* * * * * * * * * T E R R I E 'S T A K E * * * * * * *

A weekly roundup of news & information from Terrie Lloyd.

(http://www.terrie.com)

General Edition Sunday, May 19, 2013, Issue No. 710

+++ INDEX

- What's New -- Will Abenomics Work?

- News -- Send Teddy on a guided tour of Japan

- Upcoming Events

- Corrections/Feedback

- Travel Picks -- Cenotaph in Hiroshima, History in Nagasaki

- News Credits

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+++ WHAT'S NEW

In light of the daily onslaught of "feel good" news about Abenomics,

those of us in business are starting to wonder when all the positive

commentary will translate into actual improved sales and earnings in

our own teams. Almost daily we're reading of record earnings at one

Japanese exporter or another, and 10%-30% jumps in consumer purchases

of high-priced cars, apartments, and apparel. But despite all these

apparent customers for luxury goods, somehow our own customers haven't

caught the swinging mood yet, and are still holding back on

long-delayed projects, still beating us up over prices, and still

delaying hiring new staff. So if there is going to be a trickle-down

effect, we're wondering how long will it take.

We think the current economic upsurge is mainly due to: i) exporters

enjoying a temporary respite until either China and Korea react with

devaluations of their own or there is a repeat of the Eurozone

meltdown, and ii) the spending habits of exporters wealthier

shareholders and suppliers. But since exporters only account for 16%

of the economy, and just 15% of Japan's households hold any shares at

all, these very visible players should not be mistaken as representing

the Japanese economy as a whole. Rather, we think that while the top

1% might indeed be feeling wealthier, and 1m people can certainly buy

a noticeable amount of high-end goods, but there's another 126m who

are not seeing anything other than rising prices and instead are

wondering just when things will get better.

Our guess is that it could take longer than Abe actually has to pull

it off. For his government to produce a sustained bull run he needs

more than smoke and mirrors before April next year, when consumption

tax goes up and puts a damper on everything. This means not just

devaluing the currency, forcing the banks to keep offering easy loans,

and ploughing into the TPP talks. Instead, he needs to find a way to

give the core domestic market confidence in the future and in

particular to put more money into the pockets of workers. Japanese

companies are sitting on a pile of spare cash -- as much as JPY270trn

(yup, that's a lot of cash!), but they're not spending this pile on

employees, or for that matter, on the Japanese market. Our guess is

because they don't believe the good times will last.

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[...Article continues]

And you can't blame them. In the last 20 years, the average Japanese

business owner and their employees have lived in a depressed state.

They're faced with a shrinking market, shrinking savings (a remarkable

26% of households now have NO financial assets), and shrinking job

opportunities (only 30% of Japanese have a traditional full-time

"seishain" job). So it's no wonder that pessimism and caution are

their watchwords. Despite confidence rising for the fourth straight

month to April, a recent government consumer confidence survey

nonetheless found that still 55% of the population are pessimistic

about the future. In particular, 58% are pessimistic about income

growth, which has been oft quoted as the missing "third leg" of Abe's

expansion program. Previous experience such as the short-lived baby

boom of 2006-2007, tells us that the Japanese only start spending, and

reproducing, when they know that they can plan for the future, and to

do that they need more income.

So what we have in our opinion is a classic Catch-22. Business owners

are unlikely to offer pay raises when they can see that there is no

serious infrastructural change going on (Ok, farms consolidation and

TPP may have some effects later). When the government runs out of

steam and money, they don't want to be stuck with higher salaries and

have excess full-time staff that become hard to fire, like they did to

disastrous effect back after the Lehman Shock. Confirming our opinion,

a recent Teikoku Databank survey found that more than 60% of companies

have NO plans to increase wages.

What about those high-profile Keidanren companies that Abe has been

arm-twisting into giving higher base wages and bonuses? Rather than

being first movers in an altruistic pay-forward movement, we have

heard that in fact many of them are instead arm-twisting their

downstream vendors to reduce costs to make up the difference -- thus

pushing wages deflation further down the pipeline. This is Abe's real

challenge -- how to break the bullying and other entrenched bad

behavior in the nation's interdependent groups. In the end, it may be

that only a war or external energy threat that will change the

nation's systemic business "sclerosis".

Nonetheless, Abe has shown that it is possible to jolt a moribund

market into life again by more superficial means, if you offer a

radical enough local medical procedure. Since we already know that

Japan is unlikely to be able to devalue its way below the

manufacturing costs of China, Korea, and other countries in Asia,

rather than simply earning respite for its top-rank producers (who can

still compete at almost any price), Abe needs to choose business

sectors that can provide the nation with a future, then do much the

same thing for those sectors as he has done for the stock market --

pump in loads of cash and offer incentives that cause capable business

owners to start co-investing. As a small taster, we're already seeing

this with the solar cell market thanks to the feed-in tariff

legislation introduced last year. Simple legislative change -- major

investments and economic benefits.

What would these favored sectors be? Anything that would take

advantage of Japan's current negative demographics, geography, and

population and thus where a shakeup would be politically acceptable.

In particular, Japan needs to move on from focusing and supporting

manufacturing behemoths alone to instead emphasizing intellectual

property and expertise. Here are some possible game changers -- this

is by no means an exhaustive list:

1. Radically increasing the population of Asian students in Japan, one

million by 2015 would be a good number, and having them learn from

world-class faculty (yes, this implies foreign staff alongside

Japanese colleagues). Those students should then be allowed to work

for 2-3 years after they graduate, so long as they learned Japanese

while studying. Japan is safe, relatively cheap, and has an abundance

of under utilized schools and universities. Put JPY100bn into this

sector and just watch the frenzy of economic activity that would

follow. A secondary strategic benefit would be lots of bilingual,

connected trading partners as these students return home.

2. Core changes to how universities get funding for research and

compulsory commercialization of that research. Specific sectors should

be chosen and favored -- regenerative and geriatric medicine are

obvious ones -- and like the bond market, the government should seek

out and flood 1,000 qualifying research groups with JPY1bn 10-year

minimum funding projects. There would be a compulsory 20% of positions

allocated to foreign experts so as to ensure best of class

input/output, and funding would be tied to commercialization

milestones.

3. Cool Japan is a good concept but lousy in how it is being

haphazardly executed. The government needs to wrap all of its organs

and efforts into a single coordinated plan, and apply a JPY100bn

outlay to mostly small players, not the big boys looking to feed at

the trough. More than 80% of Japanese work at small companies and they

need to be part of any major grassroots push, otherwise innovation

will continue being stifled.

4. Full privatization of aged care except for those who are

means-tested. Yes, this is a bit radical, but we suggest it because

old people own most of Japan's wealth and because they are either

unable or unwilling to part with it, even as they draw heavily on the

nation's health and aged-care resources. Through marketing and

incentives, the government needs to change retirees' sense of

entitlement and at the same time open up the sector. Regulatory

exemptions on facilities ownership, construction, health care rules,

research, and long-term insurance products could make this a huge

business that could be exported later.

The question is, does Abe have the stomach to make really meaningful

changes to unleash a domestic investment spree that will have

long-term benefits for the economy? He's done a good job of ramming

through the TPP negotiations in the face of protest by the JA/farmer's

lobby, but farming isn't Japan's future, and besides he can placate

them with cash. Rather, he needs to go after even more intransigent

self-interested sectors in order to make a real difference -- such as

education and health. We think he has a 9-month window of opportunity

between the Upper House elections in July, which the LDP is likely to

win, and March 2014. We hope he won't squander this opportunity and

instead go deep in making changes. Unfortunately, based on past LDP

and Abe performances and the intransigence of the established players,

we'd have to cast our ballot with the 55% in the consumer confidence

survey mentioned earlier, and say that we're still pessimistic.

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-----------------------------------------------------------

+++ NEWS

- New 26.5MW solar plant in Oita

- Tokyo hotel rooms almost full

- Huge data leak at Yahoo Japan

- Send Teddy on a guided tour of Japan

- Japanese IBs raking it in (shame about the foreigners)

=> New 26.5MW solar plant in Oita

Solar energy company JGC has officially opened its new 26.5 MegaWatt

solar power plant in Oita City, Oita-ken, this week. The facility is

sited on an unused factory lot owned by Nissan Motor and produces

enough electricity annually to power 9,000 households. The project

cost JPY8bn, JPY6bn of which came from local financing. Presumably due

to the financing option, Oita has several other major solar plants

under construction in the same area, in the waterfront industrial

zone, and is expected to become a major player for solar power in

Japan. (Source: TT commentary from e.nikkei.com, May 16, 2013)

http://e.nikkei.com/e/ac/tnks/Nni20130516D15HH033.htm

=> Tokyo hotel rooms almost full

Average occupancy rates at Tokyo's hotels rose a significant 4.4% in

March, to 87.1%, the highest level in 6 years. Apparently the biggest

factor is a sudden surge of foreign tourists being attracted to the

city by the much lower yen, as well as significantly more business

travellers. As a result, in hotels such as the Royal Park, the ratio

of foreign guests to Japanese rose from 30% in January to 40% in

February. Spending per room is also up an average 10% at some hotels.

(Source: TT commentary from e.nikkei.com, May 16, 2013)

http://e.nikkei.com/e/ac/tnks/Nni20130515D1505A01.htm

=> Huge data leak at Yahoo Japan

There were rumors of a large customer data leak at Yahoo Japan several

weeks ago, but the company is now fessing up that as many as 22m user

IDs may have been stolen by hackers. The company is still not saying

whether the user database was actually compromised, but are admitting

that it is a possibility (meaning, it's probable). Apparently there

were no passwords in the compromised file. ***Ed: But knowing a

definite User ID means that hackers have an easier job trying to crack

their associated passwords. Making 2 attempts a day x 22m accounts

means at least some accounts will be compromised.** (Source: TT

commentary from japantimes.co.jp, May 18, 2013)

http://bit.ly/Z3ecuD

=> Send Teddy on a guided tour of Japan

Think you've heard it all? How about a travel agency that specializes

in taking your stuffed animals on guided tours of Japan? Well, there

is such a company. It's called The Unagi Travel Company, and for

JPY2,000 plus postage (for shipping Big Ted and Little Ted to Japan),

your stuffed animals will be posed and photographed enjoying

themselves at Asakusa Kannon temple, a Japanese restaurant, and other

favorite tourist spots in Tokyo. For JPY5,000 they will get their own

mini-futon and chilled beer at an onsen...! The company is offering

4-5 tours a month, and is accepting stuffed toy travellers from all

over the world. ***Ed: Of course the toys are mailed back after

they're done, along with all the photos to prove their travels were

authentic.** (Source: TT commentary from cbsnews.com, May 17, 2013)

http://cbsn.ws/13Czpv4

=> Japanese IBs raking it in (shame about the foreigners)

This Businessweek article gushes over how Japanese investment banks

have been pulling in record amounts of income thanks to the recent

stock market surge. Apparently most companies have tripled sales of

equities, hitting JPY1.7trn in the first 5 1/2 months of this year,

compared with the same period in 2012. Corporate bond issuances are

also well up, with JPY3.3trn raised this calendar year to date, the

best showing since 2009. Higher volumes of trades mean higher

commission fees, and Nomura Holdings posted its best Q1 profit in

seven years. ***Ed: In the meantime, all those foreign banks who

radically cut their equities teams two years ago must be regretting

having taken such huge haircuts. The question they must all be facing

now is whether this bull market still has long enough to run that it

makes sense to hire back in some equities staff?** (Source: TT

commentary from businessweek.com, May 16, 2013)

http://buswk.co/113iblf

NOTE: Broken links

Some online news sources remove their articles after just a few days

of posting them, thus breaking our links -- we apologize for the

inconvenience.

***------------------------****-------------------------***

+++ CANDIDATE ROUND UP/VACANCIES

=> BiOS, a leading bilingual IT services and resourcing company, is

actively marketing the following positions for customers setting up or

expanding in Japan, as well as other employers of bilinguals.

** HIGHLIGHTED POSITION

BiOS is urgently looking for an IT Service Delivery Manager with

experience delivering IT infrastructure support services to global

clients, at the client’s office in Ota-ku. The candidate will be

responsible for client-facing tasks including project management,

service management, pre-sales/sales, of IT services including service

desk, data center, server/network system support, etc. to a global

clients, as well as managing internal team members, project budgets,

etc. You will also be responsible for transitions of multinational

projects.

Due to the technical nature and demanding work environment, this

position is suitable for someone with solid experience in IT project

management/service delivery management, preferably in multinational

and large-scaled IT projects. In addition, since this role requires

direct communication with bilingual staffs and clients in English and

Japanese, fluent English and Japanese will be required.

Remuneration is JPY6m - JPY8m plus commission, depending on your

experience and skill level.

** POSITIONS VACANT

- Office Infrastructure Support Engineer, global IT services provider,

JPY4M - JPY6M

- Inside Sales Representative, global licensing services provider, JPY

3.5M - JPY4.5M

- HR/Office Manager, global licensing services provider, JPY 5M - JPY7M

- Desktop Support Engineer, global IT services provider, JPY3.5M - JPY4.5M

- Cabling Engineer, BiOS, JPY3.5M - JPY4M

Interested individuals may e-mail resumes to:

tomohiro.kimura@biosjp.com. Check out the BiOS web page for other

jobs: www.biosjp.com/careers.php.

** BiOS Job Mail

Every 2 weeks BiOS sends out a regular communication to its job

seeking candidates, called BiOS Job Mail. Every edition carries a list

of BiOS’s current and most up-to-date vacancies, with featured entries

containing a short job description and every job being linked to the

main entry on the BiOS home page. Regardless of whether you are

unemployed and searching, thinking about a career change, or just

curious to know if there is something out there that might suit you

better, the BiOS Job Mail newsletter is an easy and convenient way for

you to stay informed. If you would like to register for the BiOS Job

Mail, or to find out more, please email tomohiro.kimura@biosjp.com.

-----------------------------------------------------------

***------------------------****-------------------------***

+++ UPCOMING EVENTS/ANNOUNCEMENTS

-------- Inaugural VCLP conference - VC Investment --------

The inaugural VCLP event is for at foreign and local institutional and

private investors who are interested in networking with leaders in the

Japanese VC industry. Guests already signed up include the senior

management of some of Japan's largest VC funds.

You don't need to be an investor to attend -- government observers,

technology experts, start-up financial personnel, and others

interested in the VC space are also welcome. The program will showcase

how recent developments in incubation and VC in Japan are changing the

way investments are being made and subsequently affecting the flow of

companies able to do future IPOs and trade sales. This will be useful

if you are looking for alternative investments outside of ordinary

public equities.

The speakers include:

* Ikuo Hiraishi, a leading seed stage venture capitalist in Japan.

Having done multiple startups, his Sunbridge Global Venture entity

invests and incubates companies with global ambition.

* Alon Lifshitz, a leading early stage venture capitalist in Israel.

He is also the CEO of SalesGate International, a global business

development consultancy that helps major firms in Europe and Japan.

* Tom Sato, an international Business Development expert, serial

entrepreneur, and currently the Japan Representative for Credorax Inc.

For more information on the program, the speakers, and to reserve a

place at VCLP, please go to http://vclp.peatix.com (scroll down for

English).

-----------------------------------------------------------

---------------- Start a Company in Japan -----------------

Entrepreneur's Handbook Seminar 25th of May, 2013

If you have been considering setting up your own company, find out

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specific questions that are not normally answered in business books.

All materials are in English and are Japan-focused.

For more details: http://www.japaninc.com/entrepreneur_handbook_seminar

-----------------------------------------------------------

------------------- ICA Event - May 23 --------------------

Title: ICA Spring Networking Party

Details: Complete event details at http://www.icajapan.jp/

Date: Thursday, May 23, 2013

Time: 7.00pm Doors open till 9.30pm,

Cost: 3,700 yen (members), 4,500 yen (non-members), open to all.

Includes open bar (beer, wine, soft drinks) & multitude of food. No

sign ups at the door!!!!!!!

RSVP: RSVP by 5pm on Friday, May 17th

Venue is Bar Del Sole http://www.delsole.st/store/roppongi/access.html

-----------------------------------------------------------

***------------------------****-------------------------***

+++ CORRECTIONS/FEEDBACK

In this section we run comments and corrections submitted by readers.

We encourage you to spot our mistakes and amplify our points, by

email, to editors@terrie.com.

=> No new comments this week.

***------------------------****-------------------------***

+++ TRAVEL DESTINATIONS PICKS

=> Memorial Cenotaph, Hiroshima

Visiting the memorial sites in Hiroshima is an absolute must for any

traveler in Japan. It’s a trying and moving experience that will

certainly change you forever. The monuments and sites are a call for

peace and mourning for the victims lost in the atomic bombing in 1945,

at the end of World War II. It’s a trip that everyone ought to make at

least once in their lives.

Among the many sites in and around the Hiroshima Peace Memorial Park

is the Memorial Cenotaph, a large, saddle-shaped concrete structure

located between the Peace Memorial Museum and the A-Bomb Dome. In case

you're wondering, a cenotaph is a monument in honor of someone whose

remains are in another location. The Memorial Cenotaph’s shape

represents a shelter for the souls of the victims of the bomb.

http://en.japantourist.jp/view/memorial-cenotaph-in-hiroshima

=> Hollander Slope, Nagasaki

Nagasaki was international well before Tokyo, Yokohama or Kobe. The

city's rich foreign heritage is apparent wherever you go. The former

"foreign settlements" in Nagasaki's Higashi-Yamate, Minami-Yamate,

Oura and Dejima districts, established in 1859 when Japan was opened

to the world after centuries of isolation, are places steeped in

history. They tell the stories of those Western settlers, mainly

merchants and diplomats and their families, who lived here and often

became successful in business or influential in politics.

Although this hillside is called "Hollander Slope", it was not just

Dutchmen who lived here but people from a great number of countries.

There is a little museum in one of the buildings and another building

houses a cafe. The cafe's terrace is a nice open-air place to sit down

and have a coffee after a walk up the slopes.

http://en.japantourist.jp/photos/hollander-slope-in-nagasaki

***------------------------****-------------------------***

***********************************************************

END

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+++ ABOUT US

STAFF

Written by: Terrie Lloyd (terrie.lloyd@japaninc.com)

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