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Volume 46 | Issue 2 | February 2009
FEATURES COVER STORY 12
For a First-class Airport As Narita International Airport gears up for a Big Bang in 2010, industry leaders voice their opinions about services, costs and other related ACCJ advocacy issues. By Julian Ryall 空港も ファーストクラス をめざして 成田国際空港が2010年の 航空ビッグバン に向けて態勢固めを進める中、サービス、コストのあり方や、ACCJによ る意見書について業界リーダーらが見解を語る。文／ジュリアン・リアル
ACCJ Event — Successful E-Commerce Strategies Companies exploiting online selling are ﬁnding it more useful than bricks and mortar as the economy downturns. By Nicole Fall ACCJイベント 失敗しないEコマース戦略 景気低迷をきっかけに、実店舗販売よりオンライン販売のほうが有利と実感する企業が増加。文／ニコル・フォール
FDI Clock Turns Back Outbound Foreign Direct Investment from Japan is surging again. By Martin Foster 海外直接投資ブームの再来か 日本からの海外直接投資が再び急増している。文／マーティン・フォスター
AMF Back on the Table If an Asian Monetary Fund is approved, it could prompt much closer economic cooperation between Japan and the rest of the continent. By Anthony H. Rowley アジア通貨基金論議が再燃 アジア通貨基金が承認されれば、日本とアジア諸国との経済協力が飛躍的に促進されるはずだ。 文／アンソニー・H・ローリー
February 2009 | The Journal | 3
Volume 46 | Issue 2 | February 2009
Note from the Editor
Media Watch Mail orders decline. Highest incomes. Bigger adults, smaller babies. Dropouts and graduates. Fighting forgers.
On the Spot Thomas J. Donohue, President of the U.S. Chamber of Commerce, is interviewed by Julian Ryall.
Opinion Leader Kevin Gibson is managing director of Japan Operations, Robert Walters. オピニオンリーダー ロバート・ウォルターズ・ジャパン株式会社代表取締役社長、ケビン・ ギブソン氏
Out and About Speakers, members and guests photographed at ACCJ events.
Events Line-up Selected business and leisure-related happenings in February. By David Umeda
FDI Portfolio Japan services industry. CSR and the recession. What hotel guests want. First Stella McCartney standalone. WEF awards. EBC Report. By Nicole Fall
Business Profile Christian R. Baudat is general manager of the Hilton Tokyo. By Catherine Shaw
Behind the Book Followership: How Followers Are Creating Change and Changing Leaders by Barbara Kellerman is reviewed by Tom Baker.
Advocacy Update ACCJ Viewpoints
In the Final Analysis By Samuel H. Kidder, ACCJ Executive Director
4 | The Journal | February 2009
HILTON HOTELS CORPORATION
Nagamine Accounting Office ACCJ Leaders President Thomas W. Whitson KPMG FAS Co., Ltd.
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Chairman Allan D. Smith AIG Companies, Japan and Korea Vice Presidents Michael J. Alfant Fusion Systems Japan Co., Ltd. Laurence W. Bates General Electric Japan, Ltd. William R. Bishop, Jr. Nippon Becton Dickinson Co., Ltd. Michael D. Bobrove (Kansai) Nihon Medrad K.K. Kumi Sato Cosmo Public Relations Corporation Mark F. Schwab United Airlines, Inc. Chris Zarodkiewicz (Chubu) Cezars International K.K. Treasurer Nasir Majid PricewaterhouseCoopers Brett Jensen (Kansai) Colliers Hallifax Steve Burson (Chubu) H&R Consultants ACCJ Governors Andrew Conrad Aflac International, Inc. Christopher K. Ellis Chrysler Japan Company, Ltd. Bruce J. Ellsworth Johnson & Johnson Family of Companies James Foster Microsoft Japan Harry Hill (Chubu) Oak Lawn Marketing, Inc. Tad Johnson Pratt & Whitney Aftermarket Japan KK John Kakinuki GE Consumer Finance Co., Ltd. Jiri Mestecky Kitahama Partners L.P.C. Patricia O’Keefe USC International Offices-Tokyo Douglas L. Peterson Nikko Citi Holdings Inc. Nicole W. Piasecki Boeing Japan Jay Ponazecki Morrison & Forester LLP Mitsuyo Teramura Federal Express Corporation Jim Weisser PBXL ACCJ Executive Staff Samuel H. Kidder Executive Director Aron Kremer Deputy Executive Director ACCJ Committees American Auto Industry Rick Brown Architecture, Construction & Real Estate Kevyn Johnson/Michael P. King Asia Business Philip C. Jones B2B Sales Karl Hahne/Craig Saphin Banking and Finance Thomas Clark/Ernfred Olsen Capital Markets Douglas Hymas Charity Ball Barbara Hancock Competition Policy Task Force Robert Grondine Corporate Social Responsibility Patricia Bader-Johnston Direct Marketing Joseph Peters Environmental Naoki Arai Financial Services Forum Charles D. Lake II Food and Agriculture Collin Benson Foreign Direct Investment Nicholas Benes Government Relations Ira Wolf Healthcare Steve Plunkett Human Resource Management Chris Lamatsch, Adam Kassab Independent Business Doug Jackson Information, Communications & Technology Darren McKellin, Ann Rollins Insurance Nate Graddy/Jonathan Malamud Intellectual Property David Case International Education Patrick Newell Internet Economy Task Force Yoshitaka Sugihara Investment Management David Monroe Legal Services Arshad Karim/Eric Sedlak Corporate Counsel Clair Chino Marketing Programs Dominic Carter/Koichi Hama Membership Relations Andrew Silberman Privatization Task Force David Hoover Retail TBA Soft Landing Task Force Adam Kassab/Mariko Nakazono Special Events Barry Bergmann Young Professionals Group John Ghanotakis/Daniel Lintz Taxation Jack Bird/Michael Shikuma Toiletries, Cosmetics & Fragrances Yukiko Tsujimoto Transportation and Logistics Jeff Bernier/Jeremy Goldstrich Travel Industry Kayoko Inoue/Vincent You University Briefing Program Richard May/David Satterwhite Kansai Chapter Business Programs Jiri Mestecky Community Service Kojiro Dan External Affairs Kiran Sethi Living in Kansai Barry Louie Membership Paul Dupuis Women in Business Mari Nogami Chubu Chapter Community Service Steve Burson Independent Business Chris Oostyen/Jason Morgan Living in Chubu Lowell Sheppard Membership Relations Chris Zarodkiewicz Programs Steve Brown American Chamber of Commerce in Japan Masonic 39 MT Bldg. 10F, 2-4-5 Azabudai Minato-ku, Tokyo, Japan 106-0041 Tel: 03-3433-5381 Fax: 03-3433-8454 www.accj.or.jp / www.ecentral.jp
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Published monthly in Tokyo, on the 25th of the month, since 1964. Indexed in the PAIS BULLETIN. All rights reserved. The views and opinions expressed herein (other than editorials from the ACCJ itself) are solely the opinions and views of their authors. The ACCJ is not responsible or liable for any portions thereof. Subscription rates for non-ACCJ members One year ¥9,000; two years ¥15,000; three years ¥22,000. ¥800 per copy. Rates include domestic postage or surface postage for overseas subscribers. Add ¥7,500 per year if overseas airmail is preferred. Please allow eight weeks for changes of address to take effect. Subscription requests should be sent to email@example.com The ACCJ Journal welcomes story ideas from readers and proposals from writers. Letters to the editor may be edited for length and style. The ACCJ Journal is produced entirely on Apple computers
NOTE FROM THE EDITOR
Accommodating improvements t’s rare indeed for a magazine feature to resonate with every reader. But our cover story this month has that potential. Probably all ACCJ members have passed through Narita International Airport at some time. As the nation’s premier gateway, Narita operates
under constant stress and delivers the all-important ﬁrst and last impressions of Japan to visitors. Despite many improvements through the years, much
of which due to ACCJ advocacy efforts, there clearly remain issues of concern to business and leisure travelers, as well as those in the logistics industry and importers/exporters. Yet, it’s not all bad news for travelers. Some observers worried about the possibility of U.S.-bound passengers being turned away at airline check-in counters when the ESTA system, which requires citizens of U.S. visa-waiver countries to answer questions online before entering the U.S., was introduced on January 12. Fortunately, the U.S. airline members of the ACCJ told me in late January that there have been virtually no problems or complaints reported by Japanese travelers to the U.S. Along with the cost of travel, accommodations are a major expensive item whether on vacation or a business trip. But have you ever wondered what
kind of dedicated personality makes for the smooth running of a very large luxury hotel? We sent a writer inside the Hilton Tokyo to learn how a well-traveled career professional not only manages more than 800 bedrooms, several restaurants and more, but also had led the multi-milliondollar refurbishment of Tokyo’s ﬁrst international hotel. The man is General Manager Christian Baudat and his solution, it seems, is multitasking. Read how in Business Proﬁle on page 50. ACCJ events are a rich source of knowledge and networking. It’s often difﬁcult to choose which one to cover in each issue, as there are several activities hosted by the Chamber each month. Since just about every industry seems affected by the global downturn, it was heartening to provide a feature on one of the economy’s few bright spots— online selling. Read on page 24 about this ACCJ event, which reported how e-commerce Simon Farrell in the U.S. has helped spawn simonfarrell@ paradigm.co.jp some lucrative ideas from promising entrepreneurs.
The majority of Japanese opinion leaders surveyed* trust articles and news stories won through a PR consultancy like ours, while less than a third are convinced by ads purchased via ad agencies. Who could have guessed? *Edelman 2009 Trust Barometer
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Getting ACCJ Priorities Right: Networking, Advocacy, Information “It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness …” Looking at the world around us, these Charles Dickens’ lines about the French Revolution era seem fresh and relevant. Last year started in a reasonably comprehensible manner, but turned into a chaotic economic environment that made us question a lot of the things that we “knew” about how companies, markets, governments, and regulators work. I’m impressed that the ACCJ leadership was able to maintain our sterling reputation, our high credibility, our active advocacy programs, our solid ﬁnancial condition, and our effective member networking opportunities. But as lawyers are so fond of making us say, “Past performance is no guarantee of future results.” We face unprecedented changes in the U.S. and Japanese economies, and in the U.S. government. I have asked the Board of Governors to react quickly to redirect the Chamber’s activities and priorities, if necessary, as challenges arise in 2009. The Chamber leadership must: ■
Carefully review all our programs to ensure we are spending our member dues wisely. Determine what the changes in Washington mean for our current advocacy programs and how we must adjust to the new realities and the new people there. Get on top of the cross Paciﬁc currents to fulﬁll our obligation to the Japanese leaders who look to the ACCJ for explanations and interpretations of America, so we can continue as a valued advisor.
The January 15 Board Planning session oriented new Board members, introduced the new committee leadership, and, most importantly, gained consensus on our priorities for our core Networking, Advocacy and Information pillars. I appreciate the member feedback I got about what you consider most important in this difﬁcult year. And I think we need to be prepared to rethink our January 15 decisions if events in the next four months show us that life will be a lot different than we had anticipated. I am very pleased with the responsiveness of the Chamber ofﬁce personnel and with the experienced vice presidents, governors, and committee chairs who have helped me in this transition.
We are currently preparing for the February Diet Doorknock. This was held over from last year and we really need to take the temperature of the important Japanese leaders to see which of our advocacy initiatives are likely to be most successful this year. We also need to update our Diet contacts to prepare for our Washington Doorknock later this spring. I think that this is a good time to focus on the fundamentals and a good time to be an Thomas Whitson is ACCJ President. ACCJ member. I am email@example.com relying on all of you for your support. ■
February 2009 | The Journal | 13
NARITA NEEDS LOWER COSTS, BETTER SERVICES. By Julian Ryall
hen the ﬁrst commercial aircraft landed at what is today known as Narita International Airport, on May 20, 1978, there was a widespread sense of relief. The 16-year search for a facility designed to take the escalating ﬂight burden off Haneda Airport’s runway had been completed— built in the face of a bitter, and often violent, struggle with local landowners, unionists and radical left-wing protestors. The original plan for Narita called for three runways and a high-speed
14 | The Journal | February 2009
railway link to central Tokyo, 60km to the west. Two of the runways were put on hold, though, as authorities chose to avoid further antagonizing opponents of the airport. Work began on a second runway in November 1986, put into use ahead of the 2002 FIFA World Cup Korea/Japan, although 320m shy of the 2,500m of asphalt that a Boeing 747 requires to land and take off. Passenger and cargo trafﬁc levels at Narita, nonetheless, have grown in recent years, with 35,478,146 travelers passing through the two main terminals in 2007, and 2,254,421 metric tonnes of cargo being handled. According to
the Narita Airport Authority (NAA), its facility is the second-busiest passenger airport in Japan, after Haneda, and the busiest airfreight handler in the country—the seventh in the world. Narita serves as the main international hub for both Japan Airlines (JAL) and All Nippon Airways (ANA), and as the regional hub for Northwest Airlines (now owned by Delta Air Lines, Inc.). Yet, foreign operators using the airport, along with the ACCJ Transportation and Logistics Committee, believe that structural changes need to be made to enable Narita to retain its position as one of the busiest airports in the world.
FOR A FIRST-CLASS AIRPORT
The ACCJ has published a Viewpoint in which the Chamber lists a series of recommendations on liberalization that would help the Japanese government turn Narita into the Asian Gateway that the airport aspires to be. The Chamber recommends, for example, the creation of a 24-hour international cargo facility, improvement in business aviation access, and achievement of world-class levels in runway utilization. In interviews with senior executives of United States-based carriers using Narita, two issues come up repeatedly: lower costs and improved access. “For a long time, the user charges at Narita have been identiﬁed as a serious
burden on the airline industry and have made the airport less and less competitive in Asia and the Paciﬁc region, particularly as aircraft Mark Schwab are now able to ﬂy directly from the U.S. to other countries in the region,” says Mark Schwab, vice president of the Paciﬁc region for United Airlines, Inc. and an ACCJ vice president. “The old days of all planes having to land here are long gone, and we can see that the competitiveness of Narita and Tokyo are rapidly declining,” he says, adding that discussions with the airport authorities have been ongoing since July 2008 on changes that might enable Narita to shed its unwanted title of one of the most expensive airports in the world. Airport performance indicators for 2008 have been compiled by Jacobs Consultancy, the technically based management consultancy arm of the Jacobs Engineering Group, one of the world’s largest and most diverse providers of professional technical services. The NAA’s aeronautical revenue (what it collects from airlines and passengers) was highest in the survey, at $22.78 per passenger—well above second-place Zurich, with $18.53, and more than double the global average of $10.26. Similarly, the NAA’s costs for providing the runway, terminal and other related facilities was highest at $37.09 per passenger—ahead of secondplace London Heathrow at $23.01 and the global average of $12.91. In terms of the fees paid by airlines, Narita is second in the world—behind Osaka’s Kansai International Airport—and the third most expensive when the calculation is computed by aircraft type. The airline industry was able to negotiate a reduction in fees in 2005, although that agreement is due to expire in 2009—hence the new round of talks. “The industry is appealing for a signiﬁcant reduction—from current fees—that we think are easily justiﬁed because the airport authority continues to record substantial year-on-year proﬁts at the same time as the airlines are struggling,” says Schwab. “We think
“For a long time, the user charges at Narita have been identiﬁed as a serious burden on the airline industry and have made the airport less and less competitive in Asia and the Paciﬁc region, particularly as aircraft are now able to ﬂy directly from the U.S. to other countries in the region.” it is only fair and reasonable that they give a break to their main customers.” Work to extend the second runway (originally opened in 2002) at Narita is scheduled to be completed in March 2010. Airlines are anticipating an additional 20,000 slots for landings and takeoffs per year. The carriers are hoping the airport then will be able to spread costs over a wider base of operations. But with rising concerns over security issues, inevitably costs in this area will remain high—although the carriers do not believe they should be required to foot that particular bill at Narita. “Reducing these costs would help make Narita more cost-competitive with other world-leading Asian airports,” says Jeff Bernier, managing director, Japan, for Northwest Airlines, Inc. and co-chair of the ACCJ Transportation and Logistics Jeff Bernier Committee. “Of course, security should never be compromised; but the cost of
February 2009 | The Journal | 15
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FOR A FIRST-CLASS AIRPORT “The easiest way to assist Narita would be to have a dedicated, high-speed rail line linking Tokyo Station with Narita Airport in 20 or 25 minutes,” he says. “It could be a maglev or a Shinkansen; but if we can get the travel time to be competitive with Haneda, then customers will not care about the physical distance.” A related problem involves making the connecting ﬂight when people who arrive at either Narita or Haneda need to transfer to the other airport. JAL and ANA operate connecting facilities, but it takes other airline passengers
way off in the future, although we believe this is the right focus.” The journey should be reduced to 30 minutes, the industry believes, while train services should be provided around the clock to allow access to a 24/7 airport operation, according to Duncan, who adds, “Narita was located in the middle of nowhere, after all, with this purpose in mind.” Keisei, which runs the Skyliner, has begun construction of a 36-min connection between Nippori (55-min rail link between Tokyo Station) and Narita
around three hours to make the transfer, according to Northwest Airlines’ Bernier. “That connection time can be as little as 15 minutes elsewhere [in the world]; but given the distances involved here, we will never see that connection time, although it should be better than at present,” he says. The central government has announced that a new study will look into the possibility of providing a new express link to the center of Tokyo, Bernier says, adding, “It will be very expensive, and is a long
terminals that converts existing Shinkansen tracks for its Narita Rapid Railway, replacing the Skyliner service in 2010. There is also discontent among airlines at the gradual weakening of the commitment by the Ministry of Land, Infrastructure, Transport and Tourism (MLIT) for Narita to have the monopoly on international air services. To the contrary, Haneda, which is being rapidly expanded, has for some years provided international services, albeit limited. Today, travelers can ﬂy from Haneda to Seoul’s Incheon International
providing security at the airport should be paid by the government, versus the airlines having to pay for it.” The landing fees that airlines are charged are one of the biggest expenses at Narita. Airlines have negotiated a reduction to the approximately ¥60 billion charged each year to land, under the present arrangement with the airport operator. In the new negotiations, the carriers are looking for a similar concession. Parking charges that are levied on aircraft are another area in which they are looking for ﬂexibility, according to Mitsuyo Teramura, senior manager, Government Affairs, at Federal Express Corporation and co-chair of the ACCJ Transportation and Logistics Committee. “The airport authority introduced a new parking charge at the same time as they reduced landing fees in 2005,” says Teramura. “Airlines have a two- to four-hour turnaround period from the ﬁrst minute an aircraft is parked; and we consider that time to be for part of the landing and taking-off activities because that time is for unloading the aircraft, refueling and reloading.” Says Schwab, “The airport claims they have given us a discount on landing fees, but this new tariff—the only one we know of in the world— has taken half of that away again.” Passengers, who usually are not aware that the high costs of operating out of Narita are passed on to them, do realize how long it takes to get out to the airport to catch a ﬂight. Or the time required to return to their residence after a long journey—particularly when compared with Haneda’s proximity to the center of Tokyo. “The biggest challenge facing Narita is that the customer prefers Haneda,” says Charles Duncan, managing director, Japan, at Continental Charles Duncan Airlines, Inc. “And as Haneda opens up more to international services, all of us with an interest in seeing Narita thrive in the future want to make it better.
February 2009 | The Journal | 17
FOR A FIRST-CLASS AIRPORT
Airport, Hong Kong International Airport (Chek Lap Kok) and Shanghai Airport Authority’s Hongqiao International Airport, while the completion of Runway D in 2010 will give Haneda even greater international capacity. “American continues to closely monitor developments and announcements made by [the] MLIT concerning future plans for expansion at the two airports serving the Tokyo area,” says Theo Panagiotoulias, vice president for Asia and the Paciﬁc at American Airlines, Inc. and is increasingly concerned over internationalization of Haneda, where restricted Theo Panagiotoulias night-hour operational windows render all U.S. carriers unable to compete.” One area that is of lesser concern to overseas operators than it is to the Japanese government is the possibility of Narita International Airport Corporation being purchased by a foreign owner that
would inﬂuence decisions. In November 2008, the government announced that it would effectively limit any single investor to 20%. At present, the corporation is 100% owned by the Japanese government, but an initial public offering is scheduled for some time in ﬁscal 2009. “The key—regardless of who owns the airport—is to provide a safe, costeffective and efﬁcient world-class airport that can provide airlines and customers with the appropriate products and services in a timely and cost-effective manner,” says Bernier. Many of the executives interviewed for this article were keen to point out the areas in which advances have been made at Narita. “There are clearly signiﬁcant improvements that have gone into all three passenger terminals at Narita in recent years,” says United’s Schwab, underlining the opening of the new South Wing in June 2006 and ongoing refurbishments in Terminal 2 and the North Wing of Terminal 1. “American appreciates the approach taken by [the] NAA to group carriers at
Narita by carrier alliances,” says Panagiotoulias. “In 2007, American relocated from Terminal 1 to Terminal 2, the center of operations for oneworld alliance partner Japan Airlines. Relocation, along with terminal facility enhancements, signiﬁcantly improved the overall airport experience for travelers. “The NAA, however, must be willing to address customer airlines’ long-standing concerns over high operational costs if Narita is to remain competitive and the major hub in the Paciﬁc region,” he emphasizes. According to Schwab, “Many operations have already been renewed because there were not enough gates, and it is now pretty rare for passengers on international ﬂights to have to take a bus to their ﬂight. “That’s a signiﬁcant improvement for both the airlines and the passengers,” he says. Similarly, gates and bridges are being redesigned to enable them to ofﬂoad passengers from the new Airbus A380 next-generation large aircraft. Boeing, of course, has been marketing the B787/7E7
February 2009 | The Journal | 19
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Dreamliner, its next-generation fuel-efﬁcient, yet equally fast as present-day, midsize aircraft that delivers big-jet ranges. “One area where we have been working very closely with the airport
authority is on making the check-in lobbies more efﬁcient for airlines,” says Bernier. “In-line screening has allowed us to remove the security gates, and that makes the check-in process smoother.”
Another improvement at the terminals has been attracting more stores to the check-in areas—which means that, if the airport is earning more from its retail outlets, then its charges to airlines should be kept down. In addition, says Bernier, Northwest has been able to upgrade its lounges after discussions with the airport authority—and that efforts to make further improvements are ongoing and aimed at providing customers with a better product. “Our discussions with the airport operator have got past the point where we are talking past each other and we are now talking to each other,” said Schwab. “Those discussions are on what Narita could look like in terms of passenger numbers, the levels of operations there and our reasonable expectations. “We want to focus our efforts on a number of areas where we believe we will be able to see progress,” says Schwab. “The airport should be able to reduce costs and be more efﬁcient in other Julian Ryall is areas—at the same time The Daily Telegraph’s Tokyo as giving a very efﬁcient correspondent. and effective service.” ■
February 2009 | The Journal | 21
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Since 1999, mail order sales (includes Internet and TV infomercials) managed to post nine straight years of growth. Buoyed by the Internet, year-on-year sales growth between 2004 and 2006 averaged nearly 10%. But September 2008 sales data from 140 major members of the Japan Direct Marketing Association (JADMA) show a 1.4% decline relative to the same month in 2007. The first such decline in five years, reports Shukan Economist (Oct. 17), has the industry worried.
Emi Hasegawa, senior researcher at the Yano Economic Research Institute, notes the drop has been conspicuous— particularly in large furniture items, luxury goods and nonessential items that need not be replaced immediately. A factor in the downturn is the higher prices, including increased shipment and delivery charges tied to rising fuel prices. Japan’s top mail order firm, according to data compiled by the trade newspaper Tsuhan Shimbun, is Amazon.co.jp, whose sales grew by 37.5%, from June 2007 to May 2008, reaching revenues of ¥220 billion. The companies that anticipated the shift from catalog to online sales and made adjustments—such as Osaka-based Senshukai Co., Ltd., the nation’s third largest with annual sales of ¥145.7 billion; and Kyoto-based Nissen Co., Ltd., in 4th place with ¥127.8 billion—have been most successful at maintaining growth. By contrast, Takamatsu City-based Cecile Co., Ltd., formerly Japan’s largest mail order firm, saw its sales fall from ¥208.4 billion in 1997 to ¥66 billion last year. Its delay in setting up an online business is largely to blame. (The company was acquired by net portal LiveDoor Co., Ltd. in 2005, and may also have suffered due to the scandal that brought down LiveDoor founder Takafumi Horie.) Another marketing powerhouse has been TV shopping channels, achieving rapid growth by purchasing available airtime on cable channels. Cable households that can receive infomercials rose tenfold in a decade, from 2.3 million at the end of 1997 to over 22.4 million. Nearly half of some 700 products introduced weekly on TV are new launches. Dyson Cyclone vacuum cleaners
from the UK, for example, posted ¥600 million in orders during November 2007. The magazine cautions that such broadcasts may face a potential “millennium bug” in July 2011, when Japan is slated to halt analog broadcasting and switch exclusively to high definition. The Internal Affairs and Communications Ministry, in addressing the complaint from viewers that “BS digital channels show nothing but infomercials,” may be inclined to give priority, when licensing newly opened channels, to broadcasters that agree to reduce the airtime allocated to TV marketing firms. Two sidebars to the article present a mixed picture of movement in mail order markets. While catalog sales of garments have declined, revenues from sales of cosmetics, buoyed by the entry of many new firms, have continued to rise, creating a ¥300 billion market (2007 figures). With concerns rising over food quality and safety, particularly of imports, food item sales continued to show strengths, reaching ¥202.2 billion in 2007. The market for organically grown foods, despite the higher prices, is growing—moving from specialized mail order sales into the retail mainstream. Health food sales, on the other hand, have been declining since 2005, partially due to stricter government regulations on manufacturers’ product claims.
Mail Sales Down
February 2009 | The Journal | 23
Taller Youngsters Thanks to more Westernized lifestyles, including lots of fast food outlets, the younger generation of Japanese have become noticeably taller. This is borne out by ongoing statistics compiled by the Education Ministry. The average height of Japanese females rose from about 150cm in 1947 to 158cm in 2002. Over the same period, their BMI (body mass index) declined slightly, indicating that women may have gained height, but they also lost girth. The weight of newborn infants in Japan also has declined sharply since 1980, when it peaked at 3.23kg for boys and 3.15kg for girls. Twenty years later, the average declined to 3.04kg and 2.96kg, respectively. To put these figures in perspective, average newborns’ weight actually has fallen below that of babies born in the years just before WWII. The percentage of newborns weighing
less than 2.5kg—referred to in medical jargon as SGA (small for gestational age)—increased from 6.8% in 1993 to 9.4% in 2004. Kazuo Itabashi, a pediatrics professor at Showa Medical University, tells the Sankei Shimbun (Nov. 27): “In most economically advanced countries where adults have been getting bigger, the weight at birth increases as well. It’s only been going down in Japan. Foreign researchers also find this surprising.” Dr. Itabashi points to the common practice of dieting by many expectant mothers, as well as cigarette smoking during pregnancy since nicotine may deprive the fetus of oxygen, as the culprits. Needless to say, as they mature, such infants are more likely to be susceptible to a variety of health problems. His prescription is to follow the Health Ministry nutritional guidelines for expectant mothers
Spoiled by Success
Japan’s highest average household income, ¥7.09 million, is found along the Inokashira Line that runs between Shibuya and Kichijoji in Musashino City. In descending order, the next average income figures (according to Nomura Research Institute, Ltd.) are
24 | The Journal | February 2009
(revised in 1990), to eschew alcohol and tobacco, and to work at reducing stress by getting their spouse more involved.
by the Toyoko Line (¥7.0 million), Meguro Line (¥6.89); Denentoshi Line (¥6.88), Odakyu Line (¥6.78), Oimachi Line (¥6.71) and Ikegami Line (¥6.52). Five of Tokyo’s seven most affluent districts are along railway lines operated by the Tokyu Corporation (except Inokashira and Odakyu). But the value of certain “brand neighborhoods” is plummeting, reports Aera (Dec. 1). For example, at Tama Plaza Station (Denentoshi Line), the fashionable residential area of Utsukushigaoka 5-chome in Yokohama’s Aoba Ward fell by 6.3% in a three-month period (annual rate of 21.1%). Prices declined by an average of 15.5% along the Keio Line and 13.2% along the Odakyu Line. It seems the initial high appeal of the area—and developers’ success in attracting people to the “new town” from the early 1980s—caused the population to rise faster than the capacity of the commuter railways serving the area. The result was a bonecrushing 200% passenger capacity during morning and evening rush hours. “I’d rather live in Kyoto,” remarks financial writer Asato Izumi to Aera. “You’re only a ¥2,000 or ¥3,000 taxi [fare] away from the countryside. It’s got beautiful old temples and shrines all over. I find that appealing.”
Stealthy Veriﬁcation To assist in the crackdown on designer brand imitation goods, Yokohama-based ColorZipTM Japan Inc. has developed a new “invisible code” system, named “Stealth Code,” that can be incorporated into tags on the merchandise. The system interlaces threads containing fluorescent dye into the code on the tags, which are deciphered by a reader that emits ultraviolet LEDs. The company claims that, in addition to being difficult to forge, the code remains invisible to customers. Merchandise not registered by the system is quickly detected. The code, originally developed at South Korea’s Yonsei University in 1998, uses four colors arrayed in five horizontal and
vertical cells. The server is capable of generating over 117 billion distinctive patterns, offering considerably more security than monochrome 3D codes. The dye can withstand laundering. The Japan Marketing Journal (Dec. 3) reports that the company was to launch sales of the new coding system to manufacturers of high-end apparel, as well as other goods and retail outlets, from January 2009. Piracy and other types of trademark infringements have become an increasingly serious problem that has spread to cigarettes and alcoholic beverages. ColorZip also hopes to market its system to government customs agencies. Other applications may include printing on contest entry forms and in ads.
Which alma maters produce the greatest number of corporate heads in Japan? According to data gleaned from Toyo Keizai Shimpo-sha’s Shikiho yearbook, which covers 3,890 listed companies, Keio University (ABOVE) can lay claim to the top three places. The faculties of Economics, Law and Business produced 120, 87 and 79 corporate presidents, respectively, including those of Toyota Motor Corporation and Marubeni Corp. In fourth and fifth places are the University of Tokyo’s Faculties of Law and Economics (66 and 54), followed by Waseda University’s Faculties of Politics and Economics, Business, and Engineering (48, 47 and 44). The top 10 is rounded out by the University of Tokyo’s Faculty of Engineering (29). Todai (948) did slightly edge out Keio (922) in the totals for corporate directors. (Flash magazine)
A survey of university dropout rates in the 27 member countries of the OECD (Organisation of Economic Co-operation and Development) found that Japan has the lowest: just 10% fail to obtain a diploma. This compares with 53% in the U.S., 46% in New Zealand, 45% in Hungary and 39% in Mexico. Others with low dropout rates include Germany and Russia, 23%; France, 21%; and Denmark, 15%. One reason for the high dropout rate in the U.S. appears to be that the stats include students who enter fixedterm programs rather than seek a degree. In Europe, many students are said to transfer from universities to other types of tertiary educational institutions. University of Tokyo
Professor Ayako Morozumi points out that Japan’s low dropout rate is not necessarily something in which to take pride. In a survey of the time students devote to studying apart from lectures, the average in Japan is only 5.3 hours—as opposed to 13–14 hours a week in the U.S. (The Asahi Shimbun). In an unrelated matter, a survey conducted by the Prime Minister’s Office found that more than one Japanese in three or 36.6%, keep pets, for which the average annual outlay came to ¥124,441 for dogs and ¥72,194 for cats. Cost of ownership over the lifetime (which was 11.9 years for dogs and 9.9 years for cats) averaged ¥1.499 million and ¥861,085, respectively (Dime).
February 2009 | The Journal | 25
ACCJ Event SUCCESSFUL E-COMMERCE STRATEGIES By Nicole Fall
nline selling is one of the few bright spots in the fashion and luxury industry in the U.S. market of late. As consumers steer clear of real brick-andmortar establishments, it appears logging on for a spot of shopping has not been affected in the same way by a deteriorating economic picture. In fact, on the last Cyber Monday—the back-to-work weekday immediately following the Thanksgiving holidays—online sales grew 15% over 2007, exceeding all projections, thereby bringing temporary relief to U.S. retail inventories. According to online retail analyst comScore, Inc., the $846 million online purchases became the second-largest day of online shopping ever, after Green Monday (second Monday after Black Friday, which follows Thanksgiving Day) in 2007. Online retailers are no longer just of the lower-priced Amazon or eBay variety either. Last November, luxury jeweler Harry Winston launched an online store at harrywinston.com. Pieces on the site include a $135,000 diamond necklace. In Japan, however, the e-commerce market has yet to take off in a similar manner. To pundits, local consumers are predictably more cautious about spending online; and, when they do, Japanese are less likely to spend that much. Explaining the Web
26 | The Journal | February 2009
retail business in Japan in detail at an event organized by the ACCJ Retail Committee on November 18 was Yusaku Maezawa, founder of ZOZOTOWN (http://zozo.jp/ town/)—Japan’s biggest online fashion mall. Maezawa, CEO of Start Today Co., Ltd., established ZOZOTOWN at the age of 22, eventually making him a local “veteran” in the e-commerce market a decade later at 32. ZOZOTOWN is a fashion portal functioning as a virtual mall. The site represents a number of Japan’s best-selling Yusaku Maezawa brands—including Beams, United Arrows and Diesel—housing a total of 680 labels. ZOZOTOWN boasts around one million end-users—of which 350,000 are considered active shoppers once a year—posting ¥17 billion in transactional value in 2007. Maezawa freely admits that, while e-commerce is steadily growing in Japan, it has a long way to go before reaching the signiﬁcantly higher expenditure levels realized in international markets such as the U.S. Global brands that hope to tap online
Japanese consumer spending routinely approach Maezawa for advice. In response, he created Start Today Consulting, a one-stop advisory service focused on e-commerce strategies. As background to the Japanese e-commerce market, Maezawa explains that the average price of an item purchased on ZOZOTOWN is ¥14,000, and around 70% of users access the online mall via their PCs—as opposed to their mobile phones. The peak shopping day is Monday, with shoppers split evenly between the genders. Most of the purchasing occurs between 21:00 and midnight, due to the later working hours in Japan—and in response to ZOZOTOWN releasing new products everyday between 21:00 and 23:00, in a strategy to target shoppers in the most effective way. Most users spend 10 minutes on the site each hit and, generally speaking, shop an average four times a year— bringing personal annual expenditures to ¥52,000 per annum. For those keen on watching what people currently are buying in the mall, ZOZOTOWN provides real-time insight by way of information bubbles explaining what item was bought—and even identifying the user’s geographical location. Around 40% of ZOZOTOWN members are residents in the Kanto region. Very few users live in remote areas, stamping out the common myth that electronic shopping is targeting people who are far from brick-and-mortar retailers. In fact, says Maezawa, some of the virtual mall’s users make purchases after browsing at a brand’s store to try on a garment. Hence this goes a long way to explaining the surge in online sales on the Monday night following a typical weekend of window-shopping. According to Start Today research, apparel and accessories are the second-biggest category, after books and magazines, for consumer online purchases. Brands looking to sell online face three fundamental options. They can establish their own e-commerce Web site. Or, they can work through a fashion portal like ZOZOTOWN, which provides all the delivery logistical support, promotional activities and immediate exposure to the site’s members. Finally, brands can pursue a combination of the two strategies, which Maezawa recommends to be the most beneﬁcial in maximizing sales. ZOZOTOWN is not for every brand, however. The online mall enforces a strict policy of no returns on merchandise
unless faulty. This is in contrast to successful overseas fashion portals such as the UK’s Net-a-Porter.com or ASOS (As Seen On Screen). They both pride themselves on an easy-toimplement return policy. If a brand has its own e-commerce site that welcomes returned merchandise, its consumers may ﬁnd it confusing when dealing through ZOZOTOWN, or at the brand’s actual retail outlets. For many brands, the challenges to providing an online presence can be intimidating in terms of dealing with both delivery logistics and actual establishment costs. On the contrary, for the smaller brands with few stores in Japan—and a need for wide exposure to ZOZOTOWN’s core demographic of “working, single, fashion-loving 27-year-olds”—the virtual mall is an attractive proposition, says Maezawa. For some retailers, the hesitancy to cannibalize sales that are through existing traditional channels such as retail outlets is strong enough motive for not yet setting up any e-commerce presence. “If a brand sees more than 10% of its sales done electronically, it needs to close one store,” explains Maezawa, alluding to the higher cost of running a physical, rather than virtual, store. The positive beneﬁt of existing online stores could be “retailers closing stores in remote areas to save on money,” he adds. A possible strategy for future retail businesses could see luxury brands launching fewer stores and seeking greater revenue through e-commerce. In fact, should e-commerce continue to grow exponentially, then luxury stores a decade from now could resemble showrooms where consumers experience the brand in a unique, nonpressured no-selling environment, then purchase online later. For Japanese consumers who ﬁnd the latest designer items beyond their budgets, or for those who just need something for a one-off occasion, there are alternatives. Newell Co., Ltd.’s Cariru, an online handbag and jewelry rental service, arranges for their membership-fee shoppers to rent items such as a Louis Vuitton Tivoli bag (for ¥4,600 a week, one piece of inventory) in a range Nicole Fall is of 150 items. Users decide how long they want to a freelance journalist based keep the item and, once ﬁnished with it, return the in Tokyo. merchandise in an easy-to-use prepaid package. ■
For many brands, the challenges to providing an online presence can be intimidating in terms of dealing with both delivery logistics and actual establishment costs.
February 2009 | The Journal | 27
Thomas J. Donohue PRESIDENT OF THE U.S. CHAMBER OF COMMERCE By Julian Ryall Photos by Tony McNicol
Thomas J. Donohue has led the U.S. Chamber of Commerce since 1997, developing it into a $200-million-a-year inﬂuential powerhouse. A forceful personality and speaker, he shared his opinions on the present state of the global economy with top political and business leaders in Japan, China and South Korea during a trip to the region in January. How different is this recession from previous ones, and what is its impact on consumer attitudes in the U.S.? Will conﬁdence bounce back, as it has done in the past, or has there been a more deep-rooted shock to the system? I think this one is different. I have never seen people in the U.S. so paralyzed by economic circumstances. I wasn’t here in 1929, but I’ve heard about it. What we did at that time, which was terrible, was to up taxes and become protectionist. Why I think it’s different is because of what has happened to the banks and the assetbacked lenders, what has happened to people’s 401(k) plans and their pensions. It’s not that people were laid off—although that is becoming an issue—it’s that they
28 | The Journal | February 2009
looked at the wealth they had accumulated in the value of their house. And they wake up two months later and it’s down 40% in some cities. That is a shock, and it’s why we support a big-time stimulus program. We need to take a deﬁbrillator and shock this economy back into business. The Big Three automakers received a $17 billion rescue package, but are still on the brink of collapse. They may need another $1 billion public loan in February. Has the rescue package been a success? If not, should President Barack Obama let the automakers fail? One of the fundamental issues in the auto industry in the U.S. is that it has shrunk from 16 million units sold to 10 million.
SNAPSHOT U.S. Chamber of Commerce Established: April 12, 1912 Location: Based in Washington, D.C., but collaborates with 112 U.S. Chambers of Commerce in 99 countries Main aims: To advance human progress through an economic, political and social system based on individual freedom, incentive, initiative, opportunity, and responsibility. www.uschamber.com
That uncovers every skeleton in the closet. Second, there have been discussions of a merger between Chrysler and General Motors, which would have taken two 100% companies, put them together, and basically end up with one 120% company and taken some capacity out of the market.
ON THE SPOT
“I would support [an FTA] and encourage it. The only issue is would Japan?”
BIOGRAPHY Thomas J. Donohue Born: New York City, August 1938 Education: Bachelor’s degree from St. John’s University, New York City; MBA from Adelphi University, Garden City, New York Married: To Elizabeth Children: Tom, 43; Keith, 40; and John, 35 Hobbies: His children and grandchildren Career: Donohue served for 13 years as President and CEO of the American Trucking Associations. Currently, also a member of the President’s Advisory Committee for Trade Policy and Negotiations; and President of the Center for International Private Enterprise, a program of the National Endowment for Democracy dedicated to the development of marketoriented institutions around the world
When it came down to the Chamber deciding what we should do, it was pretty simple. We were falling into a 5.5% drop in GDP in the fourth quarter; and had you let two of the Big Three crater, it would have caused another 1 million unemployed. So what we basically did was buy these guys a couple of months to see if they could ﬁx union contracts and ﬁnd a way out of this. Considering we have already spent $700 billion and we’re going to spend another $800 billion in the stimulus program, I thought $15 billion or $18 billion to try to bridge that gap was good judgment and a good bridge. Japan fears a new era of “Japan passing,” when the previous Democratic administration of President Bill Clinton seemed to favor closer ties to Beijing than Tokyo. Does Japan have reason to worry? I don’t think Japan should be worried; but it should be active, be engaged, and ought to forget about “Japan passing” and talk about the U.S. arriving. What drove the agenda of the president in the 1980s— and his national security advisors—was where we were at that time and the problems we had. There are not a lot of problems here now.
There have been informal discussions of a U.S.-Japan Free Trade Agreement (FTA), which would, apparently, set the model for future agreements. Where are those discussions at now, and do you think the recession is likely to make an agreement a more distant prospect? An agreement with Japan, where we have an extraordinary trading and investment relationship, would be ﬁne with me; and I would support [an FTA] and encourage it. The only issue is would Japan? Because an FTA lays open to review all the non-tariff barriers that are put in place to protect domestic industries. I’m not pointing ﬁngers at Japan, because it is done all over the world—but Japan is the world’s expert. We have a very positive trading relationship with Japan, but I think a speciﬁc FTA would be a challenge. You say that markets should determine currency, but is the falling dollar going to lead to opportunities for American exports? My own view is that currencies are best dealt with in the marketplace. Historically, when central banks try to manipulate their currencies, it does not always work out according to plan because markets move so quickly and banks so slowly. Obviously, if you go to the U.S. today, which is still the largest exporter in the world, the high-tech manufacturers like the change in the dollar because they’ll be selling stuff all over the world in a hurry. Others might not like it because it does not help their export programs. The value of currency is calculated in many ways, such as the health of economies, the protection of those currencies. It’s very important for you to understand that I believe the government of the U.S. is not trying to drive the value of the dollar one way or the other. I’m not sure what this new administration will do, but Federal Reserve Chairman Ben Bernanke is somewhat independent and is not inclined to do that. In a perfect world, we would have a more balanced currency.
[But] there are no perfect worlds and there are no equal economies. What message will you pass on to Prime Minister Taro Aso during your visit to Tokyo? We are going to be both giving a message and asking. We will be giving a message on our views on the new administration and the best parts of the U.S. stimulus measures, the effects we expect on our economy; and, very importantly, I will stress our concerns that, in difﬁcult times, countries turn to protectionism. We will ask him for his own views about Japan’s stimulus package, what it looks like, and what he sees for Japan Julian Ryall is and other nations in this region The Daily Telegraph’s Tokyo in terms of trade and investcorrespondent. ment recovery. ■
February 2009 | The Journal | 29
FDI Clock Turns Back JAPAN EMBARKS ON AN OVERSEAS SHOPPING SPREE. By Martin Foster
he surge in outward merger and acquisition (M&A) activity by Japanese companies during the ﬁrst nine months of 2008 left many people wondering whether the clock had been turned back 20 years. Japanese companies spent a record $55.9 billion to take over or gain strategic interests in targeted assets in crossborder deals, a 388.9% increase over the same period in 2007, according to data from Thomson Reuters. Mitsubishi UFJ Financial Group Inc.’s (MUFG) $9 billion purchase of a 21% stake in Morgan Stanley was the largest Japanese deal announced during the period, followed by Takeda Pharmaceutical Company Limited’s $8.1 billion acquisition of Millennium Pharmaceuticals Inc. Japanese ﬁnancial institutions have emerged from recent economic turmoil in a position of strength not seen for nearly a generation, but Japanese companies today are not the same 1980s bull that ran rampant making trophy acquisitions overseas, many of which were relinquished after the economic Bubble burst.
30 | The Journal | February 2009
“Individuals may still remember the Japanese buying spree of the 1980s, but it is just a collective memory, born of a very different situation,” says Steven Thomas, managing director and head of M&As at UBS Securities Japan Ltd. “Many of those purchases were rather naïve deals driven by an artiﬁcially boosted yen. Pundits have unearthed the baggage-laden term, Japan Inc., in an attempt to explain the recent resurgence in Japanese acquisitions; but not everyone sees a coordinated assault on overseas assets. “I don’t think it is a case of the Japanese as a whole—somehow with a common mind or intention—all at the same time going overseas,” Thomas says. “It is [rather] individual companies, and individual decision makers—really having taken the time, and done their thinking, and done their planning—coming, as it happens, to a coincidental point in time where strategically meaningful deals have been actionable.” Thomas cites the MUFG’s $190 million purchase of an initial 9.9% stake in Aberdeen Asset Management PLC and its move to
FDI CLOCK TURNS BACK
For many years, the U.S. was alone among major nations in having no central government program to attract and retain inward FDI, and the U.S. government established Invest in America in March 2007. The sum rises Japanese foreign acquisitions, ¥trn 10 8 6 4 2 RECOF DATA
take full control of Union Bank of California, N.A. as more typical of recent transactions, even as bigger deals stole the limelight. “The purchase of the Aberdeen Asset Management stake was evidently one of those long-term strategic planning moves,” says Thomas of the deal that initially grants MUFG exclusive rights to distribute global equity and global ﬁxed-income products by Aberdeen Asset Management and gives the Scottish ﬁrm, in turn, a stronger presence in the Japanese pensions market. “It was a very smart move.” MUFG taking full control of the California-based banking subsidiary “was a huge statement of positive intent in the U.S.,” says Thomas. These deals were based on a combination of long-term thinking along with the ability to respond quickly and decisively, notes Thomas. “This is a strong message [that] Japanese companies want to have the capacity to continue to grow and wish to expand overseas,” says Thomas. “Japanese companies will continue to use M&As for [realizing] their strategic growth overseas.” There has never been any question about the U.S. being open to investment activity, and recent organizational developments are intended to underscore the resolve of the U.S. to entice overseas companies and funds to America.
The historically passive role of the U.S. government in encouraging FDI had become increasingly anachronistic, says Aaron Brickman, director of Invest in America, positioned within the Department of Commerce’s International Trade Administration in Washington, D.C., and supported by a staff of ﬁve.
February 2009 | The Journal | 31
Worldwide, FDI ﬂows have surged from $561 billion in 2003 to $1.8 trillion in 2006; the U.S. is facing more competition for inward FDI than ever before, according to Brickman. “As other countries come on line, they work to improve their attractiveness as a platform for inward investment,” says Brickman. “So the United States is frequently in competition against Central Europe, Mexico, China or India for investments.” At $233 billion, Japan holds the second-largest FDI position in the U.S., after the UK, and which is growing on average by 8% per annum. India’s FDI position may be growing annually on average by 53% and China by 31%; but the reality remains that each of their FDI positions is relatively small. SNAPSHOT Investment trends ■ M&As in Japan by foreign investors slumped 82.4% to ¥530.3 billion in 2008 due to the credit crisis, Kyodo reported in January. There were 198 such M&A deals in 2008, compared to 309 in 2007. ■ Quoting Recof Corp., a major M&A advisor, reports said that Japanese companies’ acquisitions of, and investments in, non-Japanese companies rose 2.6-fold year-on-year to ¥7.46 trillion as the yen strengthened. ■ Chinese and South Korean M&As of Japanese companies increased to 78 cases. ■ The pace of M&As slowed from early November as the global credit crisis hit the real economy, Recof said. ■ “Buyouts of failed firms and M&As related to industry realignment will increase against the backdrop of the worsening real economy,” said a Recof official about the outlook for 2009.
In 2007, India’s FDI in the U.S. reached nearly $3 billion (1.27% of Japan’s activity), while China’s FDI was a little over $1 billion (0.47% of Japan’s FDI). Invest in America facilitates investment inquiries by providing information about the U.S. economy, assists in contacting federal and state agencies, and helps investors learn more about related U.S. policies and investment procedures. The organization serves as the international investment community’s ombudsman in Washington, D.C., working across the
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U.S. federal government to address investor concerns and issues that involve federal agencies. Unlike other countries, transactional activities of foreign investment in the U.S. are handled on the state and local levels. Invest in America works with each of the 50 States, the District of Columbia, and U.S. territories to connect potential investors to the appropriate U.S. investment ofﬁcials. Invest in America maintains state-by-state contacts designated by each respective governor to handle international investment inquiries. The organization does not drive investment toward a speciﬁc project or locality. Invest in America provides development programs and services to educate international investors on key U.S. investment topics. A series of site visits were arranged in May 2008 to highlight U.S. open investment policies and the positive role FDI plays in local communities. Invest in America also works on the home front to enlighten citizens about the beneﬁts FDI offers to their communities. North Carolina competes aggressively with other U.S. States for Japanese FDI, striving to maintain the best business environment in the country, says Leland Gaskins, state investment representative for Asia in Tokyo. “North Carolina has been named the best business climate in the U.S. by Site Selection magazine for seven out of the last eight years.” The magazine is the leading publication in the U.S. covering the business of selecting locations for direct business investment. Incentives offered by North Carolina include the One North Carolina Fund and the Job Development & Investment Grant that provide cash grants to companies to help them purchase or install equipment, construct or renovate buildings, or invest in infrastructure improvements. Article 3J Tax Credits are based on job creation, capital investment in business property and, in some cases, on investment in real property. The State also allows new and expanding industries to issue industrial revenue bonds, while its Workforce Development Training Center provides high-quality, affordable, easily accessible training and professional development services.
HONDA AIRCRAFT COMPANY, INC.
Honda Aircraft Company, Inc. and its HondaJet is one of the latest investments by a Japanese company in North Carolina.
FDI CLOCK TURNS BACK Top 10 Manufacturing States
SOURCE: U.S. DEPARTMENT OF COMMERCE, ECONOMICS & STATISTICS ADMINISTRATION, 2005
Honda Aircraft Company, Inc. and its HondaJet is one of the latest investments by a Japanese company in North Carolina. “At this moment, the company is constructing a new headquarters and jet assembly plant in Greensboro,” says Gaskins. U.S. subsidiaries of NGK Insulators, Ltd. and Cataler Corporation, both Japanese suppliers to Toyota Motor Corporation, are adding jobs in North Carolina in spite of the overall slowing economy. In 2003, the Japanese government adopted a policy to double FDI in ﬁve years—a target that it almost reached by the end of the designated period. In March 2006, the administration of then-Prime Minister Junichiro Koizumi announced a new target of achieving an FDI base of 5% of the GDP by 2010, something conﬁrmed later by then-Prime Minister Takeo Fukuda in his Policy Speech before the 160th Session of the Diet on January 18, 2008. Fine intentions aside, however, would-be investors still face challenges in Japan. A case in point is triangular mergers, which allow a non-Japanese company with a Japanese subsidiary to acquire a Japanese target company by exchanging shares in the non-Japanese company with shareholders of the target company. Triangular mergers became acceptable in Japan from May 1, 2007, but only one successful triangular merger has been seen to date. Citigroup acquired Nikko Cordial Group in January 2008. (On May 1, 2008, Nikko Cordial Corporation merged with Citigroup Japan Holding Ltd., creating Nikko Citi Holdings Inc.; but in 2009, Citigroup is planning to auction Nikko Citi Trust and Banking, as well as sell its Smith Barney to Morgan Stanley, which would control a venture combining their brokerage units. Also, Citigroup will split into two entities for management purposes: Citicorp and Citi Holdings; and has earmarked its Japanese retail brokerage operation, Nikko Cordial Securities, for sale.) Corporate Japan remains nervous it may not be able to ward off foreign investment interest in Japanese companies. But, the establishment is missing the point, observers say. “In reality, triangular mergers are not used for hostile acquisitions, and the largest likely effect would be to help consolidation of domestic industry in Japan,” says Bruce Aronson, associate professor of Law at Creighton University in Omaha, Nebraska. Aronson explains a vote of approval by the board of directors and shareholders of the target company is needed, which involves a special resolution (2/3 of votes of shareholders present). “This is why [triangular mergers] could not be used for a hostile takeover,” Aronson says. In order to qualify as a tax-free transaction and be exempt from paying capital gains taxes on the shares swapped as part of the merger, the Japanese subsidiary of the U.S. acquirer must have an ofﬁce, staff and business activities involved in the same ﬁeld as the target company. “This essentially means that, unlike in the U.S., an acquirer could not use a ‘paper’ company, [a] special purpose vehicle [SPV], in order to carry out a triangular merger,” says Aronson. Nick Benes, president of JTP Corporation, a provider of specialized M&A services based in Tokyo, and chairman of the ACCJ Foreign Direct Investment Committee, has made repeated representations to the Japanese government, highlighting the general unavailability of tax-deferred treatment for a wide range of reorganizations or M&A transaction structures as one of the most
3.59 3.53 3.44
persistent barriers to increased FDI inward ﬂows. “Companies aiming to buy a target Japanese company by using their own stock in a triangular merger hit a Catch-22 in Japan,” says Benes. “In order to buy a company, they need to ﬁrst set up a separate company, with a semblance of real operations and synergy with the target ﬁrm.” The Ministry of Economy, Trade and Industry (METI) makes the point that this synergy can be superﬁcial, says Benes, but it is impossible to get advanced guarantees from the tax bureau on tax deferment for tax purposes. “The guy you spoke to at the outset and the tax inspector in Nagoya, say, are probably two different people,” says Benes. “The tax inspector might want to be a hero that year, and all of a sudden you could be in a big ﬁght with the tax ofﬁce, owe millions in unexpected taxes, and have former shareholders of the target sue you for taxes they have to pay.” The tax rules are not certain at the time of signing the contract, says Benes, and, therefore, an accountant is going to qualify his opinion in the case where stock is used for the deal. If it is a cash triangular merger, the foreign buyer often will have to pay huge amounts of taxes because all the assets have to be written up instantly and totally as goodwill. Tax deferral is not available for reverse triangular mergers (where the target company becomes a wholly owned subsidiary of the acquirer without any change in its corporate existence), stock-for-assets exchanges, simple stock-for-stock exchanges, or conversions of a Japanese branch of a foreign company into a Japanese corporation. If these transactions were possible under Japanese law and tax-deferred treatment was made available under fair conditions preventing tax abuse while still avoiding unnecessary write-ups of assets, the costs that pose a prohibitive obstacle to investment—most of all, paying tax even though the transaction itself has not yet generated any cash ﬂow with which to pay for it—would be substantially reduced. Faced with such obstacles, most of these transactions simply do not take place at present, denying Japan a source of tax revenue from the efﬁciency gains and taxable income that successful transactions create. Investment is a two-way street; and as far Martin Foster is a freelance as Benes is concerned, it is time for the Japajournalist based nese government to step up and make a more in Tokyo. convincing contribution. ■
February 2009 | The Journal | 33
Kevin Gibson The professional recruitment industry in Japan has undergone some radical changes in the past decade; and the pace of that change is set to intensify as demographics, foreign ﬁrms’ expansion and an unpredictable economic outlook dictate the winners and losers in this increasingly important sector. Japanese recruitment ﬁrms—of which around 7,000 are registered— have typically expanded by focusing on the junior temp market for domestic companies; but with the arrival of large numbers of international operators and the emergence of Japan-based, foreigner-managed executive recruitment ﬁrms to meet the demands of foreign businesses, a number of interesting trends have emerged. Overseas ﬁrms have entered the market with more of a mid-career specialist model, as opposed to the junior generalist; and several have managed to generate sufﬁcient proﬁts to encourage their Japanese competitors to look more closely at this rich sector of the market. With experienced consultants working on more exacting briefs for highly specialized positions, recruiters can command higher fees. As a result, many Japanese recruitment ﬁrms are looking to
34 | The Journal | February 2009
imitate or acquire this “foreign” model in an effort to increase their returns. They have, however, experienced mixed successes, as Japanese recruiters are typically unable to fully determine the bilingual capabilities of candidates and many foreign clients have been disappointed. On the other hand, they do have a very impressive candidategeneration ability that is based on mass-market advertising. This form of recruitment promotion, through advertisements on trains and television, is unique to Japan—and probably due to the fact that a mid-career change of employer is still a relatively new concept. When I’m riding the subway, it is not uncommon to see upward of four ads for different recruitment ﬁrms; and this gives me the feeling of something akin to a “gold rush” in the industry. This is the ﬁrst difference that strikes managers of foreign recruitment organizations, which generally rely on the more discrete word-of-mouth approach, or through direct contact. Foreign ﬁrms have had to adapt their marketing and branding strategies to get traction in a market in which many candidates want to be represented by a well-known company. This is a very expensive exercise, and Japanese ﬁrms can spend in excess of ¥1 billion a year on marketing to build their brand. That sort of outlay is unheard of in other markets. It still takes some time for these brands to mature in the minds of candidates, meaning that some international ﬁrms that have come in and spent large amounts of money have failed because they have not
ILLUSTRATION FOR THE ACCJ JOURNAL BY DARREN THOMPSON
RECRUITMENT INDUSTRY FACES MORE CHANGE
ケビン・ギブソン 変化に直面する人材紹介業界 had the patience for their brand to mature, or their consultants to adapt to the market. With the market tightening, some of these ﬁrms have had to cut as much as half of their personnel. As the market continues to mature, there is likely to be a shakeout, with a number of smaller ﬁrms unable to provide sufﬁcient candidate ﬂow for specialist positions. Some international ﬁrms may pull out of Japan completely. Once that upheaval has been concluded, the recruitment industry will underline its importance to the broader economy. Most crucially, the health of the recruitment industry is one of the really true gauges of economic sentiment, as it has always been a leading indicator of a nation’s ﬁnancial future—and is frequently far more reliable than government surveys. When they are optimistic, companies are actively looking to hire top-quality candidates; that reverses when they are pessimistic. And that makes us the canary in the coalmine. And with rapidly changing demographics, labor mobility and the redeployment of labor, effective recruitment will become more important than ever for businesses to stay competitive. Governments are generally too slow to adapt to these changes; and I expect to see the domestic and foreign recruitment companies combining the best practices they have learned from each other to ﬁll this gap.
Kevin Gibson is Managing Director of
Japan Operations for Robert Walters.
February 2009 | The Journal | 35
Back on the Table
FUND WOULD BOOST REGIONAL COOPERATION. By Anthony H. Rowley
36 | The Journal | February 2009
AMF BACK ON THE TABLE
decade ago, when Asia was plunged into ﬁnancial crisis, Japan proposed the idea of an Asian Monetary Fund (AMF) to assist hard-hit economies with emergency funding. The idea was shot down even before it could get off the ground; but now that Asia is facing a new crisis, an AMF is back on the agenda—this time with a strong chance of being launched successfully. The proposed fund—at a size of $120 billion or larger—is almost certain to be approved when ﬁnance ministers from the 10 ASEAN (Association of Southeast Asian Nations) states meet with their counterparts from Japan, China and South Korea in Bali, in May—and go into operation shortly thereafter. The AMF launch could herald the start of a new era in ﬁnancial and monetary cooperation between Japan and its Asian neighbors, experts say. Working together could lead to the development of new forms of pooled resources to aid infrastructure development, to the launch of regional bond markets, to foreign exchange market reforms and even to the advent of a “shadow” Asian currency. The original plan for a $100 billion AMF was proposed in 1997 by Japan’s then-vice ﬁnance minister for international affairs, Eisuke Sakakibara (popularly known as Mr. Yen, for his active currency diplomacy). But in the face of opposition from the U.S. and China—as well as from the International Monetary Fund (IMF)—the plan had to be dropped. Sakakibara, tipped to become ﬁnance minister should the current opposition Democratic Party of Japan win the country’s next general election, wants to see a $150 billion fund created. China is likely to be on board this time, according to the director of China’s National Economics Research Institute, Fan Gang. “The Chinese government’s attitude is more favorable now than it was 10 years ago,” he says. Meanwhile, an AMF in all but name is well on the way to being established—in the shape of the Chiang Mai Initiative (CMI) launched in 2002. CMI is an $80 billion network of bilateral currency swaps among Asia-Paciﬁc nations, under which they agree to help each other out with foreign currency loans whenever they get into problems regarding a balance of payments. After May, the CMI should become a “de-facto Asian Monetary Fund,” says Masahiro Kawai, dean of the Asian Development Bank Institute (ADBI) in Tokyo. The
scheme is unwieldy at present, with many partners involved, and has never been used. But now that crisis has struck again—and emerging economies in Asia are losing their access to capital market ﬁnancing—the need to reform the CMI is seen as urgent. Many Asian nations—especially Indonesia, Thailand and South Korea—do not want to have to turn to the IMF for funding. These countries remember all the conditions that the IMF attached to its lending during the 1997 Asian crisis. Governments were ordered to restructure large areas of their entire economies, for example, in exchange for emergency loans. The IMF’s policy prescriptions were often seen as inappropriate and heavy-handed. So, what is being prepared now is a regional scheme whereby the so-called ASEAN+3 countries—the 10 states in Southeast Asia plus Japan, China and South Korea—will put up $120-150 billion of funds from their foreign exchange reserves (under a formula now being worked out). These hard currencies could then be lent to those in need of emergency funds. The plan is to have a central secretariat that can monitor members’ economies and approve loans. The conditions attached to these loans are likely to be much less stringent than those applied by the IMF. The existing link between the CMI and the IMF— whereby 80% of any lending by the former needs the borrowing country ﬁrms to turn to the latter—probably will be severed. This likely is only the beginning of the story, says China’s National Economics Research Institute director Fan. China, South Korea and other countries want to see Asia use more of its $3 trillion foreign exchange reserves to expand regional cooperation. The new CMI should help to show the way, though. For example, Asian countries could borrow from an expanded fund to ﬁnance huge infrastructural projects by issuing bonds. The ADBI’s Kawai says that the CMI, meanwhile, will probably need a composite currency in which to designate its loans—in the form of an Asian Currency Unit (ACU). Once approved, the idea would make it possible, in Anthony H. Rowley general, for public and corporate is Tokyo corresponborrowers in Asia to issue bonds dent for the denominated in ACU. Kawai Singapore Business Times and ﬁeld says this funding approach editor (Japan) of could hugely expand ﬁnancOxford Analytica. ing options in the region. ■
February 2009 | The Journal | 37
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2009 Legal Services A Shared Concern Legal services require commitment to you and to markets. he ACCJ provides a vital link among relevant parties, whether dealing with primarily domestic issues, global best practices or regional compliance concerns. The industry-specific expertise and international know-how of legal consultants based here bring the precision and timely consultation that can make or break a deal. In this light, the Legal Services Committee hosted a morning event on “Current And Future Challenges For Lawyers” on September 12 of last year. Views were shared on the critical challenges that face the U.S. legal profession and other lawyers globally in the near future. It was also a chance for representative American lawyers in Japan to share their interests and concerns for the legal profession in Japan and internationally, as well as thoughts on what the American Bar Association could do to better represent their interests on these matters for the future. To realize greater interaction on a local level, the ACCJ Legal Services Committee hosted a “Tsuyu” BBQ, a joint event with the Roppongi Bar Association, on June 26. The evening brought together members of the legal community in Tokyo. The ACCJ provides a dynamic link among its committees that brings together the synergy demanded in critical legal matters—and in a context that addresses current concerns. The “New Labor Contracts Law: Impact On Foreign Companies” was co-hosted by the Human Resources
Management – Labor Mobility and the Legal Services Committees, on October 7. The limitations that Japanese labor law imposes on the employer-employee relationship have caused many companies to employ more and more employees on a contract basis— saving lifetime employment for a later date or, in some cases, trying to avoid it entirely. There were hopes that amendments to the Labor Contracts Law would improve the law from the standpoint of employers; and many groups, including the ACCJ, were involved in proposing improvements. In the end, the Labor Contracts Law was amended with significant implications for foreign companies and Japanese companies alike. There was discussion on the changes from the prior law, consideration of its interaction with other laws, and an overview of the implications for companies operating in Japan. Intellectual property remains an invaluable aspect to standing out among the competition. The Intellectual Property Committee invited the Secretariat Of Intellectual Property Strategy Headquarters, Cabinet Secretariat to address the ACCJ on September 9. Since 2002, the Secretariat has guided the national strategy on intellectual property. The Headquarters is responsible for setting the strategic direction for all forms of intellectual property laws in Japan and the intersection of those laws with all fields of endeavor and application. The Headquarters has been highly influential in changing non-intellectual property-related laws in the
areas of securities, tax, unfair competition and education policy to further the creation, exploitation and protection of intellectual property in Japan and to remove many of the legal and regulatory roadblocks that stymied development in the past. As a consequence, the Headquarters has had its hand on, or has been directly involved with, every major intellectual property-related development in the last six years. The ACCJ also keeps in touch with the region, bringing timely attention to how success in Japan relates to Asia. The Asia Business Committee posed the query, “Your Brand In Asia: Defensible?” on October 1. Brand owners throughout the world always have shared a common challenge: how to make their products readily available to consumers throughout Asia while maintaining brand integrity in a region known for some of the weakest IP protection regimes. And now with the ubiquity of the Internet, this challenge has intensified. The ACCJ discussed the evolving threat posed to businesses by these counterfeiters and presented the key elements of a comprehensive, cost-effective approach to managing the threat. As essential as legal matters are to your conducting business here, an understanding of the dynamics in play in Japan and Asia requires local legal expertise firmly committed to serving these markets as well. David Umeda Senior Editor at Paradigm
February 2009 | The Journal | 39
Law Firms Atsumi & Partners Tel: 03-5501-1166 (Bonnie Dixon) Fax: 03-5501-2211 www.apap.gr.jp Atsumi & Partners is one of Japan’s leading independent law firms and was the first Japanese law firm to admit non-Japanese partners, Ms. Bonnie Dixon, a New York lawyer; and Daniel Hounslow, an English lawyer—both with more than 20 years’ experience; our foreign partners are supported by five foreign attorneys. We operate as a fully integrated international team, providing advice on complex domestic and cross-border matters to the standards the modern business community expects. Atsumi & Partners has for some years been widely regarded as Japan’s premier law firm in the fields of securitization and structured finance, and now offers its clients a full-service capability with international experience in finance, banking, real estate finance, private equity, investment funds, mergers and acquisitions, securities, syndicated loans, derivatives, public offerings, private placements, information technology, intellectual property, general corporate law, trust law, bankruptcy, insolvency, restructuring, due diligence, compliance, litigation and arbitration.
Morgan Lewis-TMI Tel: 03-4578-2650 Fax: 03-4578-2501 E-mail: Kunio_Namekata@tmi.gr.jp, email@example.com or firstname.lastname@example.org www.morganlewis-tmi.jp Morgan Lewis-TMI is a unique joint venture between Morgan, Lewis & Bockius LLP and TMI Associates, one of the largest and most respected Japanese law firms. Drawing on our combined strengths, Morgan Lewis-TMI provides clients with a broad range of resources in Japan, the U.S. and around the world. With more than 200 highly qualified Japanese and U.S. lawyers in Tokyo, Morgan Lewis-TMI is uniquely positioned to advise American and other foreign clients on nearly every legal issue they may face in Japan. With 22 offices and more than 1,500 lawyers worldwide, we also provide support for Japanese clients in the U.S. and throughout the world. Our practice includes cross-border M&A; restructuring; finance; private equity; licensing and other technology transactions; employment issues; corporate, regulatory and securities matters; and litigation. If you have any questions about our practice, please contact Gregory R. Salathé, Lisa Yano or Kunio Namekata at 03-4578-2650, or by e-mail.
Mori Hamada & Matsumoto Tel: 03-6212-8330 (Public Relations) E-mail: email@example.com www.mhmjapan.com Mori Hamada & Matsumoto is a full-service international law firm based in Tokyo, with
40 | The Journal | February 2009
offices in Beijing and Shanghai. The firm has over 250 attorneys and a support staff of over 380, including legal assistants, translators and secretaries. In 2008, the firm received the “Client Choice Awards 2008” from ILO, “Intellectual Property Law Firm of the Year” and “The Employer of Choice 2008” from ALB, and the “Asia Tax Awards 2008” from International Tax Review. The firm is dealing with many important and innovative deals, and also received many deals of the year, such as “M&A Deal of the Year” from IFLR. The M&A team was evaluated highly in league tables. The firm was placed No.1 for our M&A work in 2008, by Thomson Reuters, Bloomberg and mergermarket. Our lawyers were ranked among the most active lawyers in corporate legal affairs in 2008, by Nikkei Inc. Four were ranked in the “Corporate legal affairs division,” and two were ranked in the “Finance division.”
Morrison & Foerster LLP Tel: 03-3214-6522 Fax: 03-3214-6512 www.mofo.com (English) www.mofo.jp (Japanese) Morrison & Foerster is the largest and most diversified global law firm in Japan, with over 100 attorneys in Tokyo, including over 40 attorneys admitted in Japan. Our Tokyo office is now one of Japan’s 10 largest law offices (domestic or foreign), and more than 80 of our Tokyo-based attorneys are either Japanese or fluent in Japanese. The office has been broadly recognized. For instance, Chambers Asia, one of the leading publications on legal firms, recognized the office as having a leading practice in 7 different areas (M&A, banking/finance, capital markets, IP, litigation, real estate and antitrust), and recognized 16 partners as leaders in their fields. Asia Legal 500 2008/2009 Edition also recognized our firm in 7 different practice areas, and listed 13 Tokyo-based partners as leading attorneys. For more information about Morrison & Foerster’s practice in Japan, please contact Ken Siegel, Managing Partner of the Tokyo office, at 03-3214-6522, or visit www.mofo.com
Nagashima Ohno & Tsunematsu Tel: 03-3288-7000 Fax: 03-5213-7800 E-mail: firstname.lastname@example.org www.noandt.com Nagashima Ohno & Tsunematsu, established in 2000, is widely known as a leading law firm in Japan, and a foremost provider of international and commercial legal services. We represent domestic and foreign companies and organizations involved in every major industry sector and in every legal service area in Japan. We have successfully structured and negotiated many of Japan’s largest and most significant corporate and finance transactions, and have deep litigation strength spanning key commercial areas, including intellectual property and taxation. As of January 1, 2009, we have 334 lawyers
(inclusive of 11 foreign-licensed lawyers) capable of providing our clients with practical solutions to meet their business needs. Main Areas of Practice: General Corporate; Mergers and Acquisitions (M&As); Private Equity; Legislation/Regulations; Restructuring/ Insolvency; Compliance/Risk Management; Capital Markets; Banking; Securitization/ Structured Finance/Trust; Financial Regulations/ Fund Management; Insurance; Acquisition Finance; Project Finance; IP, IT and Entertainment; Tax Practice; Dispute Resolution; Real Estate and J-REITs; Antitrust Practice; Environmental Law Practice; Employment and Labor Practice; China Legal Practice. Contacts: Hisashi Hara, (Ms.) Yuko Tamai (Dai-ichi Tokyo Bar Association).
The Haruki and Tokyo-Marunouchi Law Offices Tel: 03-3214-2491 Fax: 03-3214-2494 www.tmhlo.jp The Haruki and Tokyo-Marunouchi Law Offices is one of Japan’s leading law firms with a history of nearly 60 years. The firm was established in 2006 following the formation of a new partnership pairing the strengths of Haruki, Sawai & Inoue in international business, real estate securitization, project finance, mergers and acquisitions, and contracts with the experience of the Tokyo Marunouchi Law Offices in domestic business, bankruptcy and corporate rehabilitation, broadcasting, private finance initiatives and information technology. The combination of our practices has provided an extraordinary opportunity for the service we provide to our clients. Our firm’s international division includes attorneys admitted in Japan and the U.S., with several receiving their legal education in the U.S. and working in some of the largest U.S. law firms. We provide advice to many prominent Japanese and foreign companies throughout Asia, Europe and the U.S. on a full range of corporate and transactional matters. Our firm also has a significant litigation practice, having represented several Japanese and foreign companies in Japanese courts and international arbitration tribunals. Our firm also represents clients in disputes regarding intellectual property, international patents and employment matters. For more information, please contact Noriko Sawai at email@example.com (Daini Tokyo Bar Association).
White & Case LLP White & Case Law Offices (Registered Association) Tel: 03-3259-0200 Fax: 03-3259-0150 www.whitecase.com White & Case LLP was one of the first foreign law firms to open in Japan when the law was changed to permit such firms to establish offices in Japan in 1987. We now have more gaikokuhojimu bengoshi (registered foreign lawyers) than any other law firm in Japan, as well as one of the largest groups of Japanese attorneys for a foreign-based law firm.
Translation Okabe & Yampolsky Translations Tel: 03-5532-7291 E-mail: firstname.lastname@example.org www.oytrans.com Okabe & Yampolsky Translations is a New York City-based firm specializing in Japanese legal translation. We work in no other fields and handle no language pairs other than Japanese and English. Our specialized approach—rare in the translation industry—has allowed us to develop a deep well of know-how, experience and fieldspecific knowledge, and these in turn enable us to produce better translations faster and more efficiently. We are known for the quality and speed of our work and the reliability of our services. Our clients are attorneys, investors and other professionals in the U.S., Japan and Europe. Legal fields in which we have been particularly active include intellectual property, M&A, securities and finance, financial restructurings, real estate, litigation, and general business and commercial law. We have an in-house professional staff of 15, and have been in operation since 1998. In the fall of 2008, we opened our Tokyo office, to better serve our growing ranks of Japan-based clients.
including M&A, financial opinions and advisory services, and financial restructuring. The firm provides cross-border M&A advisory services, renders expert fairness opinions and is a leader in providing independent valuations for tax and financial reporting purposes. Established in 1970, the firm has over 800 employees in 14 offices in Asia, the United States and Europe. Each year the firm serves more than 1,000 clients ranging from closely held companies to Global 500 corporations. For more information on Houlihan Lokey’s services in Japan, contact Ryuta Fujino, Managing Director, at email@example.com
Legal Consulting RIS International Tel: 03-5510-5285 Fax: 03-5510 5286 www.ris-corporate.jp/ RIS International (RIS) was formed in 1999 when our five founding partners merged their offices to form an incorporated partnership. RIS provides services that go beyond the immediacy of the business decision at hand and integrate our experience with that of our network of affiliated accounting and tax professionals in order to provide “big picture” advice and consulting. We provide foreign companies and individuals with high-quality specialist advice and, thereby, assist them in conducting business in Japan. Our ability to offer professional, bilingual services—and together with the extensive knowledge and experience of our staff members—has won us the trust of the high-profile companies we represent. Our office specializes in a number of corporate business areas, including company incorporation (Kabushiki Kaisha, Branch office, Godo-Kaisha, Representative), immigration and visas, business and advisory licenses, real estate transactions and company secretarial matters. RIS also provides specific services and support on request to those clients looking to expand their business in Japan. For more information on RIS services, contact Mr. Yoshihide Kurihara, Partner, at firstname.lastname@example.org; or Ms. Hong, Henwood Foreign Client Relations Manager, at email@example.com
Risk Management M&A and Financial Advisory Consultants International Risk Services Houlihan Lokey Tel: 03-4577-6000 Fax: 03-4577-6099 www.HL.com/jp Houlihan Lokey, an international investment bank, provides a wide range of services,
Tel: 03-5369-3933 E-mail: firstname.lastname@example.org or email@example.com www.intl-risk.com
International Risk, originally the investigations arm of a Big Four accounting firm and now a subsidiary of NYSE-listed FTI Consulting Inc.
(www.fticonsulting.com), has a proven track record and reputation for integrity, independence and insight. International Risk is led by Steve Vickers and a team of seasoned professionals with extensive high-level investigative, security and corporate risk experience. From corporate scandals to political instability, companies today confront an everincreasing array of business, economic, political and security concerns that directly impact their operations and profitability. International Risk assists clients mitigate these risks with critical information and timely solutions. Whether the task is to determine the reputation and suitability of a business partner, untangle a complex fraud scheme or contain a crisis, International Risk’s mission is to provide clients with insight for informed decision-making. International Risk operates globally and provides comprehensive business risk solutions including litigation support and e-discovery services, brand protection and intellectual property strategies, investigative due diligence services, fraud and corporate investigations, business intelligence, political and security risk assessments, and crisis containment services to the world’s leading law firms and organizations.
Legal Technologies & Investigation Kroll Tel: 03-3218-5270 Fax: 03-3213-7346 www.kroll.co.jp Kroll, the world’s leading risk consulting company, provides a broad range of legal and litigation support, computer forensics, eDiscovery, electronically stored information and investigative support to help clients make better informed decisions, reduce risks, solve problems and capitalize on opportunities. Kroll has provided support for the legal community worldwide for over 35 years, and for the last 16 years in Tokyo. We excel in investigating IP infringers, trade secret or privacy data loss, providing detailed reputational due diligence reports on target acquisitions, conducting computer forensics and eDiscovery support, leading internal fraud investigations (including FCPA concerns), conducting forensic accounting and other compliance audits, supplying crisis leadership support, and many other critical services to international and local law firms and corporations in Japan. Kroll has offices in more than 65 cities in over 33 countries, with a strong presence throughout Asia, especially in Tokyo, Seoul, Hong Kong, Beijing, Shanghai, Singapore and Mumbai. Kroll has more than 4,800 employees that serve a global clientele. Kroll is a subsidiary of Marsh & McLennan Companies, Inc. (NYSE: MMC), the global professional services firm.
February 2009 | The Journal | 41
White & Case LLP was the first foreign firm to establish a “joint enterprise” with Japanese attorneys, and is unique in its success in integrating into the domestic Japanese legal scene by attracting both foreign attorneys with Japanese-language ability and Japanese lawyers with international experience, as well as establishing teams of Japanese and foreign professionals who are effective in dealing in Japan’s bi-legal, bilingual and bicultural environment. The Tokyo office of White & Case LLP now boasts over 100 professionals, including not only gaikokuho-jimu bengoshi and Japanese attorneys, but also zeirishi (licensed tax attorneys) to offer legal advice to both Japanese and international clients across key practice areas, including Alternative Dispute Resolution; Litigation and Trade; Banking and Finance; Restructuring; Real Estate; Capital Markets; Mergers & Acquisitions; Project and Equipment Finance; and Tax and International Estate Planning.
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OUT AND ABOUT
2009 ACCJ Shinnenkai Photos by Aron Kremer
ACCJ Leaders (left to right): Executive Director Samuel Kidder, Vice President William Bishop, U.S. Deputy Chief of Mission in Japan, James Zumwalt, Governor Andrew Conrad, Governor Patricia Oâ€™Keefe, President Thomas Whitson, Governor Tad Johnson, Chairman Allan Smith, Governor John Kakinuki, Vice President Mark Schwab, Governor James Foster, Governor Jim Weisser, and outgoing Governor Vicki Beyer
ACCJ President Thomas Whitson greets Yoshiaki Honpo, Deputy Vice Minister for Tourism Policy.
Taizo Nishimuro, CEO of Tokyo Stock Exchange, and Junichi Ujiie, Chairman of Japan-U.S. Business Federation
February 2009 | The Journal | 43
60th Sapporo Snow Festival is on February 5-11
67th Tokyo International Gift Show Spring 2009 February 3-6, 2009 10:00-18:00 (last day: -16:00) www.giftshow.co.jp/english One of the premier and largest personal gift and decorative accessory international trade fairs in the world, TIGS was established in 1976 and is held semiannually (spring and autumn). Some 2,200 companies spread the word on new products, the latest trends and fashions at 4,000 booths. The Gift Show is divided into 27 goods categories. Tokyo Big Sight, all East and West Halls, and Atrium, Odaiba, Tokyo Waterfront, Kokusai-tenjijo Station, Yurikamome
Setsubun February 3, 2009 Setsubun is a custom welcoming spring that dates back centuries. Witness the crowds—especially at shrines—receiving soybeans tossed by “celebrities” shouting “Oni wa soto! Fuku wa uchi” (Devils out! Fortune in!).
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43rd Super Market Trade Show
February 3, 2009
February 11-13, 2009 10:00-17:00 (last day: -16:00) www.smts.jp/english/
Daruma are good luck dolls for business and for personal good fortune. You can participate as old Daruma are returned to the temple and burned in a ceremony led by a Buddhist priest, while new dolls are purchased to improve one’s fortune in the coming year. Nishiarai-daishi Temple, Daishimae Station
60th Sapporo Snow Festival February 5-11, 2009 www.snowfes.com/english/ Every winter, about two million people come to Hokkaido to see the hundreds of beautiful snow statues and ice sculptures that line Sapporo’s Odori Park, the grounds at Community Dome Tsudome and the main street in Susukino. The Festival began in 1950 when local high school students built six snow statues in Odori Park. In 1955, the Self-Defense Forces joined in and built the very ﬁrst massive snow sculpture.
The leading international trade show for supermarkets in Japan will be the ﬁrst trade show of the year in the country to introduce international foods and beverages. Tokyo Big Sight, East Hall, Odaiba, Tokyo Waterfront, Kokusai-tenjijo Station, Yurikamome
Japan v Australia 2010 FIFA World Cup Qualiﬁer February 11, 2009 www.thefanatics.com/package Many consider this qualiﬁer for the 2010 World Cup in South Africa as another rematch of Australia Socceroos’ 2006 World Cup ﬁnals showdown with Japan. Nissan Stadium (twotiered, 72,327 seats), Yokohama, Kozukue Station, JR Yokohama Line
Eric Clapton February 12 & 13, 2009 (Osaka) February 15, 18 & 19, 24 & 25, 27 & 28, 2009 (Tokyo) 19:00 (15th & 28th: 17:00) www.ericclapton.com/ The world’s preeminent rock & blues guitarist is making his 18th visit to Japan over a 35-year span, his last appearance being in late 2006. Udo Artists Inc. has designed commemorative tickets that are miniaturized versions of the promotion posters from his ﬁrst visit to his 12th (1999). Osaka Castle Hall (16,000 seats), Osaka Castle Park, Tel. 06-63414506, Osaka-Jo Koen Station, JR Loop Line. Tokyo Nippon Budokan (14,201 seats), Tel. 03-3402-5999, Kudanshita Station, Exit 2 (5 min,), Tokyo Metro Hanzomon & Tozai, Toei Shinjuku Lines; Exit 1 or 3 (if crowded)
nano tech 2009
Tokyo Big Sight, East 3-6 & Conference Tower (tech): East 3 (converting, neo functional); East 4 (bio); East 6 (advanced surface, surface ﬁnishing, electronics printable). Odaiba, Tokyo Waterfront, Kokusai-tenjijo Station, Yurikamome
February 26-March 5, 2009 www.jnto.go.jp
APEBH 2009 February 18-20, 2009
The Asia-Paciﬁc Economic and Business History Conference is organized by the Economic History Society of Australia and New Zealand, and hosted by Gakushuin University. Early career researchers are encouraged to participate. Researchers across a range of disciplines are warmly welcome, including economists and historians of economic thought, business, society and management, as well as archivists. Gakushuin University, 1-5-1 Mejiro, Toshima-ku, Tokyo, JR Mejiro Station, Yamanote Line
JGF 2009 February 20-22, 2009 10:00-18:00 (last day: -17:00) www.japangolffair.com/english
February 18-20, 2009 10:00-17:00 www.nanotechexpo.jp/en/
This match-up between technology and manufacturing is an attractive draw for industries such as electronics, automobile, machinery, medicine, chemical and printing—offering major potential for generating more business. The conference will be covering the entire nano marketplace with concurrent organized exhibitions, as well as creating a viable meeting place for meaningful business encounters. Six concurrent events are Nano Bio Expo 2009, ASTEC 2009, 38th METEC ’09, Convertech JAPAN 2009, neo functional material 2009, and Printable Electronics 2009.
Meet Japan 2009
A large variety of golf-related companies and businesses will gather at the Japan Golf Fair. It’s an opportunity to see everything from much-talked-about golf goods, to getting the latest golf information. Tokyo Big Sight, West, 1-2, Odaiba, Tokyo Waterfront, Kokusai-tenjijo Station, Yurikamome
In cooperation with Japan’s International Convention Cities, the Japan Convention Bureau (JCB)—a division of the Japan National Tourist Organization—has made its selection among the association executives and international meeting planners who had applied by the January 9 deadline, and has extended an invitation to come to Japan as its guests in the Meet Japan – Hosted Buyers Program 2009. Participants learn about the superb convention and tourist amenities provided by the various regions. They also experience ﬁrsthand the warm hospitality and unique charm of each Convention City. They depart from their country on February 26, and the regional city inspection tours run from February 28 to March 3, concluding with a Meet David Umeda is Japan session involving Senior Editor at Paradigm city representatives, and a reception on March 4.
February 2009 | The Journal | 45
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CSR Survives Downturn In research carried out by Edelman, the world’s largest independent public relations firm, more than half the Japanese consumers surveyed say commitment to social purpose would not change even in times of economic downturn. Furthermore, 41% say they would purchase brands that support a worthy cause, even if the brand is not the least expensive. The Good (social) Purpose consumer study interviewed 502 Japanese people online and more than 5,500 living abroad.
Providing Service At the opening presentation of the EU-Japan Regional Cluster Forum held in December, Dr. Martin Schulz, senior economist at Fujitsu Research Institute (FRI), stated: “Japan’s future is in services, but it is poorly prepared.” Dr. Schulz should know. Fujitsu has been diversifying—from electronics maker to service provider—in order to maintain profits reliant on in-place contractual work, rather than on fickle consumer spending around the world. The FRI is a private think tank based in Tokyo, focusing on structural reforms and providing strategic advice in Japan. Dr. Schulz is in charge of research and consultation regarding macroeconomics, international finance, industrial restructuring and corporate strategies. “Services will eventually become more profitable, but right now Japan, at 65%, lags behind the USA at 80%, for share of services in total employment,” he explains. “Interest rates will go up eventually in Japan,” predicts Dr. Schulz. “In an ageing society, the only way to stimulate
spending among the older population is to encourage them to spend the interest earned on their savings.” He arrived in Japan in 1991 to study the burst of Japan’s economic Bubble. His second assignment commenced in 1998. Dr. Schulz has witnessed a great deal of change during his time in Tokyo. “Japan is more productive than the U.S. in R&D in terms of labor productivity, but many projects lack direction. Since capital does not cost much to borrow in Japan, R&D is a good way of wasting money,” he muses.
When asked if it was important to buy from companies that consumers know are socially responsible, 64% of the Japanese surveyed respond it is the key factor; and 46% say they would buy products from brands that make a donation to worthy causes. Only 37% of Japanese consumers surveyed indicate they are personally involved in helping the less fortunate or disadvantaged, the lowest percentage in the Asia-Pacific. Nonetheless, an average of two Japanese consumers in every three (66%) believe it is their duty to contribute to a better society and environment. Protecting the environment (68%) is the top priority among worthy causes that Japanese people surveyed support. Some 58% believe they would be influenced by a company’s environment-related performance. About specific issues, 77% care most about environmental protection, while 74% focus on improving people’s health and the quality of healthcare—indicating heightened recognition of health management as a major issue.
February 2009 | The Journal | 47
Ritz Satisfaction The Ritz-Carlton, Tokyo offers some insight into what makes it stand out, most recently in a guest satisfaction survey of 138 hotel brands in Japan by J.D. Power Asia Pacific Inc. “Don’t discount and don’t take the flowers off the tables to save money,” says Ricco de Blank, general manager, “because people still want a good atmosphere when they visit your hotel. “I can’t change the economy, but I can make sure guests are happy,” says the Dutch-born hotelier, who has been in the hospitality industry for some 18 years. His strategy is clearly working. The December survey ranks The Ritz-Carlton Hotel Company, LLC No. 1, putting it in the lead after polling more than 36,000 international travelers. Both The
Ritz-Carlton, Tokyo and Osaka have won top honors for three years+ running. “Fixed costs in Japan are significantly higher than elsewhere. Salaries are higher and so are energy costs. Reducing hotel room prices is a short-term strategy,” explains de Blank. “But what you get in Japan is a workforce that delivers excellence. “Our customers are 70% Japanese, and our positioning is very domestic,” adds de Blank. In the current economic climate, where international business trips have been reduced to essential-only and a stronger yen has made travel to Japan more expensive, The Ritz-Carlton’s Japancentric strategy is a smart one, indeed.
McCartney in Tokyo Part of the Gucci Group, fashion brand Stella McCartney has launched its first standalone store in Tokyo, located in Aoyama, alongside a legion of other fancy designer brands. Stella McCartney, daughter of Beatles Paul McCartney, came to Japan at the end
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of November to launch her eponymous named, 204m2 store launched the previous month. The interior decor relies on natural materials, including wood, brass and marble, and hosts whimsical touches in the way of non-permanent displays. The first month the store opened, for example, saw animal figurines made from Lego pieces placed on shelves, providing a playful touch to a luxury destination. Aside from apparel, accessories and other branded Stella McCartney
merchandise, the Tokyo store also sells T-shirts not available at the label’s other destinations, which include Isetan and Matsuya department stores, and specialty boutiques Estnation and United Arrows in Japan. The Tokyo launch brings Stella McCartney’s global reach to 12 freestanding stores, with a slew of outlets slated to open this year in the Middle East (Kuwait, Qatar and three other spots), two in Asia, as well as New Delhi and elsewhere in India.
Life Watching The World Economic Forum (WEF) has named Japan-based Mobile Healthcare Inc. (MHC) as a 2009 Technology Pioneer, among the 34 technology visionaries to be honored at its forum. The company develops real-time health solutions, which can be accessed over mobile phones, for preventing and managing diabetes, obesity and other lifestyle-related illnesses. The honorees were selected among 320 finalists from around the world through a stringent review process involving a team of 44 global experts. The WEF organizing body describes the
winners as “innovators of the highest calibre, whose technologies will have a deep impact on business and society.”
Says James Nakagawa, founder & CEO, Mobile Healthcare Inc.: “We have aspired from the outset to be pioneers, exploring the life-changing potential of mobile technology and finding solutions that empower people to tackle their own health issues affordably and easily via their personal cellular devices and the Internet. I was at once ecstatic and humbled by the news that our work had gained disciples from amongst the venerable body of global business and financial leaders put forth by the World Economic Forum.”
EBC Annual Report The European Business Council in Japan (EBC) on November 26, 2008 released its annual report on the Japanese business environment. It reinforced the case for a comprehensive EU-Japan Economic Integration Agreement that was first suggested by the EBC back in 2007, to eliminate barriers to trade between Japan and the European Union. “Economic Integration: the New Reform Paradigm” also argues that the current global economic crisis has exposed fundamental weaknesses in Japan’s economic development model. The latter is considered to be a hangover from the post-war era that depends on central government planning and export-led expansion. Under such a model, outdated regulation, unnecessary bureaucracy and vested interests continue to stifle innovation— preventing the development of new business models and limiting the growth of new companies. The report added that Japan faces the challenges of an aging population, declining birthrate and
shrinking labor force that threatens to overwhelm its pension and healthcare systems. The EBC is the trade policy arm of the 18 European national chambers of commerce and business associations in Japan. The council believes that Japan has reached a crossroads: “Major decisions need to be made about [Japan’s] economic direction, and there is little time to take them.” The EBC urges the government to make greater integration into international systems, the guiding principle for its new economic approach, which would kick-start Japan’s growth and competitiveness. Outgoing EBC Chairman Richard Collasse says, “Japan can no longer export its way out of crisis. It needs to change the way it regulates and manages its economy. “Its approach is too slow, too bureaucratic and too isolationist to fit with the globalized economy from which it seeks to profit,” he says. “This is not a call for Japan to relinquish control, but to fully engage in global systems, Contact Nicole adopt international standards, and abandon Fall at nicole@ barriers to trade. ﬁvebyﬁfty.com if you have ideas “There is no time to waste,” says Collasse. “The for this column. people of Japan deserve immediate and rigorous economic reform.”
February 2009 | The Journal | 49
2009 Guide to Business Start-ups ACCJ Helps SMEs The global downturn requires proven ways. he localized demands in starting up a business in Japan don’t stop with your IPO or first day of operations to be sure. That is why professional services with global resources are not just valuable options available here, but rather seasoned crisismanagement partners your business demands. The government-related Japan External Trade Organization (JETRO) offers the following breakdown on how to start a business in Japan (www.jetro.go.jp/en/invest/)—Section 1 Incorporating Your Business; Section 2 Visas and Status of Residence; Section 3 Taxes in Japan; Section 4 Human Resource Management; Section 5 Trademark and Design Protection Systems; and a two-part section on Initial Cost Estimation (model case and flowchart). While it is understandable that what may first come to mind are the large-sized corporations doing business here, the American Chamber of Commerce in Japan also places a high premium on its small to mid-sized company members. Back on December 12, for example, the B2B Sales Committee sponsored “Leadership, Not Management in Uncertain Times for the Small to Mid-sized Business,” which addressed how to survive and stand above competitors in a tough 2009 and beyond scenario of crisis-level events in the global markets. Ground-level tips and some practical back-to-basics lessons were shared by the presenters. Beyond impacting the market, the deterioration in the economy impacts human resources. Organized by the Legal Services Committee, the ACCJ addressed the topic of “The
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U.S. Employment Market: Challenging Times,” on November 20. The particular challenges to employers in managing labor costs, increasing operational efficiencies and avoiding potential disputes with employees were some of the issues covered. The ACCJ also pointed out how the U.S. Presidential election results were likely to have a significant impact on labor law and policy (which would, in turn, affect doing business here). The implications of the changes in the economic circumstances were explored, along with offering creative strategies and tips aimed at helping employers here manage risks and thrive during such economic downturns. The breadth and depth of the ACCJ lies in its membership, which also is involved in the European sphere. The Competition Policy Task Force on November 13 offered a “U.S.-Japan-EU Competition Policy Law Conference,” dealing with how the authorities have increased enforcement activity internationally, which intensifies the need for compliance by global companies to competition law. A key aim of the ACCJ conference was to encourage international harmonization of competition law. Starting up a business in Japan—particularly as the global economic crisis deepens—demands a level of expertise that, fortunately, the very competitive domestic market has been honing for decades. David Umeda Senior Editor at Paradigm
AP Outsourcing Tel: 03-5228-1820 Fax: 03-5228-1830 www.APOutsourcing.jp AP Outsourcing (APO) is an independent outsourcing provider of Accounting and Payroll with Big Four experience (Arthur Andersen and KPMG). It was separated from Azsa Audit Corporation (the audit group of KPMG Japan) in April 2004. AP Outsourcing provides bilingual staff with extensive experience and knowledge of financial operations, payroll and tax, helping you compete better and accomplish your goals. Start-up Support: APO provides business start-up support for new foreign corporations and venture companies, including legal registration, tax and social insurance applications. Project Management: Effective and efficient project management support for outsourcing migration. Outsourcing Operations: Well-qualified bilingual accountants, tax/social insurance specialists and system experts accurately and promptly provide outsourcing operations, focusing on the confidentiality of accounting payroll/information. Loan Staff: Accounting/payroll processes are facilitated by the placement of our own specialist staff in the clients’ offices for specific periods. APO also offers other specific services and support on request. For more information on how we can help you to simplify your business processes, call AP Outsourcing at 03-5228-1820.
Nagamine Accounting Office Tel: 03-3581-1975 www.nagamine-mri.com Since 1989, Nagamine Accounting Office has been assisting foreign-affiliated firms (nearly 80% of our clients are foreign-affiliated) expand their business operations into Japan by providing expertise in the areas of tax and accounting. NAO supports the business start-up process in Japan, thus offering payroll and cash management services. Our main areas of service are as follows: Transfer Pricing Consulting: Evaluating taxation risk based on client interviews and the analysis of internal information regarding related-party transactions. We offer the appropriate solutions on transfer pricing risk management.
Audit: When foreign-affiliated companies implement voluntary audits in Japan for the purpose of M&As or per request of the parent company, NAO can support with the proper handling of audits and due diligence. Tax & Accounting: NAO tailors all of services to the needs of our clients, from routine bookkeeping to the preparation and review of financial statements in accordance with the IFRS or US GAAP. Payroll: NAO can provide payroll accounting and social insurance services for our client. Cash Management: NAO can also act as an expense clerk service; by giving authorization to wire vendors, we can perform the majority of back-office financial functions. For more information, please contact Shinya Nishi at firstname.lastname@example.org
Public Relations Edelman Japan Tel: 03-6403-5200 E-mail: email@example.com www.edelman.jp www.edelman.com Founded in 1952, Edelman is the world’s largest independent public relations firm, with 3,400 professionals spanning 54 offices worldwide. No one owns us, so we are free to think. To listen, question and evaluate with an open mind unrestrained by conventional wisdom—and then provide informed and independent counsel to our clients. With leadership who has decades of in-country experience, Edelman Japan has become the fastest-growing global PR consultancy in the market. We build relationships between our clients and their stakeholders through dialogue, relevant experiences and credible sources of information—backed by industry-leading research into cutting-edge areas in communication such as new digital media, corporate social responsibility and trust. Today more than ever, public relations needs to be at the forefront of a successful company’s strategy because it has the immediacy and transparency to build enduring credibility and trust. Edelman was named “Large Agency of the Year” in 2008 and “Asia-Pacific Network of the Year” in 2007 by PRWeek, and a top-10 firm in the Advertising Age “2007 Agency A-List,” the first and only PR firm to receive this recognition. For more information, contact Thomas R. Zengage, Representative Director and Chairman of Edelman Japan: firstname.lastname@example.org; or visit www.edelman.jp/ or www.edelman.com/
Real Estate Services Kimita Estate Plan Co., Ltd. Tel: 03-5770-4649 Fax: 03-5770-4650 E-mail: email@example.com www.kimita.co.jp/e Since our establishment 10 years ago, Kimita Estate Plan has been offering extensive property listings. From the beginning, we have committed ourselves to interact with our customers with an attitude that’s 100% genuine and sincere. Whether it is in buying, selling, renting or investing, we always strive to provide better service and consider customer satisfaction a primary source of joy. Why not own your own home! We have good working relationships with Japanese banks and mortgage companies. Please feel free to contact us for the latest information on the best properties for rent or sale in the Greater Tokyo area, or visit our Web site for the latest property recommendations.
Relocation Services Asian Tigers Premier Worldwide Movers Co., Ltd. Tel: 03-6402-2371 Fax: 03-6402-2305 E-mail: firstname.lastname@example.org www.asiantigers-japan.com Move Like a Tiger Relocating into a strange culture can be a nerve-racking and stressful experience. It need not be so. The Asian Tigers group’s unmatched expertise in the move management and relocation industry makes any employee transfer a simple and smooth experience. With 27 offices in 13 countries and employing over 1,500 staff, the Asian Tigers group is Asia’s leading moving and relocation group. And we show it by offering a service of unparalleled support in relocating throughout Asia and the rest of the world. Contact us today for a no-obligation corporate consultation and/or free estimate for any staff you may have that will be relocating soon. Contact: Andrew Olea, Director of Sales & Marketing. Call 03-6402-2371, email@example.com or visit our Web site at www.asiantigers-japan.com
February 2009 | The Journal | 51
Accounting & Business Process Outsourcing
BIOGRAPHY Christian Rene Baudat ■ Born June 20, 1962 ■ Swiss ■ Married, one child ■ 1982-1985 Hotel School Lausanne, Diploma in Hotel Administration ■ 1985 F&B Management Trainee, Hilton Tokyo ■ 1988 Restaurant Manager, Hilton Tokyo Bay ■ 1988 Assistant F&B Manager, Hilton Tokyo Bay ■ 1990 F&B Manger, Hilton Singapore ■ 1992 F&B Manager, Hilton Nagoya ■ 1993 Executive Assistant Manager, Hilton Nagoya ■ 1995 Resident Manager, Hilton Zurich Airport ■ 1998 General Manager, Hilton Otaru ■ 2002 General Manager, Hilton Nagoya ■ 2005 to present General Manager, Hilton Tokyo ■ Languages: French, German, English, Japanese ■ Special interests: automobiles, music, tennis, skiing
Right Man for the HOTELIER TREATS THE HILTON AS HOME By Catherine Shaw
Interviewing Christian R. Baudat in the renovated Marble Lounge at Hilton Tokyo proved to be difﬁcult. Multitasking while he holds a detailed discussion with me about his long career with the Hilton hotel group, Baudat simultaneously observes all the action going on in this busy 542m2 space, greets guests, plus discretely guides a nearby waiter to a table he has noticed needs more wine. Pundits claim the best hotel general managers are usually Swiss or German trained (both countries being home to the leading hotel schools); Baudat, moreover, strikes me as having been born for this life. It is clear he treats the Hilton Tokyo as a much loved home. On each of the
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previous four occasions I have visited, Baudat was in the lobby greeting guests by name, speaking as easily in Japanese as he does in his native French. Even more impressive, his staff says he knows the name of even the most junior of employees.
PHOTOS HILTON HOTELS CORPORATION
Baudat is well known for his focus on, and dedication to, the hotel industry. After completing a Diploma in Hotel Administration in 1985 at the renowned Hotel School Lausanne, his long career with Hilton hotels began as an F&B management trainee at the Hilton Tokyo. He subsequently took on responsibilities as F&B manager at the Hilton Tokyo Bay, Hilton Singapore and Hilton Nagoya. Following a few years as resident manager of the Hilton Zurich Airport, he returned to Japan in mid-1998 to serve as general manager of the Hilton Otaru. In 2002, Baudat became general manager of the Hilton Nagoya, next assuming his current position at the Hilton Tokyo in April 2005. An understanding of all aspects of hotel activity is critical in successfully managing a hotel with 815 rooms, seven restaurants and bars and extensive banquet facilities. Baudat adds construction management as a further personal skill, recently having led a multi-million dollar refurbishment of Tokyo’s ﬁrst international hotel. “It needed a facelift,” admits Baudat. “Tokyo’s hotel market has changed dramatically in the last decade, and the hotel needed to take a fresh look at what our guests wanted.” Baudat stresses that the Hilton Tokyo’s phenomenally successful relaunch involved much more than cosmetic changes. “We wanted to reposition the hotel,” explains Baudat. “So the hotel needed more than just new carpets and a touch-up.
“It was a great opportunity to be part of this venture,” he says. “I’ve learned the key to a successful renovation in a hotel environment is twofold: a good project team that includes the best project manager and quantity surveyor, and a tightly controlled program focused on priorities. “We put resources where they mattered most—the guestrooms,” says Baudat. “And we looked at the areas where an improvement would be most appreciated, like the entrance foyer that was transformed from a tired, almost ’80s-looking foyer into a strikingly modern greeting area.” It has to be said that the results are stunning. I did a double take while walking through the entrance, encountering a new elegant marble foyer with multiple kitchens, comfy chairs, contemporary Japanese artwork—and a lively buzz. Baudat felt team members also needed to beneﬁt from the renovations. “I knew it would help them appreciate how the hotel was changing,” he explains. “We made functional changes to the back-of-thehouse operations. One of the best things we did was to renovate the sales ofﬁce so that staff would ‘see’ what they were promoting and get a sense of the excitement from the renovation. We also renovated the team dining facilities; and this was obviously appreciated.” One of the most innovative elements created in the refurbishment process was
the creation of a “hotel-within-a-hotel” concept that has proven highly proﬁtable. The 174 newly renovated Executive guestrooms and an exclusive, modern lounge have proved exceptionally popular with business travelers who enjoy exclusive services such as private check-in and a relaxing bar and lounge, whose panoramic views of Tokyo took me by surprise. “It’s one of our best kept secrets,” laughs Baudat before adding, “One of the things I wanted to create was an environment where executive guests could work or relax where they want. “We now have wireless Internet throughout; and if guests need a printer, we will simply bring it to them where they are,” says Baudat, who came up with the idea of providing maximum ﬂexibility to his guests. “Our No-Name bar has also been very well received; guests who want to mingle or chat informally sit at the bar and enjoy the relaxed social environment.” The Hilton Tokyo also invested heavily in its state-of-the-art gym and pool area, which is much larger than that found in most hotels. “It’s open all day and night,” says Baudat, proudly showing me the hightech gym equipment and stopping to talk with a guest climbing off a treadmill. Many of the ideas introduced at the iconic hotel, like the 24-hour service in the ﬁrst-ﬂoor Marble Lounge and smoke-free atmosphere, emanate from Baudat’s professional eye and enthusiasm
for continually improving the hotel environment. “We recently introduced another wonderful new concept, a Chocolate Boutique in the foyer,” says Baudat, obviously having drawn upon his innate Swiss love of quality chocolate. “We already have a fantastically popular cheese and chocolate buffet in the lobby, but this new boutique is quite amazing and the ﬁrst of its kind.” Baudat’s passion for Japanese art led to the “Suite Gallery Project” where 12 Deluxe Tower Suites were reappointed with modern Japanese ﬁne artworks. Baudat brought in renowned art gallery Roentgenwerke AG to feature contemporary works by young and talented Japanese artists, and is happy to see the pieces already proving to be an instant success with companies hosting creative meetings. A female staff member who had worked with Baudat in Nagoya tells of how he even once agreed to be photographed perched on the edge of a bubble bath in which a beautiful Japanese model was posing—as part of a special hotel promotion for women. Baudat wasn’t at all keen at ﬁrst, she laughs recalling the experience; but as soon as we explained it would be good for the hotel, he agreed and posed with Catherine Shaw the best of humor. Baudat is a freelance journalist based was the best manager I’ve in Tokyo. ever worked for, she adds. ■
February 2009 | The Journal | 53
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American Chamber of Commerce in Japan Masonic 39 MT Bldg. 10F 2-4-5 Azabudai, Minato-ku Tokyo 106-0041 Tel: 03-3433-7304 Fax: 03-3433-8454 E-mail: firstname.lastname@example.org Web: www.accj.or.jp Bringing Businesses Together for 61 Years. ACCJ members help the ACCJ grow by referring new members!
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Kamiyama Ambassador 108 18-6 Kamiyama-cho Shibuya-ku, Tokyo 150-0047 Tel: 03-3466-4798 Fax: 03-3466-4799 E-mail: email@example.com Web: www.runforthecure.org
If you have big ideas for fundraisers and special events, please join us! We are looking for volunteers interested in a leadership role within the Foundation. If you work well with people, enjoy networking, and want to help us raise the necessary funds to achieve our mission, please join our development team.
ARK (Animal Refuge Kansai) 595 Noma Ohara Nose-cho, Toyono-gun Osaka-fu 563-0131 Tel: 072-737-0712 Fax: 072-737-1886 Web: www.arkbark.net Tokyo e-mail Briar at firstname.lastname@example.org or call on 080-6146-3889 (Japanese/English OK) Sponsor, adopt or foster a pet.
Paradigm Kamiyama Ambassador, 209 18-6 Kamiyama-cho Shibuya-ku, Tokyo 150-0047 Tel: 03-5478-7941 Fax: 03-5478-7942 E-mail: email@example.com Web: www.paradigm.co.jp Highly experienced writers and designers create striking original layouts to capture attention and inform readers. Publishers of the ACCJ Journal and Kaleidoscope.
54 | The Journal | February 2009
To book space on this page call Francesca on 03-5478-7941 or e-mail: firstname.lastname@example.org
BEHIND THE BOOK
Followership: How Followers Are Creating Change and Changing Leaders By Barbara Kellerman Harvard Business Press, 305 pp, $29.95 Reviewed by Tom Baker “Leader” is a word that never goes out of style. “But all of us follow some of the time. It’s the human condition,” writes Harvard University lecturer Barbara Kellerman in her book Followership, which looks at the less glamorous people, without whom leaders could not exist. Kellerman acknowledges the importance of “good” followers (in a moral and pragmatic sense), but Followership contains scant advice on how followers might make the most of their lot, or how a leader might cultivate good followers. Instead, the bulk of her book is devoted to how an observer might classify followers. Her own yardstick is a ﬁve-level scale of follower engagement (whether pro or con regarding the leader). At the low end are Isolates, who are “completely withdrawn.” These types of followers are discussed brieﬂy, while the remaining four types each get a chapter-length case study. First come the Bystanders, who “observe but do not participate … which amounts to tacit support for whoever and whatever constitutes the status quo.” Kellerman’s case study for this follower is Nazi Germany, which was full of citizens who may not have participated in the crimes of the regime, but passively allowed them to happen. Next are the Participants, who care enough about their leaders or organizations—pro or con—“to invest some of what they have (time, for instance) to try to have an impact.” The case study is the pharmaceutical company, Merck, which plowed ahead with plans to release the arthritis drug Vioxx in 1999, despite signs that it could
have deadly side effects. When those signs became reality, Merck took a hit to its reputation and its bottom line. Kellerman writes that Vioxx was championed by high-level executives—leaders in their own spheres, but followers of Merck CEO Raymond Gilmartin—who thought a blockbuster drug was essential to the company’s health. A signiﬁcant aspect of this case is that Gilmartin had been recruited as CEO from outside the pharmaceutical industry, making him especially dependent on the advice of his more experienced underlings. The fourth type is Activists, who “are eager, energetic and engaged … they work hard either on behalf of their leaders or to undermine and even unseat them.” The example given is lay Catholics in the Boston area, who objected to Cardinal Bernard Law’s inept and secretive handling of sexually abusive priests. Some of the laypeople were spontaneous grassroots campaigners, but others—such as a judge and the state attorney general—were acting in ofﬁcial leadership roles. Last come the Diehards, who “are deﬁned by their dedication, including their willingness to risk life and limb.” Here, Kellerman looks at brave and loyal U.S. soldiers who did their best in a major operation in Afghanistan, only to see it botched by higher-ups. All four case studies show dramatically negative situations. But most followers make their mark, for good or ill, through the cumulative effect of their day-to-day activities. By focusing on catastrophes—however Tom Baker is interesting they may be in their detail—the a staff writer author misses the opportunity to explore at The Daily Yomiuri. a mundane but fundamental reality. ■ We are giving away 3 copies of Followership. Simply e-mail email@example.com by February 16. The winners will be picked at random. Winners of Rivals: Lennart Johansson, Lennart Johansson & Associates; Darren Morrish, Ramada Osaka; Scott D. Peterman, Sidley Austin Nishikawa.
February 2009 | The Journal | 55
Advocacy Update ACCJ Viewpoints are the core products of ACCJ Advocacy. An ACCJ Viewpoint is a brief paper, generated by a committee, that expresses the Chamberâ€™s official position on a specific issue. Viewpoints are primarily used to express opinions on current policies, policies under consideration by the Japanese and/or U.S. governments, and policies under discussion in bilateral or multilateral forums. They are also used to raise new concerns about issues not currently on the Japanese government agenda.
Ensure that the Scheduled Review of the Money Lending Business Law is Conducted by a Qualified Independent Policy Research Organization
Ensure the Viability of the Policyholders Protection Corporation
Modernize the Installment Sales Law
Valid Through March 2009
Banking and Finance Committee
Valid Through July 2009
Banking and Finance Committee Valid Through July 2009
The revised Money Lending Business Law (MLBL) should be reviewed in accordance with Article 67 of the Supplemental Provisions of the Law prior to June 2010, and in any event prior to full implementation. In order to ensure an objective and unbiased review is performed, the ACCJ recommends a qualified independent policy research organization conduct the review and report the results to the Diet and appropriate regulators, including the FSA, MOF and MOJ. To give effect to the purpose of Article 67, the review should be carefully considered by the Diet and appropriate regulators, and its findings considered in finalizing implementation of the MLBL revisions.
The American Chamber of Commerce in Japan (ACCJ) calls on the Government of Japan to: 1) continue improving its mechanisms for promptly treating the causes of life insurance company failure through ensuring accurate and timely disclosure and early intervention procedures by the Financial Services Agency (FSA); and 2) reform the life insurance safety net system called the Policyholder Protection Corporation (PPC) from a pre-funded to a post-funded system to ensure that the PPC is used as a last resort. The debate about this reform should occur promptly to ensure that an efficient safety net system is in place when current measures expire in March 2009. The ACCJ requests that all interested parties, including the insurance industry (both domestic and foreign), are provided meaningful opportunities to be informed of, comment on, and exchange views on proposed measures related to the PPC prior to their implementation and/or submission to the Diet. These opportunities must include actively contributing to the deliberations on reforming the PPC, including deliberations undertaken by the Financial System Council Working Group or other groups which might be convened by the Government of Japan to address PPC reforms.
The American Chamber of Commerce in Japan (ACCJ) welcomes proposals from a METI-led council to amend the Installment Sale Law (â€œISLâ€?) so as to afford greater protections to consumers when they purchase goods on credit. Many of the proposed amendments to the ISL can be effective tools to combat fraudulent business practices, and afford consumers redress where they have incurred financial damage on account of such practices. At the same time, we urge the Government to ensure that these revisions recognize the important role of sales finance and credit card sales in enabling customers to purchase major household items and consumer durables, and in supporting a robust retail sector and overall economic growth. The ACCJ specifically recommends (i) that strengthened documentation requirements be realistic, and allow for common market practices such as electronic verification, (ii) that the law promote industry selfregulation as much as possible based on the principle of fair and transparent disclosures, and avoid imposition of arbitrary restrictions on sales credit that could constrict the retail sector, (iii) that cooling off periods take into account existing rights of consumers to cancel contracts, and contain safeguards against fraudulent use of cancellations, and (iv) that rights of customers to receive refunds of amounts paid ensure fair redress from merchants that have breached sales agreements or committed fraud, while avoiding the creation of excessive liability for sales finance companies that have acted in good faith to finance purchases.
Released ACCJ Viewpoints can be read in full in the Advocacy section of www.accj.or.jp
56 | The Journal | February 2009
ACCJの 「意見書」 は、特定の問題に対してのACCJの公式見解を表明する委員会が作成した簡潔な提言書であり、提言活動の 中核を成しています。現行の政策や、 日本又は米国政府で検討中の政策、二国間もしくは多国間で協議中の政策についてだけで なく、新たな関心を高めるために現在日本政府の課題となっていない問題についても意見を述べています。
を受けることができるようにするとともに、誠実に与信を 行った個品割賦購入あっせん業者に対して過大な責任を 負わせないようにする。
February 2009 | The Journal | 57
IN THE FINAL ANALYSIS
Changing of the Guards
I’m writing this minutes after the new Board just met for the ﬁrst time in 2009. It was a successful and crisp planning session with new President Tom Whitson presiding. All agreed that we are sailing into a strong economic headwind. But there were also good suggestions on how we can tack into the winds to keep the ACCJ heading forward. As we met to make plans for the new year our Person of the Year for 2008, Ambassador Tom Schieffer, was ﬂying back to the States at the end of his tenure and rumors about who would replace him were ﬂying as well. We’ll miss Ambassador Schieffer and wish him well on the next phase of his career and hope the culture shock of returning to Texas is not too severe. But we know the Embassy will be in good hands with Jim Zumwalt serving as Charge d’affairs while we all await a formal successor. Jim has served ably in Japan and has extensive experience with Japan and U.S. trade policy. It was clear that Jim was selected as Deputy Chief of Mission because the State Department knew he would be an excellent stand-in in the ambassadorial interregnum (or is that interambassadorum). In any case we look forward to working with Jim and will depend on him to help us to navigate the new Washington waters. Last month our leadership also met with Tom Donohue, President and CEO of the United States Chamber of Commerce (see page 26 for interview). Tom Donahue is a major player in the Washington policy scene and we’re glad to have had the opportunity to sit down with him and his team to present our views on where we need to be going in JapanAmerican trade relations. One question that came up several times during my new year’s visits to Japanese ofﬁcials was the relationship between the U.S. Chamber and the ACCJ. When asked, I remind friends and contacts that we are glad to have a good working relationship with the U.S. Chamber, but Samuel H. that we are a totally separate organization. ACCJ is Kidder is ACCJ Executive governed by our elected leaders and we jealously Director. guard our independence on advocacy issues. ■
Areas of Practice: Corporate/M&A
IP, IT and Entertainment
- General Corporate
- Capital Markets
- Mergers and Acquisitions (M&A)
- Private Equity
- Securitization/Structured Finance/Trust
Real Estate and J-REITs
- Financial Regulations/Fund Management
Environmental Law Practice
- Compliance/Risk Management
- Acquisition Finance
Employment and Labor Practice
- Project Finance
China Legal Practice
Number of Lawyers: 334 (as of January 1, 2009) Languages Spoken:
Japanese, English, Chinese, French, German
Hisashi Hara, (Ms) Yuko Tamai (Dai-ichi Tokyo Bar Association)
Kioicho Building, 3-12, Kioicho, Chiyoda-ku, Tokyo 102-0094, Japan Tel: 03-3288-7000 Fax: 03-5213-7800 Web: http://www.noandt.com/ Email: firstname.lastname@example.org