November 15, 2009 – Osaka, Japan
On November 14, Nikkei, Japan’s leading newspaper specialized in economy/business and politics, reported on Japan-U.S. summit and on joint press conference of Prime Minister Yukio Hatoyama and U.S. President Barack Obama sharing a firm handshake in front of the cameras at their bilateral meeting, held on Friday evening of November 13. It was the first time for Mr. Obama to visit Japan, and second time for the two leaders to meet since September in New York. The summit was held for 1-1/2 hours, and after dinner, the two leaders had an exclusive discussion for 15 minutes.
The two leaders affirmed the importance of further deepening and developing the Japan-U.S. alliance and agreed on starting discussion between the two governments towards 50th anniversary of the Japan-US Security Treaty Amendment in 2010. Also, they agreed on making efforts to solve the issue quickly of relocation of U.S. Marine Corps Air Station Futenma in Okinawa Prefecture, which was agreed to by Tokyo and Washington in a 2006 accord, and confirmed on collaboration in aiding Afghanistan and solving nuclear issue of North Korea and Iran. The main points discussed by the two leaders are as below.
Main Points Discussed by the Two Leaders
(Source: Nikkei, translated by the author)
1. Affirmed the importance of further deepening and developing the Japan-U.S. alliance.
2. Discuss for a year between the two governments towards 50th anniversary of the Japan-US Security Treaty Amendment in 2010, and draw out a conclusion.
3. Agreed on making efforts to solve quickly relocation of U.S. Marine Corps Air Station Futenma in Okinawa Prefecture.
4. Mr. Hatoyama expressed maximum 5 year aid of 5 billion USD to Afghanistan, to which Mr. Obama expressed gratitude.
5. Cooperation on nuclear issue of North Korea and Iran.
6. Agreed on 80% GHG reduction by 2050, and on collaboration to succeed COP 15.
After the discussion, joint press conferment was held, in which, regarding the new discussion between the two governments on the Japan-US Security Treaty, Mr. Hatoyama expressed, “I would like to create future-focused and constructive new alliance” and Mr. Obama added, “I would like to look back on past achievements and proceed the next step.” Mr. Hatoyama also emphasized that “the Japan-U.S. alliance is the fundamental of everything”, and regarding concept of “East Asia Community” that he advocates, expressed that the U.S.’s involvement is inevitable by saying “It is with the firm Japan-U.S. alliance that I advocate this concept.”
It is only once that the Japan- US Summit ended without any agreement. That was in 1994 when President Clinton requested starting discussion on trade framework, to which Prime Minister Hosokawa refused. The U.S. immediately countercharged by such measures as navigating to high yen.
This summit was full of smile, and such issues as elimination of nuclear weapons and global environment were documented; however, inner workings are more serious than 15 years ago. It is highly desired that blue print for each issue is drafted and executed immediately, which requires strong leadership of the two leaders.
2009年11月15日日曜日
2009年11月7日土曜日
Japanese Companies to Bottom-Out Fiscal Year Ending March 2010, but Demands Caution
November 7, 2009 – Osaka, Japan
Today, Nikkei, Japan’s leading newspaper specialized in economy/business and politics, reported that financial performance of Japanese listed companies in total to bottom-out by the end of the fiscal year (FY) ending March 2010, according to estimation of head quarters of the companies. Consolidated profit for FY ending March 2010 is estimated to be +0.7% vs. previous year, although the estimation in August was -9%. This is because of reduction in fixed cost* and economy-boosting measures of governments of various countries, which led to drastic improvement in profit and loss (P/L) of consumer electronics and automobiles. However, there are anxieties such as ongoing high yen situation and improvement of business climate likely to terminate after January 2010. Therefore, some experts view that outlook demands caution.
Increase/Decrease of Consolidated Profit by Industry: Consumer Electronics and Automobile are the Drivers of Recovery
Source: Nikkei (translated by the author)
Increase From Previous Year
Electronics / 1 .484 trillion yen
Oil / 734 billion yen
Automobile and Components / 50.63 billion yen
Electricity etc. / 1.263 trillion yen
Decrease From Previous Year
Steel / -1.2145 trillion yen
Trading / -61.84 billion yen
Machinery / -36.91 billion yen
Marine Transportation etc. / -1.478 trillion yen
Nikkei reports that the data used are of 940 companies who have finished making financial announcement for first half of 2009 (April-September 2009) by November 6, 2009 (excluding financial institutions). These companies cover 78% of total market value.
According to the current analysis, consolidated profit for FY ending March 2010 is expected to be +0.7% from previous year, which is 9.8 trillion yen. Some experts view that the speed of recovery is more than anticipated and it is possible that the final performance achievement would be better than this. Consolidated profit of listed companies was directly and negatively impacted by the worldwide economic crisis, resulting in decrease in profit first time in 7 quarters, by more than 60%.
Improvement in revenue by quarter has been evident since January this year. January-March in loss was the bottom, and it went back in black in total for April-June, and the profit increased for July-September, meaning consecutive improvement. This is the reason for the favourable outlook for the total FY year ending March 2010.
The driver for the performance improvement is reduction in fixed cost. Sales are estimated to be approximately 343 trillion yen which is -13% from previous year but the profit is estimated to be about the same with previous year because cost reduction by companies is ongoing with the greater speed than originally assumed. For example, Komatsu is to double the amount of fixed cost reduction to 50 billion yen. Thus, profit ratio of listed companies in general is to improve, highlighting the recovery driven by rationalization.
Economy-boosting measures by the government played as a driver for the performance improvement as well. Consumer electronics that posted large amount of loss benefited from eco-point system, an economy-boosting measure implemented by the Japanese government, and their sales (e.g. TV) increased, leading to increase in profit by almost 1.5 trillion yen. Automobiles and components are also estimated to increase their profit by approximately 500 billion yen, going back to black. For example, Nissan is benefiting from positive effect of government’s economy-boosting measures designed to promote buying new cars to replace old ones, to revise its original outlook of increasing loss to 20 billion yen in profit. Improvements in oil attributing to increase in resource price are also evident.
On the other hand, financial performance of steels and machinery are deteriorating. This is because their primary customers of automobile and electronics are still cautious of facility investment and production increase. Trading companies are also to decrease their profit because their automobile and steel businesses are struggling.
The outlook for the future remains uncertain. There are many companies that out-perform vs. original plan for April-September but estimation for total year remains the same. For example, VP of JFE Holdings comments that it is doubtful whether the improvement in steel stock demand continues, and that high yen is also an anxiety factor. Many management executives are not confident in sustainable business improvement because of doldrums of consumer spending and employment.
* Brief Explanation on Fixed Cost (source: Nikkei, edited and translated by the author）
Fixed Cost is the cost that is constant regardless of fluctuation in sales of a company such as employment cost of back office department and depreciation cost of plant and equipment. On the other hand, cost that fluctuates linking with by production volume and sales such as raw material cost and operating labour cost are called “variable cost”. Many companies cut fixed cost to quickly recover their profitability when they face drop in sales.
Sales equaling total of fixed and variable cost is called break even point. Dividing this by sales is break even point ratio. According to Nikkei’s analysis of 1633 listed companies (non-consolidated), this ratio was about 80% before 2007 but for 2008 it increased to more than 89% because the reduction in fixed cost was not in par with drastic drop in sales and revenue.
Today, Nikkei, Japan’s leading newspaper specialized in economy/business and politics, reported that financial performance of Japanese listed companies in total to bottom-out by the end of the fiscal year (FY) ending March 2010, according to estimation of head quarters of the companies. Consolidated profit for FY ending March 2010 is estimated to be +0.7% vs. previous year, although the estimation in August was -9%. This is because of reduction in fixed cost* and economy-boosting measures of governments of various countries, which led to drastic improvement in profit and loss (P/L) of consumer electronics and automobiles. However, there are anxieties such as ongoing high yen situation and improvement of business climate likely to terminate after January 2010. Therefore, some experts view that outlook demands caution.
Increase/Decrease of Consolidated Profit by Industry: Consumer Electronics and Automobile are the Drivers of Recovery
Source: Nikkei (translated by the author)
Increase From Previous Year
Electronics / 1 .484 trillion yen
Oil / 734 billion yen
Automobile and Components / 50.63 billion yen
Electricity etc. / 1.263 trillion yen
Decrease From Previous Year
Steel / -1.2145 trillion yen
Trading / -61.84 billion yen
Machinery / -36.91 billion yen
Marine Transportation etc. / -1.478 trillion yen
Nikkei reports that the data used are of 940 companies who have finished making financial announcement for first half of 2009 (April-September 2009) by November 6, 2009 (excluding financial institutions). These companies cover 78% of total market value.
According to the current analysis, consolidated profit for FY ending March 2010 is expected to be +0.7% from previous year, which is 9.8 trillion yen. Some experts view that the speed of recovery is more than anticipated and it is possible that the final performance achievement would be better than this. Consolidated profit of listed companies was directly and negatively impacted by the worldwide economic crisis, resulting in decrease in profit first time in 7 quarters, by more than 60%.
Improvement in revenue by quarter has been evident since January this year. January-March in loss was the bottom, and it went back in black in total for April-June, and the profit increased for July-September, meaning consecutive improvement. This is the reason for the favourable outlook for the total FY year ending March 2010.
The driver for the performance improvement is reduction in fixed cost. Sales are estimated to be approximately 343 trillion yen which is -13% from previous year but the profit is estimated to be about the same with previous year because cost reduction by companies is ongoing with the greater speed than originally assumed. For example, Komatsu is to double the amount of fixed cost reduction to 50 billion yen. Thus, profit ratio of listed companies in general is to improve, highlighting the recovery driven by rationalization.
Economy-boosting measures by the government played as a driver for the performance improvement as well. Consumer electronics that posted large amount of loss benefited from eco-point system, an economy-boosting measure implemented by the Japanese government, and their sales (e.g. TV) increased, leading to increase in profit by almost 1.5 trillion yen. Automobiles and components are also estimated to increase their profit by approximately 500 billion yen, going back to black. For example, Nissan is benefiting from positive effect of government’s economy-boosting measures designed to promote buying new cars to replace old ones, to revise its original outlook of increasing loss to 20 billion yen in profit. Improvements in oil attributing to increase in resource price are also evident.
On the other hand, financial performance of steels and machinery are deteriorating. This is because their primary customers of automobile and electronics are still cautious of facility investment and production increase. Trading companies are also to decrease their profit because their automobile and steel businesses are struggling.
The outlook for the future remains uncertain. There are many companies that out-perform vs. original plan for April-September but estimation for total year remains the same. For example, VP of JFE Holdings comments that it is doubtful whether the improvement in steel stock demand continues, and that high yen is also an anxiety factor. Many management executives are not confident in sustainable business improvement because of doldrums of consumer spending and employment.
* Brief Explanation on Fixed Cost (source: Nikkei, edited and translated by the author）
Fixed Cost is the cost that is constant regardless of fluctuation in sales of a company such as employment cost of back office department and depreciation cost of plant and equipment. On the other hand, cost that fluctuates linking with by production volume and sales such as raw material cost and operating labour cost are called “variable cost”. Many companies cut fixed cost to quickly recover their profitability when they face drop in sales.
Sales equaling total of fixed and variable cost is called break even point. Dividing this by sales is break even point ratio. According to Nikkei’s analysis of 1633 listed companies (non-consolidated), this ratio was about 80% before 2007 but for 2008 it increased to more than 89% because the reduction in fixed cost was not in par with drastic drop in sales and revenue.
2009年11月1日日曜日
Financial Improvement in Japanese Listed Companies
November 1, 2009 – Osaka, Japan
Today, Nikkei, Japan’s leading newspaper specialized in economy/business and politics, reported that in general financial performance of Japanese listed companies has been continuously improving for two consecutive quarters. Nikkei analyzed financial performance of listed companies for July-September 2009, and the result was that the total consolidated profit was 2.3 times that of April-June 2009, meaning improvement for two consecutive quarters. The improvement is because of rationalization/cost reduction efforts especially of manufacturers and termination of sales drop attributing to economy-boosting measures* by the government of respective countries. Having said that, whether the performance improvement continues is a question because the positive effect of government policies has taken a round and the high yen still continues.
Consolidated Profits of Major Companies (100 million yen)
Source: Nikkei (translated by the author)
Company Name / July-September / April-June
Increase in Black Companies
Honda / 661 / 54
Mitsubishi Corporation / 831 / 619
Komatsu / 97 / 87
Returning to Black Companies
Panasonic / 253 / -517
JFE / 98 / -672
Mitsui OSK Lines / 14 / -114
Decrease in Red Companies
Hitachi / -293 / -808
Nippon Steel / -302 / -556
Sony / -170 / -329
Deterioration in Performance Companies
Nintendo / 457 / 648
Japan Tabacco / 563 / 788
Kawasaki Kinsen / -271 / -227
Notes: EBIT (Earnings before Income Tax) for companies using GAAP, profit in Japan auditing principle for others
Nikkei reports that the data used for analysis is of 527 companies that have finished making financial announcement for 2009 Q3 by October 30, 2009 (excluding financial institutions). These companies cover 63% of total market value industry-wide.
Their performance was negatively impacted by the worldwide economic crisis and went to red January-March. It went back to black in total April-June (97.49 million yen in black) with rationalization but manufacturers remained in red in total by 25.47 billion yen. And for July-September their performance in total was in black by 2.2021 trillion yen, and manufacturers in total also returned to black after three quarters by 81.58 billion yen. 68% of companies have improved from April-June.
Increase in sales was the driver for performance improvement. Consolidated sales for July-September increased by 10% from April-June, marking the first sales increase of a quarter (vs. previous quarter) after four quarters. Revenue of manufacturing companies increased by 12% from the previous quarter.
Favourable Japan domestic market sales also contributed to performance improvement. This was driven by economy-boosting measures designed to promote consumer purchase of environmentally-friendly products. Honda increased its sales by 3% and Mazuda by 31% from previous quarter with the economy-boosting measures, leading to favourable sales of fuel-efficient cars benefiting from tax reduction of eco-friendly cars (eco = ecology & economy). Panasonic also benefited from economy-boosting measures and its domestic sales/revenue of TV and washing machine increased by 9%. Steel giants that supply materials including Nippon Steel and other three companies increased their sales/revenue.
Aggressive demand of China and other emerging countries also contributed to performance improvement. LCD sales of Sharp for July-September were 22.23 billion yen which was 26% increase from the previous quarter. This highly attributes to Chinese government’s measures designed to promote penetration of consumer electronics in which 13% cash back is given as subsidy to consumers who purchase consumer electronics.
Further rationalization efforts by manufacturers also greatly contributed to performance improvement. Fujitsu reduced cost by 40 billion yen which led to returning to black for July-September. Toshiba originally planned to cut fixed cost by 67 billion yen but increased the amount of fixed cost cut to 200 billion yen for April-September.
Although the performance has been improving, performance for 2009 for total industry is still at low level compared with previous year of 2008 and there are still concerns; therefore, the outlook is not necessarily bright. 2009 sales is 23% and profit is 42% of 2008. Demand recovery of developed countries is still ongoing, and Sony’s CFO comments that Christmas season also needs to be promoted with cautiousness. Senescence of economy-boosting measures and high yen are also concerns. Since incentives of respective countries designed to promote buying new cars to replace old ones is to end soon, it is quite possible that there comes a “rebound” after April 2010, as Honda’s VP comments. Three ship giants including NYK Logistics made downward revision of their performance outlook for fiscal year ending March 2010, but they may need to further make downward revision because of high yen.
*Brief Explanation on Economy-Boosting Measures
(source: Nikkei, edited and translated by the author）
This is policies by the government including financial policy with the objectives of stabilizing economic situation. With worldwide economic crisis, government of respective countries one after another adopted policies to stimulate consumer spending, leading to economic recovery. In Japan, incentives to promote consumers purchasing environmentally-friendly products were given for 2009 (due to end March 2010). Tax reduction and subsidies were given for consumers buying eco-friendly cars. Also in Japan, eco-point system in which points achieved by purchasing energy-saving consumer electronics can be changed with local specialty products. In the U.S, subsidy for buying fuel-efficient cars to replace old ones was provided (ended August 2009). Germany also adopted the same incentive (ended September 2009). And China adopted a tax incentive measure for consumers buying small cars (due until end of 2009) and a subsidy incentive for consumers buying consumer electronics (due until 2012).
Today, Nikkei, Japan’s leading newspaper specialized in economy/business and politics, reported that in general financial performance of Japanese listed companies has been continuously improving for two consecutive quarters. Nikkei analyzed financial performance of listed companies for July-September 2009, and the result was that the total consolidated profit was 2.3 times that of April-June 2009, meaning improvement for two consecutive quarters. The improvement is because of rationalization/cost reduction efforts especially of manufacturers and termination of sales drop attributing to economy-boosting measures* by the government of respective countries. Having said that, whether the performance improvement continues is a question because the positive effect of government policies has taken a round and the high yen still continues.
Consolidated Profits of Major Companies (100 million yen)
Source: Nikkei (translated by the author)
Company Name / July-September / April-June
Increase in Black Companies
Honda / 661 / 54
Mitsubishi Corporation / 831 / 619
Komatsu / 97 / 87
Returning to Black Companies
Panasonic / 253 / -517
JFE / 98 / -672
Mitsui OSK Lines / 14 / -114
Decrease in Red Companies
Hitachi / -293 / -808
Nippon Steel / -302 / -556
Sony / -170 / -329
Deterioration in Performance Companies
Nintendo / 457 / 648
Japan Tabacco / 563 / 788
Kawasaki Kinsen / -271 / -227
Notes: EBIT (Earnings before Income Tax) for companies using GAAP, profit in Japan auditing principle for others
Nikkei reports that the data used for analysis is of 527 companies that have finished making financial announcement for 2009 Q3 by October 30, 2009 (excluding financial institutions). These companies cover 63% of total market value industry-wide.
Their performance was negatively impacted by the worldwide economic crisis and went to red January-March. It went back to black in total April-June (97.49 million yen in black) with rationalization but manufacturers remained in red in total by 25.47 billion yen. And for July-September their performance in total was in black by 2.2021 trillion yen, and manufacturers in total also returned to black after three quarters by 81.58 billion yen. 68% of companies have improved from April-June.
Increase in sales was the driver for performance improvement. Consolidated sales for July-September increased by 10% from April-June, marking the first sales increase of a quarter (vs. previous quarter) after four quarters. Revenue of manufacturing companies increased by 12% from the previous quarter.
Favourable Japan domestic market sales also contributed to performance improvement. This was driven by economy-boosting measures designed to promote consumer purchase of environmentally-friendly products. Honda increased its sales by 3% and Mazuda by 31% from previous quarter with the economy-boosting measures, leading to favourable sales of fuel-efficient cars benefiting from tax reduction of eco-friendly cars (eco = ecology & economy). Panasonic also benefited from economy-boosting measures and its domestic sales/revenue of TV and washing machine increased by 9%. Steel giants that supply materials including Nippon Steel and other three companies increased their sales/revenue.
Aggressive demand of China and other emerging countries also contributed to performance improvement. LCD sales of Sharp for July-September were 22.23 billion yen which was 26% increase from the previous quarter. This highly attributes to Chinese government’s measures designed to promote penetration of consumer electronics in which 13% cash back is given as subsidy to consumers who purchase consumer electronics.
Further rationalization efforts by manufacturers also greatly contributed to performance improvement. Fujitsu reduced cost by 40 billion yen which led to returning to black for July-September. Toshiba originally planned to cut fixed cost by 67 billion yen but increased the amount of fixed cost cut to 200 billion yen for April-September.
Although the performance has been improving, performance for 2009 for total industry is still at low level compared with previous year of 2008 and there are still concerns; therefore, the outlook is not necessarily bright. 2009 sales is 23% and profit is 42% of 2008. Demand recovery of developed countries is still ongoing, and Sony’s CFO comments that Christmas season also needs to be promoted with cautiousness. Senescence of economy-boosting measures and high yen are also concerns. Since incentives of respective countries designed to promote buying new cars to replace old ones is to end soon, it is quite possible that there comes a “rebound” after April 2010, as Honda’s VP comments. Three ship giants including NYK Logistics made downward revision of their performance outlook for fiscal year ending March 2010, but they may need to further make downward revision because of high yen.
*Brief Explanation on Economy-Boosting Measures
(source: Nikkei, edited and translated by the author）
This is policies by the government including financial policy with the objectives of stabilizing economic situation. With worldwide economic crisis, government of respective countries one after another adopted policies to stimulate consumer spending, leading to economic recovery. In Japan, incentives to promote consumers purchasing environmentally-friendly products were given for 2009 (due to end March 2010). Tax reduction and subsidies were given for consumers buying eco-friendly cars. Also in Japan, eco-point system in which points achieved by purchasing energy-saving consumer electronics can be changed with local specialty products. In the U.S, subsidy for buying fuel-efficient cars to replace old ones was provided (ended August 2009). Germany also adopted the same incentive (ended September 2009). And China adopted a tax incentive measure for consumers buying small cars (due until end of 2009) and a subsidy incentive for consumers buying consumer electronics (due until 2012).
2009年10月25日日曜日
JAL to be GM of Japan – Turnaround under Government’s Control
October 25, 2009 – Osaka, Japan
Today Nikkei, Japan’s leading newspaper specialized in economy and politics, reported that on October 24, the Japanese government finalized the policy of aiding turnaround of JAL (Japan Air Lines) by making JAL leverage public institution of “Company Turnaround Aid Institution”. Related ministers will discuss this issue and officially announce the policy by the end of this month, with the objective of reducing excess debt under the government’s control and develop drastic restructuring plan. The institution will execute bridge financing etc. to abolish credit uneasiness of JAL. The government will wait for the restructuring plan then study increase capital by public funding as a last resort. More drastic solution is to be studied and developed for pension debt reduction which is currently very slow in progress. Restructuring plan development under strong government’s control is to start at last.
According to Nikkei, the outlook of the JAL turnaround is as below.
Capital increase: Current restructuring plan is 300 billon yen including public funding. The government’s policy includes leveraging Company Turnaround Aid Institution to insert capital by the end of 2009.
Debt write-off: Current plan is 220 billion yen. The government’s policy is to convincing syndicates of banks to accept debt write-offs, on condition that JAL will drastically restructure with public funding.
Debt-for-equity swap: Current plan is 30 billion yen. The government’s policy is to convincing syndicates of banks to accept debt-for-equity swap, on condition that JAL will drastically restructure with public funding.
Bridge financing: Current plan is 200 billion yen. The government’s policy is to execute this by the end of November 2009.
Pension debt reduction: Current plan is reducing insufficient accumulation to 100 billion yen from 330 billion yen. The government’s policy is change to more drastic plan.
Restructuring: Current plan includes cutting almost 9000 jobs and abolishing 45-50 routes by 2014.
Capital deficit: Current estimation is up to 270 billion yen.
JAL’s turnaround has been going through a trial and error process as below.
June 30: 100 billion yen financing agreement with Development Bank of Japan etc. froze.
August 7: April-June consolidated financial result was in red by 99 billion yen.
August 21: Starting negotiation of integrating air cargo business with NYK (Nippon Yusen Kaisha) Line.
Beginning of September: Alliance negotiation with Delta and American Airlines including financing came to light.
September 15: Draft of management improvement plan with pillars of cutting 68000 jobs and abolishing total of domestic and international 50 routes proposed at blue-ribbon panel.
September 25: A task force directly controlled by Mr. Maehara, Minister of Land, Infrastructure, Transport and Tourism established, marking the start of reviewing the current turnaround plan.
October 13: The task force proposed a turnaround plan draft to financial institutes etc. requesting them to accept debt write-offs of 300 billion yen in total.
October 20: The task force made the revised draft including increase of capital of 300 billion yen by public funding etc.
The Japanese government finalized the policy of aiding turnaround of JAL (Japan Air Lines) by making JAL leverage public funding by Company Turnaround Aid Institution because of the tough reality that they would not be able to win understanding and support from syndicates of banks without strong control and interference from the government. Under a situation of extreme funding difficulties, the government decided to back-up in full scale. Hatoyama administration cannot fail this turnaround with wall at their back; as Mr. Maehara states, we cannot have a situation in which we do not have flights and allow inconvenience to travellers. However, there are many hurdles and obstacles to overcome and the outlook is not necessarily bright.
The turnaround is not only about financing and debt write-offs. It is really all about whether the mindset of current JAL employees and retired workers, and the whether the system and culture of the entire company change from the current “the government will foot the bill” culture. It is only when the company totally change from inside to an organization that it will start creating value to generate revenue with optimum cost so that financing/cash flow management will be a sound one.
Today Nikkei, Japan’s leading newspaper specialized in economy and politics, reported that on October 24, the Japanese government finalized the policy of aiding turnaround of JAL (Japan Air Lines) by making JAL leverage public institution of “Company Turnaround Aid Institution”. Related ministers will discuss this issue and officially announce the policy by the end of this month, with the objective of reducing excess debt under the government’s control and develop drastic restructuring plan. The institution will execute bridge financing etc. to abolish credit uneasiness of JAL. The government will wait for the restructuring plan then study increase capital by public funding as a last resort. More drastic solution is to be studied and developed for pension debt reduction which is currently very slow in progress. Restructuring plan development under strong government’s control is to start at last.
According to Nikkei, the outlook of the JAL turnaround is as below.
Capital increase: Current restructuring plan is 300 billon yen including public funding. The government’s policy includes leveraging Company Turnaround Aid Institution to insert capital by the end of 2009.
Debt write-off: Current plan is 220 billion yen. The government’s policy is to convincing syndicates of banks to accept debt write-offs, on condition that JAL will drastically restructure with public funding.
Debt-for-equity swap: Current plan is 30 billion yen. The government’s policy is to convincing syndicates of banks to accept debt-for-equity swap, on condition that JAL will drastically restructure with public funding.
Bridge financing: Current plan is 200 billion yen. The government’s policy is to execute this by the end of November 2009.
Pension debt reduction: Current plan is reducing insufficient accumulation to 100 billion yen from 330 billion yen. The government’s policy is change to more drastic plan.
Restructuring: Current plan includes cutting almost 9000 jobs and abolishing 45-50 routes by 2014.
Capital deficit: Current estimation is up to 270 billion yen.
JAL’s turnaround has been going through a trial and error process as below.
June 30: 100 billion yen financing agreement with Development Bank of Japan etc. froze.
August 7: April-June consolidated financial result was in red by 99 billion yen.
August 21: Starting negotiation of integrating air cargo business with NYK (Nippon Yusen Kaisha) Line.
Beginning of September: Alliance negotiation with Delta and American Airlines including financing came to light.
September 15: Draft of management improvement plan with pillars of cutting 68000 jobs and abolishing total of domestic and international 50 routes proposed at blue-ribbon panel.
September 25: A task force directly controlled by Mr. Maehara, Minister of Land, Infrastructure, Transport and Tourism established, marking the start of reviewing the current turnaround plan.
October 13: The task force proposed a turnaround plan draft to financial institutes etc. requesting them to accept debt write-offs of 300 billion yen in total.
October 20: The task force made the revised draft including increase of capital of 300 billion yen by public funding etc.
The Japanese government finalized the policy of aiding turnaround of JAL (Japan Air Lines) by making JAL leverage public funding by Company Turnaround Aid Institution because of the tough reality that they would not be able to win understanding and support from syndicates of banks without strong control and interference from the government. Under a situation of extreme funding difficulties, the government decided to back-up in full scale. Hatoyama administration cannot fail this turnaround with wall at their back; as Mr. Maehara states, we cannot have a situation in which we do not have flights and allow inconvenience to travellers. However, there are many hurdles and obstacles to overcome and the outlook is not necessarily bright.
The turnaround is not only about financing and debt write-offs. It is really all about whether the mindset of current JAL employees and retired workers, and the whether the system and culture of the entire company change from the current “the government will foot the bill” culture. It is only when the company totally change from inside to an organization that it will start creating value to generate revenue with optimum cost so that financing/cash flow management will be a sound one.
2009年10月12日月曜日
Promoting Health and Well-Being Through Sports on National Sports Day
October 12, 2009 – Osaka, Japan
The second Monday of October is National Sports Day/Health-Sports Day in Japan. Its purpose is to promote health and well-being through sports, and this is the day for sports and to foster a sound mind and body. The day was originally celebrated on October 10th, the day that is most likely to be sunny at this time of the year according to statistical research result, to commemorate the opening ceremony of the 1964 Tokyo Olympics. In 2000, it was changed to the second Monday of October by a new law, and for this year, it is today, October 12. This is one of the background for Japan (Osaka, Nagoya, Tokyo) announcing its candidacy to host Olympic game, and today it was reported by mass media that Hiroshima and Nagasaki, the two prefectures that are the sites of nuclear bombing in World War II, are planning to announce their joint-candidacy for 2020 Olympics.
Around this time of the year sports festival is held in schools, sometime in other places such as companies. Sports festival, a whole day event, had really been a big event for the school, community and society. For example, whole family joins the school sports festival and enjoy, and parents take so many photos and videos of their children. There used to be a TV programme of it in which TV stars participated in the festival.
Usually participants are divided into 2 groups/teams of red and white to compete, and variety of games are played at the festival, some are common worldwide such as 100m sprint race, relay race and tug of war, and some other are rather Japan unique. The rather Japan unique ones are as below:-
- “Tamaire” (ball games): During a defined time, participants throw beanbags of their team colour into their team’s basket as many as they can like basket players shoot.
- Obstacle race: Participants compete the speed of going through obstacles such as going over balance beam, running under mats etc.
- Mock cavalry battle: Participants, usually boys of around 11 years old, get into teams and compete for battle.
- Three-legged race: Two people make a team. A leg of each is tied to make three legs and teams have a face of usually 100 metres.
- “Pan-kui-kyoso” Eating bread race: Bread is tied with a rope which is hung, and participants take a big bite to the bread and race to the goal with the bread.
- Centipede race: About 10 participants make a team. Their right and left foot are tied to a board (something like a ski), and the teams walk as quickly as possible toward the goal. Teamwork really counts!
- “Karimono-kyoso” borrowing race: Participants race to pick a card which states something (e.g. girl with red skirt) that he/she is asked to borrow from people present at the festival and take it/that person to the goal as quickly as possible.
In addition, there is team work gymnastics. Children practice this hard for the festival under the guidance from their teachers and on the day, they perform this to show their efforts to their family. And there is also cheering group that liven up the festival. The group is led by a cheering leader, usually a male, and they also practice a lot for the festival.
National Sports Day is also the timing in which body strength of citizens will be focused. Every year Ministry of Education, Science, Sports, and Culture execute a survey of body strength including stamina and agility. Approximately 70,000 citizens of age 6-75 are parametric model and the survey will be held May-October, whose results are analyze according to age groups and reported on the National Sports Day. According to the result reported today via mass media, the overall result for children started to improve although it had been on the declined since 1985 and therefore had been an issue. An expert, a member of the analysis team, commented that it is probably the result of step-by-step efforts of schools of increasing opportunities for exercise and sports. On the other hand, results for adults were mixture. Female of age 20-30 deteriorated but male and female of age 40+ and 65+ improved. The overall trend of body strength level is concluded that both male and female increase from 6 years old, and male reach the peak around 17 years old and female around 14 years old; however for grip strength, male reach the peak 30-34 years old and female 40-44 years old.
The survey result and analysis clarified that regular exercise and participating in sports highly contribute to maintaining high level of body strength; however, people in 20s are doing less exercises and enjoying sports compared to 15 and 30 years ago and their body strength level has dropped. Possible reasons for this include the fact that people in their 20s grew up playing indoors, with gaming, Internet and comics, too busy with their work and has insufficient time to regularly enjoy exercise and sports, and so forth. It might well need “fundamental” measures and actions to change and improve this trend and it would take time for tangible results to come out.
The second Monday of October is National Sports Day/Health-Sports Day in Japan. Its purpose is to promote health and well-being through sports, and this is the day for sports and to foster a sound mind and body. The day was originally celebrated on October 10th, the day that is most likely to be sunny at this time of the year according to statistical research result, to commemorate the opening ceremony of the 1964 Tokyo Olympics. In 2000, it was changed to the second Monday of October by a new law, and for this year, it is today, October 12. This is one of the background for Japan (Osaka, Nagoya, Tokyo) announcing its candidacy to host Olympic game, and today it was reported by mass media that Hiroshima and Nagasaki, the two prefectures that are the sites of nuclear bombing in World War II, are planning to announce their joint-candidacy for 2020 Olympics.
Around this time of the year sports festival is held in schools, sometime in other places such as companies. Sports festival, a whole day event, had really been a big event for the school, community and society. For example, whole family joins the school sports festival and enjoy, and parents take so many photos and videos of their children. There used to be a TV programme of it in which TV stars participated in the festival.
Usually participants are divided into 2 groups/teams of red and white to compete, and variety of games are played at the festival, some are common worldwide such as 100m sprint race, relay race and tug of war, and some other are rather Japan unique. The rather Japan unique ones are as below:-
- “Tamaire” (ball games): During a defined time, participants throw beanbags of their team colour into their team’s basket as many as they can like basket players shoot.
- Obstacle race: Participants compete the speed of going through obstacles such as going over balance beam, running under mats etc.
- Mock cavalry battle: Participants, usually boys of around 11 years old, get into teams and compete for battle.
- Three-legged race: Two people make a team. A leg of each is tied to make three legs and teams have a face of usually 100 metres.
- “Pan-kui-kyoso” Eating bread race: Bread is tied with a rope which is hung, and participants take a big bite to the bread and race to the goal with the bread.
- Centipede race: About 10 participants make a team. Their right and left foot are tied to a board (something like a ski), and the teams walk as quickly as possible toward the goal. Teamwork really counts!
- “Karimono-kyoso” borrowing race: Participants race to pick a card which states something (e.g. girl with red skirt) that he/she is asked to borrow from people present at the festival and take it/that person to the goal as quickly as possible.
In addition, there is team work gymnastics. Children practice this hard for the festival under the guidance from their teachers and on the day, they perform this to show their efforts to their family. And there is also cheering group that liven up the festival. The group is led by a cheering leader, usually a male, and they also practice a lot for the festival.
National Sports Day is also the timing in which body strength of citizens will be focused. Every year Ministry of Education, Science, Sports, and Culture execute a survey of body strength including stamina and agility. Approximately 70,000 citizens of age 6-75 are parametric model and the survey will be held May-October, whose results are analyze according to age groups and reported on the National Sports Day. According to the result reported today via mass media, the overall result for children started to improve although it had been on the declined since 1985 and therefore had been an issue. An expert, a member of the analysis team, commented that it is probably the result of step-by-step efforts of schools of increasing opportunities for exercise and sports. On the other hand, results for adults were mixture. Female of age 20-30 deteriorated but male and female of age 40+ and 65+ improved. The overall trend of body strength level is concluded that both male and female increase from 6 years old, and male reach the peak around 17 years old and female around 14 years old; however for grip strength, male reach the peak 30-34 years old and female 40-44 years old.
The survey result and analysis clarified that regular exercise and participating in sports highly contribute to maintaining high level of body strength; however, people in 20s are doing less exercises and enjoying sports compared to 15 and 30 years ago and their body strength level has dropped. Possible reasons for this include the fact that people in their 20s grew up playing indoors, with gaming, Internet and comics, too busy with their work and has insufficient time to regularly enjoy exercise and sports, and so forth. It might well need “fundamental” measures and actions to change and improve this trend and it would take time for tangible results to come out.
2009年10月11日日曜日
Japanese Manufacturers’ Main Businesses Returning to Black
October 10, 2009 – Osaka, Japan,
Nikkei, Japan’s leading newspaper specialized in economy and politics, reported today that main businesses of Japanese manufacture giants especially high-tech companies that once fell in the red have been going back to black. This is because of Japanese manufactures’ efforts in cost reduction, together with digital consumer electronics and automobile sales hitting the bottom attributing to demand increase of emerging markets and positive effect of government policy such as eco-point system (incentive for consumers purchasing eco-friendly consumer electronics and automobiles). Price hovering at appropriate level due to supply volume control is also a contributor of the recovery. Continuous improvement in operational income by sector would be the overall performance support for such companies in the process of recovery, although there are some uncertainty factors such as high yen.
Market recovery is conspicuous in semi-conductors, HDD and precision component. Toshiba’s flash memories used in mobile audio music players and PC recording media have returned to black for fiscal quarter of July-September instead of original expectation of October-December. Toshiba had been cutting production by 30% January-June this year. And decrease in price stopped and then demand started to recover. Hitachi’s HDD business has also been recovering; its operation income was minus 9 billion yen for April-September but is expected to return to black for October-December.
Positive effects of emerging marketing demand and government policy have led to digital consumer electronics sales hitting the bottom. Sharp’s LCD panel business was in the red by 14.7 billion yen April-June but is expected to go back to black by 16 billion yen for fiscal year ending March 2010. With incentive/tax reduction for eco (ecological & economical) cars, sales related to EV car have been good. Koito’s Japan domestic business of light supplied for Toyota’s Prius cars has been drastically improving. Its operating income was minus 1.2 billion yen for April-June but seems to have returned to black by 5+ billion for July-September.
Cost reduction is also a contribution factor for recovery. Hoya transferred its digital camera production to overseas, and together with good new product sales its business for September seems to have returned to black. Digital camera businesses of Fuji Film Holdings and Olympus are expected to return to black as well. Energy plant business of IHI was in the red by 6.2 billion for fiscal year ending March 2009 but is expected to land on 11 billion yen in black for fiscal year ending March 2010, attributing to clearing out unprofitable overseas businesses plus drop in purchasing cost.
The worldwide economic crisis and recession started autumn last year had hit directly revenues of companies, resulting in total of approximately 3.6 trillion yen in red for total of all Japanese manufacturers for fiscal year ending March 2009. Consumer electronics, automobile and component businesses were the hardest hit, with an example of Toshiba’s semiconductor business that went in the red by 280 billion yen. And then amount of red decreased to 730 billion yen for total manufacturers for April-June, which is 1/8 of January-March. Therefore many experts assume that it has hit the bottom and if recovery trend continues it is possible that the complete recovery scenario for fiscal year ending March 2010 becomes a reality.
Some possible risks for such a recovery scenario include high yen for many Japanese manufacturers whose business relies heavily on export, and uncertain business trend for January-March 2010. Machine tool and semiconductor manufacturing equipment sectors relying on increase in production and investment are quite possible to remain in the red because few companies still refrain from increasing equipment investment with the assumption of demand recovery.
The author strongly believes that performance (operational income) recovery of Japanese manufacturers has an impact on feasibility of Japanese government’s new policy and upcoming action plans as well as on overall economic recovery. Government’s revenue (corporate tax) fluctuates by the degree of recovery in their performance, and in fact this is a big topic in recent budgeting of the government for 2010. It is also the requirement for labour market recovery and stable earnings for citizens, meaning it has big impact on consumer spending. Of course, it also greatly influence investment etc.
Nikkei, Japan’s leading newspaper specialized in economy and politics, reported today that main businesses of Japanese manufacture giants especially high-tech companies that once fell in the red have been going back to black. This is because of Japanese manufactures’ efforts in cost reduction, together with digital consumer electronics and automobile sales hitting the bottom attributing to demand increase of emerging markets and positive effect of government policy such as eco-point system (incentive for consumers purchasing eco-friendly consumer electronics and automobiles). Price hovering at appropriate level due to supply volume control is also a contributor of the recovery. Continuous improvement in operational income by sector would be the overall performance support for such companies in the process of recovery, although there are some uncertainty factors such as high yen.
Market recovery is conspicuous in semi-conductors, HDD and precision component. Toshiba’s flash memories used in mobile audio music players and PC recording media have returned to black for fiscal quarter of July-September instead of original expectation of October-December. Toshiba had been cutting production by 30% January-June this year. And decrease in price stopped and then demand started to recover. Hitachi’s HDD business has also been recovering; its operation income was minus 9 billion yen for April-September but is expected to return to black for October-December.
Positive effects of emerging marketing demand and government policy have led to digital consumer electronics sales hitting the bottom. Sharp’s LCD panel business was in the red by 14.7 billion yen April-June but is expected to go back to black by 16 billion yen for fiscal year ending March 2010. With incentive/tax reduction for eco (ecological & economical) cars, sales related to EV car have been good. Koito’s Japan domestic business of light supplied for Toyota’s Prius cars has been drastically improving. Its operating income was minus 1.2 billion yen for April-June but seems to have returned to black by 5+ billion for July-September.
Cost reduction is also a contribution factor for recovery. Hoya transferred its digital camera production to overseas, and together with good new product sales its business for September seems to have returned to black. Digital camera businesses of Fuji Film Holdings and Olympus are expected to return to black as well. Energy plant business of IHI was in the red by 6.2 billion for fiscal year ending March 2009 but is expected to land on 11 billion yen in black for fiscal year ending March 2010, attributing to clearing out unprofitable overseas businesses plus drop in purchasing cost.
The worldwide economic crisis and recession started autumn last year had hit directly revenues of companies, resulting in total of approximately 3.6 trillion yen in red for total of all Japanese manufacturers for fiscal year ending March 2009. Consumer electronics, automobile and component businesses were the hardest hit, with an example of Toshiba’s semiconductor business that went in the red by 280 billion yen. And then amount of red decreased to 730 billion yen for total manufacturers for April-June, which is 1/8 of January-March. Therefore many experts assume that it has hit the bottom and if recovery trend continues it is possible that the complete recovery scenario for fiscal year ending March 2010 becomes a reality.
Some possible risks for such a recovery scenario include high yen for many Japanese manufacturers whose business relies heavily on export, and uncertain business trend for January-March 2010. Machine tool and semiconductor manufacturing equipment sectors relying on increase in production and investment are quite possible to remain in the red because few companies still refrain from increasing equipment investment with the assumption of demand recovery.
The author strongly believes that performance (operational income) recovery of Japanese manufacturers has an impact on feasibility of Japanese government’s new policy and upcoming action plans as well as on overall economic recovery. Government’s revenue (corporate tax) fluctuates by the degree of recovery in their performance, and in fact this is a big topic in recent budgeting of the government for 2010. It is also the requirement for labour market recovery and stable earnings for citizens, meaning it has big impact on consumer spending. Of course, it also greatly influence investment etc.
2009年10月10日土曜日
Digital Convergence to Shape the Ubiquitous Networking Society – From CEATEC Japan 2009
October 10, 2009 – Osaka, Japan,
CEATEC Japan, cutting-edge IT & electronics comprehensive exhibition was held in October 6-10, under the theme “Digital Convergence – Defining the Shape of the Future”. For many IT and electronics companies (perhaps especially Japanese companies), CEATEC is a good opportunity to introduce their cutting-edge technologies and concepts to the media and the general public, and this exhibition draws much attention worldwide. CEATEC Japan 2009 official website has been posting news updates, and there have already been many articles on CNET etc. There was also an evening TV news in Japan on 5th (i.e. before the opening) introducing some of the highlights.
Some highlights include future of mobile phones, new concept TV in which operation can be done without a remote control, future robots that can sing and dance or ride a bicycle, future EV car, and future nursing care products including a bed that can become a wheelchair which can be operated automatically by IT and transport system that is more user-friendly than current wheelchairs. It is amazing to see these includes products and companies not only from the traditional IT and electronics companies but also from automobiles (e.g. Nissan). The bed is of Panasonic group that has always been a major player in this exhibition. As far as the author understands, Panasonic used to introduce nursing care products in exhibition specialized in Home Care and Rehabilitation Exhibition only and not at CEATEC.
What is worth noting is that not only IT and electronics business but also automobile and healthcare business that were out of scope of this exhibition in the past also started to converge, creating new concept products, services and business, which implies the ongoing dramatic transformation of respective industries, shaping new competitive landscape in the new ubiquitous networking society. This can be explained by IT marketing principle and theory. As digitalization gets underway, convergence of products and services gets underway leading to lowering of barriers between business domain and industry. Probably the example easiest to understand for everyone is the convergence of digital camera, mobile phone and mobile application connecting to Internet.
Digital convergence has already been creating new market and business involving players from many industries such as online book, music and news, and is opening the door to the new virtualized world like the one depicted in a recent forbes.com article. The author strongly feels that digital convergence has potential to make our lives more convenient and productive in various settings including home, business, education and healthcare/nursing, opening the door to a new world. Whatever the new world may be, the author is very much fascinated by it and is looking forward to it.
References:-
CEATEC Japan 2009 Official Website (English Version)
http://www.ceatec.com/2009/en/news/index.html
Ceatec--gadget extravaganza in Japan
http://news.cnet.com/8301-1001_3-10367757-92.html?part=rss&subj=news&tag=2547-1_3-0-20
Our Virtualized World
http://www.forbes.com/2009/10/06/software-computers-enterprise-technology-virtualization-09_land.html
CEATEC Japan, cutting-edge IT & electronics comprehensive exhibition was held in October 6-10, under the theme “Digital Convergence – Defining the Shape of the Future”. For many IT and electronics companies (perhaps especially Japanese companies), CEATEC is a good opportunity to introduce their cutting-edge technologies and concepts to the media and the general public, and this exhibition draws much attention worldwide. CEATEC Japan 2009 official website has been posting news updates, and there have already been many articles on CNET etc. There was also an evening TV news in Japan on 5th (i.e. before the opening) introducing some of the highlights.
Some highlights include future of mobile phones, new concept TV in which operation can be done without a remote control, future robots that can sing and dance or ride a bicycle, future EV car, and future nursing care products including a bed that can become a wheelchair which can be operated automatically by IT and transport system that is more user-friendly than current wheelchairs. It is amazing to see these includes products and companies not only from the traditional IT and electronics companies but also from automobiles (e.g. Nissan). The bed is of Panasonic group that has always been a major player in this exhibition. As far as the author understands, Panasonic used to introduce nursing care products in exhibition specialized in Home Care and Rehabilitation Exhibition only and not at CEATEC.
What is worth noting is that not only IT and electronics business but also automobile and healthcare business that were out of scope of this exhibition in the past also started to converge, creating new concept products, services and business, which implies the ongoing dramatic transformation of respective industries, shaping new competitive landscape in the new ubiquitous networking society. This can be explained by IT marketing principle and theory. As digitalization gets underway, convergence of products and services gets underway leading to lowering of barriers between business domain and industry. Probably the example easiest to understand for everyone is the convergence of digital camera, mobile phone and mobile application connecting to Internet.
Digital convergence has already been creating new market and business involving players from many industries such as online book, music and news, and is opening the door to the new virtualized world like the one depicted in a recent forbes.com article. The author strongly feels that digital convergence has potential to make our lives more convenient and productive in various settings including home, business, education and healthcare/nursing, opening the door to a new world. Whatever the new world may be, the author is very much fascinated by it and is looking forward to it.
References:-
CEATEC Japan 2009 Official Website (English Version)
http://www.ceatec.com/2009/en/news/index.html
Ceatec--gadget extravaganza in Japan
http://news.cnet.com/8301-1001_3-10367757-92.html?part=rss&subj=news&tag=2547-1_3-0-20
Our Virtualized World
http://www.forbes.com/2009/10/06/software-computers-enterprise-technology-virtualization-09_land.html
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