions in negotiation are included. On the other hand, Korea has already signed FTA with the U.S. and EU, and if countries and regions in negotiation are included it would be as much as over 60%.
The country that Japan seems to be able to agree to conclude EPA in the near future is Peru, whose negotiation is in progress. Mr. Okada, Minister of Foreign Affairs, said that Japan would like to start negotiation with EU and Korea and conclude EPA following agreement with India; however, there is no concrete EPA strategy.
4. Why Japan is behind in FTA / EPA?
It is because Japan has not been able to take bold step for market liberalization in agriculture. This is why in the EPA agreed with India main agriculture products such as rice have been excluded from items whose tariff will be abolished. However, lowering tariff of agriculture products would be inevitable if the Japanese government is to set a target of concluding EPA with the agriculture giants such as the U.S., China and Australia in the basic EPA policy to be drafted by November this year.
Scope of discussion topic of liberalization may expand beyond agriculture. Recently there have been some cases in which liberalization in items of non-tariff barriers such as standardization of safety criteria of products. What is required to initiate EPA is strong leadership of the government (ruling party) to convince stakeholders.
Japan and India Reach a Broad EPA
Osaka – Sunday, September 12, 2010
Nikkei, Japanese newspaper specialized in business and economy, reported on September 10 that the governments of Japan and India reached a broad agreement to conclude EPA (economic partnership agreement). Japan’s EPA has already come into effect with 11 countries and regions, and India is the first country to conclude EPA with the major emerging countries of Brazil, Russia, China and India.
Tariffs of items that equals to 94% of the total trade amount between the two countries will be abolished in 10 years from the point of the agreement coming into effect. This could well drive more Japanese companies entering India market because most items that are exported from Japan such as iron and steel and components of automobiles will be free from tariff. Japan is to accept the request from India and study to speed-up approval of Generic drugs.
The main points of EPA that have been agreed with Japan and India are as below.
1. EPA is targeted to be officially agreed and concluded in October when Prime Minister of India Mr. Singh visits Japan.
Mr. Singh, the Prime Minister of India, is to visit Japan in October. The EPA is to be officially concluded then, and is expected to come into effect in 2011.
2. When the agreement comes into effect, tariffs of items covering 94% of total trade between the two countries will be abolished in 10 years.
According to 2009 statistics of JETRO (Japan External Trade Organization), approximately USD 6.3 billion was exported from Japan to India and approximately USD 3.7 billion was imported from India to Japan. Tariffs of items equivalent to 90% of the USD 6.3 billion from Japan to India and 97% of the USD 3.7 billion from India to Japan will be abolished in 10 years after the agreement comes into effect.
3. Tariffs of most items of iron and steel and automobile components will be abolished.
The two countries agreed to abolish tariffs in most items of the major industries of Japan including components of automobile, iron and steel and electronics. In many cases, 7.5% or 10% tariff is set in exporting these items from Japan to India, which sill be abolished in 10 years. It seems that tariffs of finished products will remain as today.
4. Tariffs of some agricultural items will be abolished but some others remain as today.
As for agricultural items, MAFF (Ministry of Agriculture, Forestry and Fisheries of Japan) announced that curry, tea and logs imported from India to Japan will become free from tariff but other items such as rice, wheat, beef, pork and sugar will remain as today. As for items exported from Japan to India, bonsai, strawberries and peaches will be free from tariff, and rice, milk powder and chicken will remain as today.
5. Items that India has requested will be discussed for crystallization.
Accelerating approval of generic drugs and expansion of working opportunities of India people in Japan will be agreed to further discussed to crystallize collaboration.
Japan also accepted India companies to establish in India call centre(s) targeting Japan market even if the companies do not have a branch in Japan.
Nikkei, Japanese newspaper specialized in business and economy, reported on September 10 that the governments of Japan and India reached a broad agreement to conclude EPA (economic partnership agreement). Japan’s EPA has already come into effect with 11 countries and regions, and India is the first country to conclude EPA with the major emerging countries of Brazil, Russia, China and India.
Tariffs of items that equals to 94% of the total trade amount between the two countries will be abolished in 10 years from the point of the agreement coming into effect. This could well drive more Japanese companies entering India market because most items that are exported from Japan such as iron and steel and components of automobiles will be free from tariff. Japan is to accept the request from India and study to speed-up approval of Generic drugs.
The main points of EPA that have been agreed with Japan and India are as below.
1. EPA is targeted to be officially agreed and concluded in October when Prime Minister of India Mr. Singh visits Japan.
Mr. Singh, the Prime Minister of India, is to visit Japan in October. The EPA is to be officially concluded then, and is expected to come into effect in 2011.
2. When the agreement comes into effect, tariffs of items covering 94% of total trade between the two countries will be abolished in 10 years.
According to 2009 statistics of JETRO (Japan External Trade Organization), approximately USD 6.3 billion was exported from Japan to India and approximately USD 3.7 billion was imported from India to Japan. Tariffs of items equivalent to 90% of the USD 6.3 billion from Japan to India and 97% of the USD 3.7 billion from India to Japan will be abolished in 10 years after the agreement comes into effect.
3. Tariffs of most items of iron and steel and automobile components will be abolished.
The two countries agreed to abolish tariffs in most items of the major industries of Japan including components of automobile, iron and steel and electronics. In many cases, 7.5% or 10% tariff is set in exporting these items from Japan to India, which sill be abolished in 10 years. It seems that tariffs of finished products will remain as today.
4. Tariffs of some agricultural items will be abolished but some others remain as today.
As for agricultural items, MAFF (Ministry of Agriculture, Forestry and Fisheries of Japan) announced that curry, tea and logs imported from India to Japan will become free from tariff but other items such as rice, wheat, beef, pork and sugar will remain as today. As for items exported from Japan to India, bonsai, strawberries and peaches will be free from tariff, and rice, milk powder and chicken will remain as today.
5. Items that India has requested will be discussed for crystallization.
Accelerating approval of generic drugs and expansion of working opportunities of India people in Japan will be agreed to further discussed to crystallize collaboration.
Japan also accepted India companies to establish in India call centre(s) targeting Japan market even if the companies do not have a branch in Japan.
2010年9月5日日曜日
Automobile Companies Compete to Win Promising India Market
Osaka – Sunday, September 5, 2010
Nikkei, Japanese newspaper specialized in business and economy, reported today that Suzuki Motor, a Japanese automobile company strong in small cars, has made a policy of investing approximately 30 billion yen in India to construct new car plant, with the annual production capacity of 250,000 cars. The plant may start its operation as early as 2013, and the annual production capacity is expected to expand to 1.7 million cars at the maximum, which is far greater than that of Japan.
Suzuki is the leader in India with market share of nearly 50%. Other automobile giants such as Toyota and Nissan are also aggressive in entering India market. Therefore, Suzuki aims to make the most of “first mover advantage” strategy and to establish a system for stable supply in the rapidly growing promising market before the competition gets tough.
1. What is Suzuki’s strategy to remain leading India Market?
Suzuki was the first foreign affiliate company in India to start production in 1983. The company plans to expand its annual production capacity to 1.45 million cars in 2012. With the construction of the new plant, the annual production capacity in India will be the largest in the world, which is much more than the total annual production capacity of 3 plants in Japan combined (1.4 million cars).
The new plant is to be constructed in Manesar in Haryana, the suburb of New Deli. In this area, Suzuki has already constructed the first plant with the annual production capacity of 300,000 cars (to be increased to 350,000 cars by the end of this year) that started its operation in 2007. Suzuki also is constructing the second plant with annual production capacity of 250,000 cars, to start its operation in 2012. Suzuki is to start construction of the third plant simultaneously and to install equipments depending on the demand trend. The types of cars to be produced are assumed to be primarily the best selling line products in the local market.
One main reason for consecutive construction of the plants in Manesar in Haryana is that the plant in Gurgaon in Haryana is getting old, although its annual production capacity is to be increased to 850,000 cars by the end of this year. Mr. Suzuki, the Chairman and President of Suzuki group, says that the company would like to preserve available production capacity in Manesar to establish a network that is capable of stable production and supply even when the Gurgaon plant needs to be renovated.
Suzuki, the pioneer of passenger car market in India, still enjoys market share of almost 50%. Two thirds of Suzuki’s consolidated operating profit is regarded as from business in India. Suzuki would like to make haste in establishing its leading position and improve its profitability in India business when the competition is expected to get tough, and leverage the know how from India business in strengthening businesses in other markets in Asia and Europe.
2. How are other automobile companies doing business in India?
Other global and local automobile companies have recently been entering India market, with their own respective strategy.
1) Toyota (Japan)
Toyota is to start local production and sales of small, strategic cars from the end of 2010.
2) Honda (Japan)
Honda is to start business of small cars with the price range below 500,000 rupee (approximately 900,000 yen) in 2011.
3) Nissan (Japan)
Nissan has started business of small cars with the price range below 400,000 rupee in July this year.
4) Volkswagen (Germany)
Volkswagen started its operation of its new plant with annual production capacity of 110,000 cars in March 2009, and started its business of small cars.
5) General Motors (the U.S.)
GM started its business of small cars with the price of approximately 300,000 rupee in January this year.
6) Tata Motors (India)
Tata Motors started operation of its plant that exclusively produces Tata Nano, its low price range car, in June this year.
3. Why worldwide automobile companies are aggressive in starting and expanding business in India?
The reasons are the fact that India is a promising market and that success in India business will a requisite for global companies to expand their business in other emerging markets.
1) India is a promising market
With its economy growing, India’s automobile market is expected to grow. From statistics, it is generally said that popularization of automobiles start when GDP surpasses 1,000 USD and India is currently at that stage. It is estimated that 4 million cars will be used in India in 2015, when 40% of China’s automobile production capacity is to be excess in 2015, according to the estimation of China government. The pace of automobile market expansion in India is expected to accelerate when middle-income group gets big.
2) Success in India business determines success in other emerging market
In India, approximately 80% of new cars are passenger cars, and over 60% of passenger cars are small cars with engine size below 1200cc. Volume price range in India is 300,000 – 450,000 rupee (approximately 550,000 – 800,000 yen), and is regarded as the most competitive market in the world for cars with low price range.
With this background, India business is the core of their global strategy of small cars, and success of India business is likely to determine their business success in worldwide emerging markets. This is because automobile companies are to accumulate know how of development, production and marketing of low price range cars through their business in India then expand their business in other emerging markets.
Nikkei, Japanese newspaper specialized in business and economy, reported today that Suzuki Motor, a Japanese automobile company strong in small cars, has made a policy of investing approximately 30 billion yen in India to construct new car plant, with the annual production capacity of 250,000 cars. The plant may start its operation as early as 2013, and the annual production capacity is expected to expand to 1.7 million cars at the maximum, which is far greater than that of Japan.
Suzuki is the leader in India with market share of nearly 50%. Other automobile giants such as Toyota and Nissan are also aggressive in entering India market. Therefore, Suzuki aims to make the most of “first mover advantage” strategy and to establish a system for stable supply in the rapidly growing promising market before the competition gets tough.
1. What is Suzuki’s strategy to remain leading India Market?
Suzuki was the first foreign affiliate company in India to start production in 1983. The company plans to expand its annual production capacity to 1.45 million cars in 2012. With the construction of the new plant, the annual production capacity in India will be the largest in the world, which is much more than the total annual production capacity of 3 plants in Japan combined (1.4 million cars).
The new plant is to be constructed in Manesar in Haryana, the suburb of New Deli. In this area, Suzuki has already constructed the first plant with the annual production capacity of 300,000 cars (to be increased to 350,000 cars by the end of this year) that started its operation in 2007. Suzuki also is constructing the second plant with annual production capacity of 250,000 cars, to start its operation in 2012. Suzuki is to start construction of the third plant simultaneously and to install equipments depending on the demand trend. The types of cars to be produced are assumed to be primarily the best selling line products in the local market.
One main reason for consecutive construction of the plants in Manesar in Haryana is that the plant in Gurgaon in Haryana is getting old, although its annual production capacity is to be increased to 850,000 cars by the end of this year. Mr. Suzuki, the Chairman and President of Suzuki group, says that the company would like to preserve available production capacity in Manesar to establish a network that is capable of stable production and supply even when the Gurgaon plant needs to be renovated.
Suzuki, the pioneer of passenger car market in India, still enjoys market share of almost 50%. Two thirds of Suzuki’s consolidated operating profit is regarded as from business in India. Suzuki would like to make haste in establishing its leading position and improve its profitability in India business when the competition is expected to get tough, and leverage the know how from India business in strengthening businesses in other markets in Asia and Europe.
2. How are other automobile companies doing business in India?
Other global and local automobile companies have recently been entering India market, with their own respective strategy.
1) Toyota (Japan)
Toyota is to start local production and sales of small, strategic cars from the end of 2010.
2) Honda (Japan)
Honda is to start business of small cars with the price range below 500,000 rupee (approximately 900,000 yen) in 2011.
3) Nissan (Japan)
Nissan has started business of small cars with the price range below 400,000 rupee in July this year.
4) Volkswagen (Germany)
Volkswagen started its operation of its new plant with annual production capacity of 110,000 cars in March 2009, and started its business of small cars.
5) General Motors (the U.S.)
GM started its business of small cars with the price of approximately 300,000 rupee in January this year.
6) Tata Motors (India)
Tata Motors started operation of its plant that exclusively produces Tata Nano, its low price range car, in June this year.
3. Why worldwide automobile companies are aggressive in starting and expanding business in India?
The reasons are the fact that India is a promising market and that success in India business will a requisite for global companies to expand their business in other emerging markets.
1) India is a promising market
With its economy growing, India’s automobile market is expected to grow. From statistics, it is generally said that popularization of automobiles start when GDP surpasses 1,000 USD and India is currently at that stage. It is estimated that 4 million cars will be used in India in 2015, when 40% of China’s automobile production capacity is to be excess in 2015, according to the estimation of China government. The pace of automobile market expansion in India is expected to accelerate when middle-income group gets big.
2) Success in India business determines success in other emerging market
In India, approximately 80% of new cars are passenger cars, and over 60% of passenger cars are small cars with engine size below 1200cc. Volume price range in India is 300,000 – 450,000 rupee (approximately 550,000 – 800,000 yen), and is regarded as the most competitive market in the world for cars with low price range.
With this background, India business is the core of their global strategy of small cars, and success of India business is likely to determine their business success in worldwide emerging markets. This is because automobile companies are to accumulate know how of development, production and marketing of low price range cars through their business in India then expand their business in other emerging markets.
2010年8月29日日曜日
Japanese Companies Enter the U.S. Healthcare IT Market
Osaka – Sunday, August 29, 2010
Nikkei, Japanese newspaper specialized in business and economy, reported today that Japanese IT related companies started to enter the U.S. healthcare IT market, when the U.S. counterparts have been accelerating their investment in this market. NEC is to enter the U.S. healthcare inspection business in the summer 2011. The company invests in the U.S. healthcare venture business and develops a system that determines risk of having disease by inspecting proteins in the blood. Fuji film integrated their U.S. healthcare information system affiliates to establish and strengthen their business of diagnostic imaging systems.
The U.S. preventive healthcare market is expected to grow with president Obama’s healthcare reform, and the U.S. companies have been entering and/strengthen their businesses in this market. Competition in the new promising healthcare IT market has started and is expected to get fierce.
1. Why is the U.S. preventive healthcare marketing promising and is expected to grow?
The healthcare IT demand is expected to grow dramatically with the increase in the healthcare insurance consumers. This is because of the healthcare insurance reform law was enacted in March. This law aims all of the U.S. citizens to benefit from the healthcare insurance.
Demand of preventive healthcare is also expected to grow because all the preventive healthcare cost is to be paid by insurance.
2. How are Japanese companies to enter and/or strengthen their healthcare IT business in the U.S.?
1) NEC
NEC is to enter the U.S. healthcare inspection business in the summer 2011 and to make healthcare IT business as a new business pillar. The company is to develop a new system that determine risk of having diseases by inspecting proteins in the blood, whose market size is expected to grow as big as more than 200 billion yen worldwide, the U.S. being the biggest market.
NEC invested 5 million USD (approximately 400 million yen) in a U.S. venture company and made alliance with the venture company. The venture company has a technology of inspecting in details proteins in blood. Based on the data from this inspection, NEC is to system that immediately determines risk of having diseases. The system will be located in a data centre in the U.S. The inspection result will be delivered to the customers by the Internet, precisely speaking, “cloud computing”.
NEC will be entrusted with the inspection from pharmaceutical companies that initiates “order made healthcare”, treatment tailoring to meet constitution of each patients, from summer 2011. From 2012 the company is to be entrusted with the inspection also from hospitals. The company is also to study health check service for individuals; collecting bloods in places such as at super market and send the inspection result to mobile terminal.
2) Fuji Film
Fuji Film integrated an affiliate strong in diagnostic imaging management (located in Indiana) and another affiliate engaged in system supporting diagnostic tasks earlier this month.
Fuji Film had acquired the two affiliates after 2006 and has been supplying systems to approximately 700 U.S. and worldwide healthcare organizations. By integrating the two affiliates, the experts believe that the company is to broaden the range of services to expand their business, so that they can achieve the target of supplying their systems to 1000 organizations very soon.
3. How have the U.S. companies been developing their healthcare IT business?
The U.S. companies of IT and healthcare have been accelerating investment in healthcare IT business. This is because with President Obama’s healthcare reform aims to reduce 32 million citizens without healthcare insurance in the next 10 years, meaning growth of healthcare IT demand such as electronic clinical record.
GE and Intel agreed to integrate their in-home healthcare system business earlier year. They plan to invest more than 250 million USD by 2014 and develop in-home healthcare system for senior citizens and demented patients.
Oracle acquired a software company specialized in healthcare software with 68.5 million USD.
Dell acquired an IT company with 3.9 billion USD to enter electronic clinical record business.
Nikkei, Japanese newspaper specialized in business and economy, reported today that Japanese IT related companies started to enter the U.S. healthcare IT market, when the U.S. counterparts have been accelerating their investment in this market. NEC is to enter the U.S. healthcare inspection business in the summer 2011. The company invests in the U.S. healthcare venture business and develops a system that determines risk of having disease by inspecting proteins in the blood. Fuji film integrated their U.S. healthcare information system affiliates to establish and strengthen their business of diagnostic imaging systems.
The U.S. preventive healthcare market is expected to grow with president Obama’s healthcare reform, and the U.S. companies have been entering and/strengthen their businesses in this market. Competition in the new promising healthcare IT market has started and is expected to get fierce.
1. Why is the U.S. preventive healthcare marketing promising and is expected to grow?
The healthcare IT demand is expected to grow dramatically with the increase in the healthcare insurance consumers. This is because of the healthcare insurance reform law was enacted in March. This law aims all of the U.S. citizens to benefit from the healthcare insurance.
Demand of preventive healthcare is also expected to grow because all the preventive healthcare cost is to be paid by insurance.
2. How are Japanese companies to enter and/or strengthen their healthcare IT business in the U.S.?
1) NEC
NEC is to enter the U.S. healthcare inspection business in the summer 2011 and to make healthcare IT business as a new business pillar. The company is to develop a new system that determine risk of having diseases by inspecting proteins in the blood, whose market size is expected to grow as big as more than 200 billion yen worldwide, the U.S. being the biggest market.
NEC invested 5 million USD (approximately 400 million yen) in a U.S. venture company and made alliance with the venture company. The venture company has a technology of inspecting in details proteins in blood. Based on the data from this inspection, NEC is to system that immediately determines risk of having diseases. The system will be located in a data centre in the U.S. The inspection result will be delivered to the customers by the Internet, precisely speaking, “cloud computing”.
NEC will be entrusted with the inspection from pharmaceutical companies that initiates “order made healthcare”, treatment tailoring to meet constitution of each patients, from summer 2011. From 2012 the company is to be entrusted with the inspection also from hospitals. The company is also to study health check service for individuals; collecting bloods in places such as at super market and send the inspection result to mobile terminal.
2) Fuji Film
Fuji Film integrated an affiliate strong in diagnostic imaging management (located in Indiana) and another affiliate engaged in system supporting diagnostic tasks earlier this month.
Fuji Film had acquired the two affiliates after 2006 and has been supplying systems to approximately 700 U.S. and worldwide healthcare organizations. By integrating the two affiliates, the experts believe that the company is to broaden the range of services to expand their business, so that they can achieve the target of supplying their systems to 1000 organizations very soon.
3. How have the U.S. companies been developing their healthcare IT business?
The U.S. companies of IT and healthcare have been accelerating investment in healthcare IT business. This is because with President Obama’s healthcare reform aims to reduce 32 million citizens without healthcare insurance in the next 10 years, meaning growth of healthcare IT demand such as electronic clinical record.
GE and Intel agreed to integrate their in-home healthcare system business earlier year. They plan to invest more than 250 million USD by 2014 and develop in-home healthcare system for senior citizens and demented patients.
Oracle acquired a software company specialized in healthcare software with 68.5 million USD.
Dell acquired an IT company with 3.9 billion USD to enter electronic clinical record business.
2010年8月22日日曜日
Japan Ventures Filing IPO in Asia Emerging Equity Markets
Osaka – Sunday, August 22, 2010
Nikkei, Japanese newspaper specialized in business and economy, reported today that Japanese Venture companies are filing IPO in Asia emerging equity markets instead of in Japan stock exchange market. It is estimated that by the end of next year more than 10 companies are to file IPO not in Japan where IPO filing has been sluggish but in Korea and Taiwan where IPO has recovered and stock trading is active.
In addition to effectively raising capital, such companies aim to enhance company awareness and leverage in expanding business in Asia emerging countries.
If more leading and promising companies should list in stock market outside Japan instead of in Japan market, it is possible that hollowing of Japan’s emerging equity market accelerates.
1. Which companies are filing in Asia emerging equity market?
Major Japanese Venture Companies Filing IPO Abroad
(Source: Nikkei, translated by the author)
Company Name / Business / Year of Foundation / Sales (million yen/year)
DLE Inc / Production of animation and videos / 2001 / 800
Zero / Internet payment / 1989 / 3,000
Food Discovery / Lecture on vegetable sommelier, green vegetable sales / 2001 / 1,300
Office 24 / OA equipment sales, office convenience / 1993 / 7,500
Salvatore Cuomo Japan / Pizza franchise chain / 2005 / 5,600
DLE Inc http://www.dle.jp/en/, an animation production company based in Tokyo, is to file IPO in Taiwan equity market by June, 2011. They had been planning to file in Japan but changed their policy because Japanese animation is highly evaluated abroad. The company has already made alliance with a Taiwan production company, and aims to expand their business, taking the opportunity of IPO.
Zero http://www.zeroweb.co.jp/, an Internet payment company based in Tokyo, is to file IPO in an emerging equity market called “Catalyst” of Singapore. The company aims to raise capital necessary for future growth and enter Asia market.
Quite a number of companies are planning to file in an emerging equity market called “KOSDAQ” of Korea. Food Discovery http://fooddiscovery.jp/, a company based in Tokyo that is engaged in businesses including lecture on vegetable sommelier and green vegetable sales, is to file IPO in KOSDAQ in October this year. Office 24 http://www.webjapan.co.jp/, a company based in Tokyo engaged in business of OA equipment sales and office convenience, also has established its policy of filing IPO in KOSDAQ around November this year. Salvatore Cuomo Japan http://www.salvatore.jp/, a Tokyo based pizza chain company, also is studying to file in KOSDAQ. The companies aim to raise capital in Korea and utilize it in building and establishing local branch network.
Internet (online) business companies and semiconductor related companies are also planning to file IPO in emerging Asia instead of Japan.
2. Have Japanese venture companies been filing IPO in Asia emerging equity market until today?
No, only 1 Japanese venture company (excluding local joint venture companies) had filed IPO in KOSDAQ. One after the other Japanese venture companies filed IPO in NASDAQ in the U.S. around 2000. Then Japan local emerging stock exchange markets (e.g. Mothers = Market of the High-Growth and Emerging Stocks, JASDAQ = Japan Association of Securities Dealers Automated Quotations) were drastically improved and Japanese venture companies has been filing IPO to such markets instead of those of abroad.
3. Have Japanese companies been active in filing IPO lately?
No. Japanese companies filing for IPO has been decreasing in the last 4 years, with the negative effects of the worldwide depression. In 2009, only 19 companies filed for IPO, which is 1/10 of the peak in 2006. Experts estimates that only 20-30 companies will file for IPO in 2010.
The amount of capital raised by IPO and after being listed has also been sluggish. The average capital raised in 2009 was 3 billion yen, which is less than that of 2006.
4. Why Japanese venture companies are aggressive in filing IPO in Asia emerging stock exchange market?
1) Asia emerging stock exchange market is active
Asia emerging stock exchange markets are now attracting investment capital, and many companies are filing IPO in such stock exchange markets. According to WFE, 56 companies filed IPO in KOSDAQ in 2009, which is 47% increase from 2008, and 14 companies filed IPO in Catalyst in 2009, which is double of 2008.
In addition, Asia emerging stock exchange markets are making upmost efforts in attracting companies abroad filing IPO in their market. Taiwan Equity Market has abolished regulation for foreign companies being listed in their market. KOSDAQ also are focusing on attracting foreign companies to list in their market.
2) Hurdle for filing IPO in Asia emerging equity market is low
Time required to be listed after filing is far shorter for Asia emerging equity market compared to those for Japan. It takes more than 2 years in Japan, when it takes only approximately 1 year for KOSDAQ and 1-1/2 years for Taiwan.
Profit criteria, a critical requirement for filing IPO, is less for Asia emerging equity market compared to that of Japan. The criterion is 500 million yen for JASDAQ, when it is approximately 150 million yen of net profit for KOSDAQ. For Catalyst, there is no regulation on this issue.
5. What are the disadvantages of filing IPO in Asia emerging equity market?
1) Additional cost is necessary
Additional cost would be necessary. Such cost includes cost of local IR to be performed in local language, and cost to be paid to lawyers accompanied by information disclosure.
2) Alliance with sponsor company is required (in some cases)
In filing IPO in Catalyst, companies are requested to make an alliance with a sponsor company that is responsible as guarantee of listing. Finding an appropriate sponsor company and making an alliance for this purpose means much additional work.
Nikkei, Japanese newspaper specialized in business and economy, reported today that Japanese Venture companies are filing IPO in Asia emerging equity markets instead of in Japan stock exchange market. It is estimated that by the end of next year more than 10 companies are to file IPO not in Japan where IPO filing has been sluggish but in Korea and Taiwan where IPO has recovered and stock trading is active.
In addition to effectively raising capital, such companies aim to enhance company awareness and leverage in expanding business in Asia emerging countries.
If more leading and promising companies should list in stock market outside Japan instead of in Japan market, it is possible that hollowing of Japan’s emerging equity market accelerates.
1. Which companies are filing in Asia emerging equity market?
Major Japanese Venture Companies Filing IPO Abroad
(Source: Nikkei, translated by the author)
Company Name / Business / Year of Foundation / Sales (million yen/year)
DLE Inc / Production of animation and videos / 2001 / 800
Zero / Internet payment / 1989 / 3,000
Food Discovery / Lecture on vegetable sommelier, green vegetable sales / 2001 / 1,300
Office 24 / OA equipment sales, office convenience / 1993 / 7,500
Salvatore Cuomo Japan / Pizza franchise chain / 2005 / 5,600
DLE Inc http://www.dle.jp/en/, an animation production company based in Tokyo, is to file IPO in Taiwan equity market by June, 2011. They had been planning to file in Japan but changed their policy because Japanese animation is highly evaluated abroad. The company has already made alliance with a Taiwan production company, and aims to expand their business, taking the opportunity of IPO.
Zero http://www.zeroweb.co.jp/, an Internet payment company based in Tokyo, is to file IPO in an emerging equity market called “Catalyst” of Singapore. The company aims to raise capital necessary for future growth and enter Asia market.
Quite a number of companies are planning to file in an emerging equity market called “KOSDAQ” of Korea. Food Discovery http://fooddiscovery.jp/, a company based in Tokyo that is engaged in businesses including lecture on vegetable sommelier and green vegetable sales, is to file IPO in KOSDAQ in October this year. Office 24 http://www.webjapan.co.jp/, a company based in Tokyo engaged in business of OA equipment sales and office convenience, also has established its policy of filing IPO in KOSDAQ around November this year. Salvatore Cuomo Japan http://www.salvatore.jp/, a Tokyo based pizza chain company, also is studying to file in KOSDAQ. The companies aim to raise capital in Korea and utilize it in building and establishing local branch network.
Internet (online) business companies and semiconductor related companies are also planning to file IPO in emerging Asia instead of Japan.
2. Have Japanese venture companies been filing IPO in Asia emerging equity market until today?
No, only 1 Japanese venture company (excluding local joint venture companies) had filed IPO in KOSDAQ. One after the other Japanese venture companies filed IPO in NASDAQ in the U.S. around 2000. Then Japan local emerging stock exchange markets (e.g. Mothers = Market of the High-Growth and Emerging Stocks, JASDAQ = Japan Association of Securities Dealers Automated Quotations) were drastically improved and Japanese venture companies has been filing IPO to such markets instead of those of abroad.
3. Have Japanese companies been active in filing IPO lately?
No. Japanese companies filing for IPO has been decreasing in the last 4 years, with the negative effects of the worldwide depression. In 2009, only 19 companies filed for IPO, which is 1/10 of the peak in 2006. Experts estimates that only 20-30 companies will file for IPO in 2010.
The amount of capital raised by IPO and after being listed has also been sluggish. The average capital raised in 2009 was 3 billion yen, which is less than that of 2006.
4. Why Japanese venture companies are aggressive in filing IPO in Asia emerging stock exchange market?
1) Asia emerging stock exchange market is active
Asia emerging stock exchange markets are now attracting investment capital, and many companies are filing IPO in such stock exchange markets. According to WFE, 56 companies filed IPO in KOSDAQ in 2009, which is 47% increase from 2008, and 14 companies filed IPO in Catalyst in 2009, which is double of 2008.
In addition, Asia emerging stock exchange markets are making upmost efforts in attracting companies abroad filing IPO in their market. Taiwan Equity Market has abolished regulation for foreign companies being listed in their market. KOSDAQ also are focusing on attracting foreign companies to list in their market.
2) Hurdle for filing IPO in Asia emerging equity market is low
Time required to be listed after filing is far shorter for Asia emerging equity market compared to those for Japan. It takes more than 2 years in Japan, when it takes only approximately 1 year for KOSDAQ and 1-1/2 years for Taiwan.
Profit criteria, a critical requirement for filing IPO, is less for Asia emerging equity market compared to that of Japan. The criterion is 500 million yen for JASDAQ, when it is approximately 150 million yen of net profit for KOSDAQ. For Catalyst, there is no regulation on this issue.
5. What are the disadvantages of filing IPO in Asia emerging equity market?
1) Additional cost is necessary
Additional cost would be necessary. Such cost includes cost of local IR to be performed in local language, and cost to be paid to lawyers accompanied by information disclosure.
2) Alliance with sponsor company is required (in some cases)
In filing IPO in Catalyst, companies are requested to make an alliance with a sponsor company that is responsible as guarantee of listing. Finding an appropriate sponsor company and making an alliance for this purpose means much additional work.
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