Photography by Benjamin Parks

“The management didn’t like to hear it,” says Sato. “They said ‘if you have such great ideas why don’t you run the company.’”

So she decided to do just that.

Sato bought Cosmo and headed back to Tokyo – where she’d grown up – asking her American husband Donald Kanak to make the move with her. After a year working in business development, she assumed the role of President at Cosmo PR.
Kumi Sato was 27 years old.

Ahead of the Curve
Today, Cosmo PR specializes in advocacy and communication strategies for companies in the healthcare and food industries. Clients include major industry players like GlaxoSmithKline, for whom Cosmo helped lay the groundwork for the Japan introduction a cervical cancer vaccine. Under Sato’s leadership, Cosmo has built an enviable network of policymakers, doctors and patient groups, while also working closely with organizations like the Medical Journalists Association of Japan and the ACCJ – where Sato serves as Chair.

In recent years, Sato has won a string of awards for her work, including “Business Stateswoman of the Year 2011″ from the Harvard Business School Club of Japan and “Outstanding Individual Achievement” at the Asia-Pacific SABRE Awards. Cosmo, too, was named “2011 Japanese Consultancy of the Year” in the Holmes Report.

The media loves to portray Sato, who is now 52, as the model female CEO, the one who can have her cake and eat it too. Certainly that is one way to describe her; in addition to building a thriving company, she also has a husband and three grown children. But when she met with the Journal in her office on a sunny March afternoon, Sato didn’t want to talk about work-life balance or even a subject that has long been dear to her – female empowerment (Sato founded and later sold a website dedicated to empowering women, womenjapan.com).

Instead, she wanted to focus on her company and how it evolved from that editorial-driven PR firm to the award-winning communications consultancy that it is today. Embedded in that story, she says, are crucial lessons for firms in Japan. And when you listen to her story it becomes apparent that the most impressive thing about Sato isn’t that she has risen to a position in Japan that few women have before. Rather, it’s her consistent knack for staying ahead of the curve.

Out of the Comfort Zone
In the 25 years that Sato has sat in the president’s chair, she estimates that she has changed the direction of her company four or five times. Looking back, she sees herself more as an entrepreneur type than a typical CEO.

“The natural tendency for companies is to become conservative and then be sort of pessimistic or inward-looking and my job is to make sure that everyone is looking outward, pushing them and pushing them,” says Sato. “I’m constantly thinking about where the world is going and how we need to change to keep up. I don’t like us to be in a comfort zone, ever.”

Getting Cosmo out of its comfort zone was the very first thing Sato did. When she began refocusing the company, she quickly identified that foreign firms lacked brand identity in Japan, so Sato decided that this would be Cosmo’s new focus. However, in order to meet the needs of these new overseas clients, Sato needed a staff with a particular expertise and language skills. She needed bilinguals like herself who had been educated abroad – even though, unfortunately, such people were scarce at the time.

Sato came to the conclusion that she would need to hire foreign people not just as token copy-editors, but to work closely with the rest of her Japanese team. Essentially, two people were needed to come together to make one bilingual “person.”

“The major challenge was changing the Japanese mindset, the fear of dealing with their foreign counterparts,” Sato explains. It would take years. One of the first things Sato did was to ban the use of the expression “in Japan” from the office. It’s an example of one of the small – but necessary – little changes that can provoke a big mental shift.

“You can’t say ‘in Japan’ because the world is going to go more and more global and, yes, we understand local sentiments, but we’re in the service business so you can’t use ‘in Japan’ as an excuse. You always have to come up with a constructive solution – and that was the culture I began, which is always to provide solutions.”

Walking through the Cosmo office, Sato emphasizes the open layout: one big room with clusters of desks facing each other.

“I make them sit next to each other,” she says with a laugh.

Of all her successes, it is clear that her cosmopolitan team is among the dearest.

“One of the things that I felt really proud about this company is that, if a foreigner walked into Cosmo 25 years ago, they’d be treated as a foreigner – as okyakusan. But now when they come in, our people are so used to working with foreigners that immediately they’re on a first name basis,” she says.

“I changed the company from being insular to being natural. There is an ease that carries over into the workplace, an ease to work with new people from different countries. This is very important because Japanese companies don’t have that.”

Importance of Specialization
One of Sato’s other critical moves was to specialize. After the boom years, Cosmo rode out the 90s downturn by helping companies navigate the thorny language of mergers, downsizing, and “refocusing.” With the new decade – and new market and economic realities to face – Sato felt that it was time to move forward again.

Photography by Benjamin Parks

This was how she decided to focus on the healthcare and food industries, and decided to build up a knowledge base by adding doctors and scientists to Cosmo’s advisory board. It is also her favorite way to make decisions.

“The best way for me to envision which way the company is going is trotting around the world. I want to see what’s happening. What are the leading companies doing? I spend about a hundred days out of the year outside of Japan really talking to different firms.”

Talk about a global strategy. It helps that Sato has an international network of friends that began with her student days (she earned a BA in East Asian studies at Wellesley in Massachusetts) as well as a global family (her husband works in Hong Kong and her children study and work in the US and Singapore). She’s also a self-professed information junkie and even admits to reading celebrity gossip rag Radar online.

Increasingly, Sato is looking more and more towards Asia and expanding her network there.

“I go there, find out what’s going on and then I come back and share it with my people. It’s not like the CEO is off doing their own thing,” says Sato, who also notes that Japanese companies, in general, would benefit from a more open policy towards sharing information.

“That is the message I want to send to the heads of big companies in Japan: don’t underestimate your staff.”

The latest project from the globetrotting CEO is a book on communication tools and strategies due out later this summer from Nikkei. In it, Sato hopes to distill some of the lessons learned at Cosmo, turning it into useful advice for a larger audience.

And while, as always, she’s wondering about what will come next, Kumi Sato is also happy where she is.

“I like running Cosmo more than I did ten years ago,” she says. “One of my mentors said to me years ago that if you want to create a great firm, hire people who are smarter than you. I truly believe this and it’s exactly what I did.”

Photography by Benjamin Parks

Illustration by Louise Rouse

Public speakers are made not born. Sure, some people begin with more natural talent than others, but even the world’s greatest speakers hone their craft through repetition and practice. Some, like Winston Churchill, even overcome great speech impediments to develop into world-class orators.

Practice is the key to becoming a great speaker along with preparation and learning some simple public speaking techniques. Over the past few years, I have worked with dozens of CEOs, senior managers, politicians, public servants and members of the military on improving presentation skills. I have found the following techniques the most effective in developing clarity and confidence – and in making speeches or presentations more compelling.

Elements of An Effective Presentation
An effective presentation must have several verbal elements to generate and hold audience interest including a basic structure, smooth transitions and engaging content. However, these elements are only part of the equation; a good presentation also requires effective non-verbal communication. This includes vocal delivery, eye-contact with the audience, hand-gestures and body movement – along with the use of visuals and/or props. Staging, lighting and adornments also impact how the message will be received, along with what you wear. Clothing, hair and make-up are also important factors in sending out strong non-verbal signals during a presentation.

Experts suggest the key to a good presentation is simplicity. Keeping things simple and straight-forward makes a presentation easier for the audience to follow. That’s why I always recommend that speakers limit the use of technical language (or jargon) and go easy on numbers or statistics. The best presentations stick to 3-or-4 main points, book-ended by a strong introduction and conclusion.

Verbal Elements of a Presentation
1. Basic Structure
A good presentation should have three main elements: an introduction, body and conclusion. While each of these elements should work together to maintain audience interest, your introduction is most important in getting the audience interested in your topic. It’s true that you only have one chance to make a strong first impression, so start your presentation with a bang.

Introduction
■ Begin with a question or story to engage the audience
■ Clearly state your thesis and to orient the audience as to where you will go
■ Think of yourself as a tour guide taking the audience on a trip: i.e. “Today, I’m going to talk about (thesis). First, I will discuss (point 1). Next, I’ll look at (point 2). Finally, I will examine (point 3). Now, let’s being with our first point (point 1).”
■ Use humor ONLY if you are comfortable telling jokes

Body
■ Keep this section simple, limited to 3 or 4 main points
■ Make each point different if possible. i.e. use a story to support the first point, statistics for the second point and an analogy for the third point
■ Don’t overload a presentation with too many ideas, turning it into a ‘shopping list’ that audiences cannot follow

Conclusion
■ Should restate your thesis and recap main points. i.e. “Today, I told you about (point 1, point 2 and point 3). I hope all of these points have convinced you of (main thesis).”
■ Conclusion should lead back to your introduction

2. Smooth Transitions
Transitions are effective in guiding your audience through the various elements of a presentation. Transitions move your listeners from the introduction into the first point and then connect each main point and your conclusion.

Sign-Posting, Listing or Sequencing
■ Outline each element as you come to them to guide the audience through your presentation (this is called ‘signposting’). i.e. “I have just told you about (point 1). Now, let’s move on to (point 2).”
■ Helps to orient the audience in the direction you want to go

3. Interesting and Engaging Content
The best presentations contain focused content that supports one or two main ideas. These ideas become the thesis of your presentation. Boil presentations down to the most important idea that you want to get across. Then state this thesis in your introduction; refer to it during each main point and show how you have supported your thesis in the conclusion. By continuously referring to your thesis as you go along, you keep the audience on message and help to sell the main idea of your presentation.

The style of writing used to create a presentation is also important. Presentations are meant to be heard rather than read, so the writing should reflect this fact. Professional speech coaches recommend that a presentation be listenable – in other words, easy for the audience to understand. Your language should be simple and easy to follow, free of technical words or jargon that might go over everyone’s head.

For example, a presentation might include a sentence such as this, “The sanitation engineer was able to devise a control mechanism to mitigate the propagation of fluid from the corroded conduit…” A more listenable sentence might read, “The janitor fixed the leak in the rusty pipe.”

A speaker should not try to impress the audience with vocabulary or technical language but with the ideas they are trying to convey. An audience that cannot follow what is being said will not understand these ideas.

Non-Verbal Elements of a Presentation
1.Vocal Delivery
In a presentation, how you say something is as important as what you say. Your subject might be fascinating and your content highly interesting, but if your vocal delivery is a flat monotone, your audience will quickly lose interest. A presenter needs to be dynamic, varying their speaking style and using their voice to its full capacity to elevate a presentation beyond the mundane.

Key T.I.P.S. for Vocal Delivery (Tone, Intonation, Pace & Style)
■ Tone: The volume of your voice or how loudly or softly you speak. Don’t stay at one volume, vary it up. Speaking softly at key times during a presentation draws the audience in, while raising the volume for key points drives your message home.
■ Intonation: Or how high and low the pitch of your voice goes during a presentation. A high voice can be grating on the ears while a low voice can be difficult to hear. So again, change things up. Use a lower voice to end or support key points, the way broadcasters end segments on authoritative ‘down notes.’ Also, avoid using the same pitch patterns during presentation and don’t start and end paragraphs at the same pitch. This is called being ‘sing-songy’ during a presentation.
■ Pace:How fast or slow one speaks during a presentation. This is crucial to being understood. Those who speak too quickly are difficult to follow, while presenters who speak too slowly bore the audience. Again, vary your speed; go quickly over less detailed areas but slow down to deliver key facts or statistics. Varying the speed of your vocal delivery creates interest and keeps the audience engaged.
■ Style: Formal or casual. This should be appropriate for the audience at hand. Do not use an overly casual vocal style with a business audience but also avoid too much formality with a public audience. (In general, English audiences prefer less formality than Japanese audiences due to cultural differences in communication).

2.Eye-Contact
As the old saying goes, “The eyes are the window to our soul.” They are also the most important non-verbal element of a presentation. Strong eye-contact allows the presenter to engage with members of the audience, driving home key points subtly but effectively. Eye-contact also allows the presenter to get non-verbal feedback from the audience. This information tells the presenter whether or not the audience understands what is being said and whether or not the audience is still interested. A good presenter makes eye contact with as many audience members as possible and uses this non-verbal feedback to adjust or improve their content while it is being presented.

Eye-contact also helps fight nervousness. A presenter who sees that audience members are ‘getting it’ gains confidence and becomes a more effective speaker. So making eye-contact is a great way to fight presentation anxiety.

Tips for Eye-Contact
■ Look from front to back and left to right as you deliver your information
■ Stop at favorable faces and return to them to make key points
■ Try to look at audience members for 2-3 seconds before moving on

3. Hand Gestures and Body Movement
Hand gestures are important in supporting main points. They add value to the spoken content, offering a visual element to back up the audio (vocal) elements of a speech. In a similar vein, body movement creates visual interest for the audience. A speaker who moves around the room appears more dynamic than one who stays in one place for the entire presentation. A note about hand gestures and body movement – they are culturally defined. Some cultures, such as North Americans and Europeans, use hand gestures and body movement a great deal when communicating. Other cultures, such as Asians, use few or none. So again, a presenter needs to know the appropriate non-verbal cues for the audience at hand.

4.Visual Aids/Props
Audiences get bored easily in this television and internet age. They are used to computers and (now) mobile phones that deliver content through audio and visual means. Although a presenter can be effective with style and vocal delivery, visual aids and/or props can add value to a presentation. In fact, many audiences expect to see visuals such as Powerpoint slides at the very least.

Powerpoint slides, charts, maps, drawings and photographs complement the spoken portion of a presentation and make it easier for the presenter to explain complex details or statistics.

Tips for Visual Aids/Props
■ Keep them simple and do not overload slides, etc. with information
■ Limit slides to 3-4 simple sentences or bullet points
■ Make sure visual aids are appropriate for your audience
■ Make slides, charts, graphics, etc. large enough for everyone to see
■ Use flip-charts (not slides) for smaller or one-on-one presentations
■ Use audience members as props – or to demonstrate props Ultimately, delivering a strong presentation is not difficult. But it takes confidence, organization and practice. Work on the tips suggested here, and you will be surprised at how quickly you improve.

This scene used to be uncommon in Japan – but no longer. Over the past decade, Japan has seen a surge in online sales and direct marketing. According to Masayuki Kakio of the Japan Direct Marketing Association (JADMA), sales via DM channels have grown an average of 6.4 percent per year over the last ten years, increasing from ¥2.5 trillion to over ¥4.6 trillion ($31 billion to $58 billion).

Kakio explained the phenomenon to members of the ACCJ Direct Marketing Committee meeting earlier this year. He used Chart 1 to show how and where direct marketing had its greatest impact. As total retail sales of tangible goods for direct marketers doubled from 1.7 to 3.4 percent during the period from 2000 to 2010, department store sales took the biggest hit.

Kakio predicts that mail order sales will overtake domestic department store sales in the next few years. More and more consumers are purchasing items directly from overseas shops through the Internet. The purchase of goods from the US now accounts for 10 percent of all mail order sales in Japan.

Newspaper Sales Declining
Newspapers used to be a major channel for advertising in Japan. However, that too is changing. According to JADMA statistics, the Internet has overtaken newspapers, growing from ¥170 billion in 2000 to ¥658 billion in 2010 ($2 billion to $8 billion).

Kakio says people still read newspapers, but digital versions rather than print: “You can see evidence of this by the low number of people reading newspapers as they ride the trains when compared to past years.”

“Direct marketing ads in the newspapers are now mostly comprised of cruise tours, supplements, and anti-aging cosmetics – all geared towards the over 50 age group as these are the people who are still most loyal to newsprint.”

Age demographics and the number of people making online purchases are also changing. It used to be that few consumers over the age of 60 used the Internet. Now, two-thirds of women over 60 and half the men in that age bracket make purchases online. As Japan’s market continues to grey – a quarter of the population is over 65 – this will only increase.

Kakio says this is a demographic that direct marketers cannot afford to ignore, “These are the people who don’t want to spend their time going to doctors and they are conscious of their health, the foods they buy, and they want supplements to protect against aging. They also have more time, and money, to spend on hobbies. Products that match this demographic group are selling well.”

So, if you are considering where to spend your company’s media budget, Chart 2 might help. It shows statistics of where other marketers spend their advertising money. Growing demographics Direct market should also be aware of the growing “housewife” demographic.

Kakio says these women have taken on a new purchasing power, using their smartphones for online shopping instead of PCs. The four main products they buy are:
Health 1. food and supplements
2. Cosmetics
3. Food products
4. Other beauty related products
(medical devices, jewelry, toiletries) Items one through three should be of special interest to direct marketers because they are most often sold as “repeat products” on a monthly basis.

Types of businesses
There has also been a change in the types of businesses operating in the direct marketing arena over the last few years. Originally, it was primarily mail-order companies. Next came dedicated cosmetics companies like DHC. Now, primary and secondary small producers can – and do – sell over the Internet through online sites such as Rakuten. And the big brands aren’t just sitting back and watching these smaller firms eat up the market. National brands have jumped into the fray, with the firms like Uniqlo and Yodobashi offering more of their products online.

“Multi-channel sales have become very important. Merchandisers have to enable consumers to buy their products through any channel, but the important point to for these companies to keep in mind is that they want consumers to buy their brand and at their store, whether it’s online or bricks and mortar,” says Kakio.

Regulations As direct marketing in Japan has grown over the past few years, regulations governing the industry have also changed. The Japanese government believed that consumers needed protection because many direct marketers have no physical stores. So the government created the Consumer Affairs Agency and implemented the Act on Specified Commercial Transactions in December 2009. This legislation governs and strengthens regulations on mail-order sales including Internet transactions.

The legislation sets rules for returning goods for a refund. For example, a consumer may return a purchased item within eight days if conditions for returning goods are not clearly specified in an advertisement. However, other types of return/refund rules can been specified by a direct marketing company in a sales agreement, if the purchaser agrees. The sales agreement must make it clear what can and cannot be done. The ‘how to return’ information must be clear and indicated in the purchase agreement. If it is not clear the merchandiser must accept the return. The consumer is responsible for shipment costs. A clear guideline of the procedure is available on the METI website.

The Act also changed the rules for sending email advertisements from operating under an opt-out system to an opt-in. An advertising email may not be sent to a consumer unless the consumer has requested it. Direct Marketers must keep records of requests for information for three years.

In December 2011, JADMA created rules to register companies selling health products and supplements, which make up 40 percent (¥267 billion / $3.3 billion) of the products sold through direct marketing. The Consumer Affairs Agency was also taking a closer look at what is said and what is actually done in this area.

In all, it seems that Japanese consumers are buying and selling millions of yen worth of products every day. They’re doing it at home, at work and on the train. So smart companies that want to increase business and/or sales need to take a look at them, because online shopping is growing by leaps and bounds.

Joe Peters is Chair of the ACCJ’s Direct Marketing Committee.

Revitalizing Tohoku Event, April 5

After coming within centimeters of death, Arakawa is now fighting to get his business and the Ishinomaki community back to life. One way he is supporting the community is through the Ishinomaki “Genki” Revitalization Association which promotes its member’s products and services through their Ganbappe website (www.ganbappe.biz/e/). Arakawa notes that although the Government of Japan NPOs Help Rebuild Tohoku Volunteering makes a difference has created a revitalization fund for small and medium sized companies, it is not enough for all the small companies that suffered from the disaster, and Tohoku still needs corporate and volunteer support to recover.

Volunteering boosts employee morale, and gives work greater meaning by making employees part of something bigger than themselves. Glynn Brasington of Pitney Bowes Japan told the Journal in a previous article that, “Volunteering really empowered members of my staff. They were so excited to be able to make a contribution. The people who did it, said ‘Yeah, we did that! What can we do next?’”

“Sixty of our 200 employees engaged in volunteer activity in Ishinomaki, in teams of six,” said Brasington. “Each team had very mixed representation from around the country and from different departments. Team leaders, who were not necessarily in leadership roles in their day-to-day work, took real decisions for others about safety and organization.”

To share ideas among companies for increasing CSR, Peace Boat has sponsored idea exchanges for HR directors get together and share information on volunteer preparedness for the big quake that is supposed to hit in the coming years.

Arakawa of the Ishinomaki survival story gave the key note speech at last month’s ACCJ event, “Revitalizing Tohoku: Reigniting Volunteering Efforts for Reconstruction,” which hosted a number of NPOs and their work. The event was MC’d by Shaun Dubin, moderated by Melanie Brock, and hosted by the ACCJ Tohoku Revitalization Task Force led by Jay Ponazecki and Jonathan Kushner. Held at the Goethe Institute in Akasaka, 15 volunteer organizations participated to explain what they have been doing in the past year and what they will do this year to support the revitalization of Tohoku. Seven of the participating NPOs shared their activities for Journal readers here.

Give2Asia is a San Francisco-based foundation that helps donor-advised giving across the Asia-Pacific region. G2A helps private philanthropy focus on Asia and magnifies donor impact. Give2Asia immediately established a Japan Earthquake & Tsunami Fund after the March 11 disaster to raise support for the affected communities. G2A led a relief and recovery campaign with more than 22 other organizations across the country, including non-corporate groups like the Japan Society of Northern California, Keizai Society, Japan Policy Research Institute, and Artists Help Japan. They also brought in corporate help. So far, the group has raised more than $5.6 million.

G2A started by supporting emergency relief efforts but puts a high priority on recovery and redevelopment. It has been in regular contact with more than 50 organizations and done outreach to more than 150 groups in the three worst-hit prefectures.

Shaun Dubin, Motokazu Arakawa, Jay Ponazeki and Jonathan Kishner

HABITAT FOR HUMANITY
Habitat for Humanity is a global nonprofit housing organization that seeks to bring people together to build homes, communities and hope. Since 1976, Habitat has served more than half a million families by building and improving homes; by advocating for fair and just housing policies; and by providing training and access to resources to help families improve their shelter conditions.

Soon after 3/11, Habitat for Humanity launched the ‘Rebuilding Japan’ program. Initial efforts focused on providing and supporting volunteers to clear mud and debris from houses, community buildings and communal areas in Ofunato and Rikuzentakata, Iwate and Ishinomaki. Habitat volunteers have already spent about 10,000 days and their work still continues.

HANDS ON TOKYO
Founded in 2006, Hands On Tokyo addresses the critical needs of the community by partnering with other organizations focusing on educational and social issues in Tokyo as well as disaster relief in north eastern Japan. By collaborating with partners to create projects designed to meet their needs, HOT provides numerous bilingual volunteer opportunities for individuals or corporations.

Tohoku projects are mainly conducted on weekends and include debris clean up, supporting strawberry farmers, hosting community cafes and BBQs, delivering supplies to those in temporary housing, and making candles for festivals and ceremonies. The group has also helped restore damaged cemeteries, create new town evacuation routes and even recreated lost wedding photos.

Tasukeai Japan with ACCJ Governor Tish Robinson

JAPAN EMERGENCY NGO
JEN (Japan Emergency NGO) supports the self-reliance of people in need in Ishinomaki by delivering psycho-social support. JEN also works with companies to provide long-term volunteer opportunities. JEN received a Foreign Minister’s Commendation for 2011 from the Government of Japan for its activities in Tohoku.

NADIA
NADIA has been working hand-in-hand with residents of Ishinomaki since the disaster. Believing that “hands don’t have nationalities,” the NPO has continuously brought direct volunteer manpower to help clear out left over debris and mud from the Tsunami where government officials couldn’t stretch their help. More than 25 nationalities are represented among the 1000-strong pool of volunteers that went weekly up north.

As NADIA has developed close relationships with local residents, as well as major actors for local economy recovery, the support is made according to real needs. The clearing and cleaning of individual households being almost over, NADIA is now helping to find ways for people to get back to a normal life.

PEACE BOAT DISASTER RELIEF VOLUNTEER CENTER
The mission of Peace Boat Disaster Relief Volunteer Center provides support for the long-term social and economic recovery of the Tohoku region of Japan, focusing on the city of Ishinomaki, Miyagi Prefecture and its environs. Peace Boat works in consultation and partnership with local communities, responding to situations and needs, enabling and empowering them as part of there recovery process. Peace Boat’s operations focus on the training and deployment of volunteers in the belief that volunteers can provide essential support in the physical regeneration of Tohoku, and the human solidarity they provide is a vital factor in a comprehensive recovery of the region.

TOHOKU UP PROGRAM
Tohoku UP Program is a joint program between Microsoft Japan and NPO Sodateage Net. As Tohoku enters its recovery period, two major needs are housing and employment. Tohoku UP program specializes in underserved youth employability to increase employment opportunities of the people of Tohoku disaster-affected areas.

The program enables the NPOs in Tohoku an environment to incorporate IT skills training as part of the support programs for victims of the earthquake. The new skill sets not only support information access but also opens up new job opportunities which may have never been on their radar.

TRACING THE ROUTE
Shaun Dubin, who MC’d the ACCJ event, traveled along route 45 from Kuji in Iwate Prefecture all the way down to Ishinomaki six months before the Tohoku earthquake and tsunami. He returned again last November to trace as much of the route as he did before, including Kita Yamazaki. Dubin says a lot has changed on the geographic level and on the business level. When he asked a merchant in Kita Yamazaki “where are all the tourists?” he was told “the tour buses do not stop here anymore.” He believes it’s time tourists returned to the area to help support the local economy.

Give2Asia:
www.give2asia.org/japantsunami-2011
Habitat for Humanity Japan:
www.habitatjp.org
Hands On Tokyo (HOT):
www.handsontokyo.org
Japan Emergency NGO (JEN ):
www.jen-npo.org/en/index.php

NADIA: team-nadia.org
Peace Boat:
www.peaceboat.org/english/
Tohoku UP Project:
www.ms-tohoku-up.jp/

Tish Robinson serves on the ACCJ Board of Governors, in addition to job on the faculty of Hitotsubashi University, where she teaches Organizational Behavior and Systems Thinking. She led several volunteer trips to Tohoku and headed the 2011 ACCJ Tohoku CSR YearBook, available at: http://www.accj. or.jp/doclib/csr/2011_CSR_Yearbook.pdf

Photo by Benjamin Parks

These questions are difficult to answer. But this one isn’t – does one’s interest and concern over what is posted on Facebook change from culture-to-culture? Quite simply, the answer is “yes.” At least that’s what our surveys found when we asked people across 12 countries various questions about personal privacy.

Sixty-five percent of Hong Kong citizens agree that “it’s better to be open about your problems,” compared to 50 percent of Americans and only 20 percent of Japanese. However, half of the Japanese surveyed agree that they “get embarrassed very easily,” compared to about 40 percent of Americans and only 30 percent of Hong Kong citizens.

The findings are part of a global investigation McCann Worldgroup did last year entitled: “The Truth about Privacy.” Our study involved extensive interviews across a dozen countries, followed by extended Internet surveys with about seven thousand people in the UK, US, Hong Kong, India, Chile and Japan. The research set out to understand what privacy means to people; if privacy concerns differ; and how marketers can cultivate responsible sharing.

What emerged was that people everywhere are concerned about “privacy.” However, “privacy” remains a complex, multi-dimensional issue that encompasses everything from personal, real-world snooping to sharing data online. Further, when it comes to data sharing we need to unpack the issue even more as people categorize data into different categories, i.e. shopping, location, personal, medical, and financial. People also have varying degrees of concern with sharing each type. In fact, 71 percent of consumers say they are willing to share shopping data with a brand online. Eighty-six percent of consumers say that there are major benefits associated with sharing data with businesses online while 65 percent see one of the top two benefits as better access to discounts and promotions.

Tatemae vs. Honne
In Japan, every gaijin quickly learns how important it is to sort out “honne” and “tatemae.” The former concerns a person’s true feelings and desires, which may be contrary to what is expected by society or what is required according to one’s position and circumstances. Honne is often kept hidden, shared only with one’s family or closest friends. Tatemae, on the other hand means “façade” – and is the behavior and opinions one displays in public. Tatemae is one’s public face: what is expected by society and required according to one’s position and circumstances. This public face may or may not match one’s honne.

It turns out that when it comes to how willing Japanese people are to share their points of view, their lives and their public face, they do indeed think very differently than the rest of the world. They are also very shy about exposing themselves, reflecting a long term cultural reticence to stand out.

Our survey found that Americans are cautious but more experimental to a level around the global average, while the Japanese are just shy of revealing too much about anything. We got the following results when we asked people how much they were willing to share on social media pages:

■ 50 percent of Indian people say they want as many commenting about them as possible, the global average is about 25 percent, while only 10 percent of Japanese feel that way

■ Well over 50 percent of Indian people say they love to be the center of attention. Surprisingly, only around 20 percent of Americans feel that way, but not surprisingly only around 10 percent of Japanese do

■ And while 45 percent of Indian people would like to be on a reality TV show, fewer than 10 percent of Japanese want to “get their chance.” Perhaps that helps explain why Japan is the only major market in the world where the “Idol” style of programming has never taken off

■ As for how important it is “to build a positive image of yourself online,” Americans come in around the global average of 45 percent, while Indian people are again much more likely at 70 percent and the Japanese are the least likely to agree at 25 percent

Standing Out From the Crowd
While Japanese people have embraced blogging, text messaging, twitter and social media sites like Mixi and Facebook, they show distinct beliefs as to what they are willing share. Others around the world have embraced social media sites as a way to broadcast their lives and themselves. In developing countries like India, Malaysia and Chile, we found people viewed social media as a way to advertise themselves. The reason Indians were so enthusiastic to reveal themselves was simply that they felt it was a way to get an edge in a fast changing world.

In Japan, there was a definite counter view. The relatively anonymity of being able to use tags and bios without revealing real details meant that people could feel free to voice their own thoughts without the trap of “standing out from the crowd.”

Japanese people are also more afraid of losing their security online than many others. While about 50 percent of the people we surveyed said they feared the possibility of having someone impersonate them for goods and services online, the number jumps to nearly 80 percent in Japan. So for the Japanese, sharing seems fine as long as the environment can be controlled.

Helpful Findings for Business
Here are some other findings uncovered by our research that might help business people:

Businesses need to understand the privacy value equation
For all types of companies and brands, there are four key dynamics to privacy and maintaining a proactive, productive and share-worthy relationship with consumers: control, choice, commitment and compensation are the key to assurance and trust. People want a commitment from companies that their personal data (i.e. email address, phone numbers, etc.) won’t be passed on to third parties. Globally, 55 percent of people say this is one of their top three most important criteria when deciding to trust a brand. They also want a choice about how their data will be used. About 51 percent around the world say it is important to know exactly how their data is going to be used. When it comes to control, 49 percent want to be in total command of which pieces of data they share, while the vast majority want to know what is being shared. Consumers also want compensation. They want a reason to share data and an understanding of how they will benefit. It’s no surprise that Amazon is one the most trusted brands because people can see how the company uses data to make relevant suggestions.

A Brave New World of sharing
In a world where social networking is a normal part of everyday life, people are required to spend more and more time managing their online brand. Consumers around the world admitted to multiple online personalities, on the spectrum from ‘virtuous me’ with information suitable for family and employers to ‘popular me’ where they include items intended to impress friends and social acquaintances. And this habit of “creating” different online personas was heightened in Japan. This becomes a challenge for brands which need to understand what version of their consumer they are interacting with each day.

Privacy is a two-way street
While 84 percent of consumers believe they have a total or some right to privacy, only 51 percent believe the same applies to the government. The government, it seems, must trade privacy for power. Similarly, only 57 percent of consumers believe a brand or business has a right to privacy. Sixty-five percent of consumers say a reality TV star has a right to privacy; the other 35 percent might believe that star has traded his or her private life for fame (and perhaps a cash prize). Increasingly, governments and businesses will need to recognize that privacy is a two-way street. People might be willing to share more of their personal information in order to gain benefits but they expect a greater degree of transparency in return.

The rise of the Savvy Shopper…especially in Japan
It may come as no surprise to find that when it comes to attitudes towards privacy, Japanese people have a different profile to Westerners. But the difference is actually more different than we initially thought. We identified five profiles on consumer behavior and attitude towards receiving, sharing and privacy:

■ Eager Extroverts (15 percent of the global population, less than 4 percent in Japan ) are the people most likely to want to be on a reality TV show

■ Sunny Sharers (20 percent globally, 6 percent in Japan ) are most likely to say they like receiving surprises in their “in box”

■ Savvy Shoppers (37 percent globally, 60 percent in Japan) are most likely to sign up for store loyalty cards

■ Spam Stoppers (9 percent globally, 8 percent Japan ) are most likely to want to cut off all unknown correspondence

■ Walled Worriers (19 percent globally, 22 percent Japan ) are most likely to agree that they don’t trust big business

The largest group, Savvy Shoppers, best embody a nuanced approach to this brave new world of sharing and the Japanese approach. They are willing to engage with businesses in exchange for commitment to security and compensation in the form of discounts or preferred status. A full 86 percent of all consumers globally understand that there are major benefits associated with sharing data onlineand that shopping data is the type of information they are most willing to share (71 percent of consumers globally are willing to share shopping data with a brand online). For the majority (65 percent), one of the top two benefits is better access to discounts and promotions – a very “Savvy Shopper” mentality. And this is where Japanese people show a much greater willingness for limited openness than say Americans.

So it seems that privacy is really about trade-offs. People are quickly learning that nothing is “truly private” anymore. However, at the same time, they also know that the value of privacy can be a valuable commercial tool.

So next time you read about how Japanese women carry an estimated 26 store cards for various retailers, just remember, they are very savvy shoppers. However, they might not be so keen to tell you about it.

Dave McCaughan is Director of Strategic Planning at McCann WorldGroup’s Asia Pacific office.

Illustration by John Shelley

“Kazuya!” she called out.

The little boy turned and there was a moment of recognition. But Akeo never got to follow up. To her surprise, the principal marched over and grabbed her arm. “Why did you come here?” he barked. “Why did you interrupt the concert?”

Akeo was pulled into a separate room and interrogated. She was ordered to leave the school and not talk to her son again.

“That choir concert was in the morning,” she says. “I waited outside the gate until six o’clock. But he did not come out.”

Akeo was treated like a criminal for wanting to see her son. But she was not a criminal. In fact, she was a victim of child abduction and parental alienation. And she remains so to this day.

In late summer 2006, Kazuya was spirited away from the family home by Akeo’s Japanese ex-husband. Akeo tried everything to get her son back including hiring private investigators and going to court more than 60 times. Nothing worked. Despite being a desperate mother, she has only seen the boy three times since his abduction.

“I met him two times in the Family Court,” she says. “One time was one hour – the other time was 45 minutes.

“The last mediation, my ex-husband made an agreement. I could meet my son every two months. But then final mediation, he gave the court my son’s letter. The letter said: ‘Oh, I have to study to enter high school. It is quite difficult for me now (to meet you).’

“Always, I had hope. But that day finished everything. I can’t do anything about my son.”

Takaji Takeuchi can sympathize with Akeo’s desperation. On a warm spring night in March of 2011, he tried to talk to his son who had also been taken away by his Japanese ex-spouse several years before. Japan had been hit by the horrible 3/11 tragedy and Takeuchi, like many others, was concerned about his family. He found his son at home with his ex-wife.

Takaji Takeuchi has only seen his son Kousuke five times in five years. (Photo by Mike DeJong)

Both Takeuchi and Akeo’s children have been turned against them. It’s a common occurance for children separated from their mothers or fathers for lengthy periods of time. And it’s something that causes great pain on all sides.

“Every year, (at) New Year I say this year will be better,” Akeo says. “But you know, every year is getting worse. Still, I must keep going and keep doing something.”

Heartbreaking But Not Uncommon
These two cases are heartbreaking but not uncommon in Japan. In fact, there may be thousands of parents like them, who have lost contact with their children following a marital breakdown.

The reason is simple: there are no provisions for joint custody in Japan. In fact, under the country’s Meiji Era Civil Code, child custody is awarded to only one parent following a divorce, with the other parent is generally shut out. With no enforceable visitation rules, non-custodial parents generally lose access to their own children.

“Japanese Family Law is a misnomer in that there isn’t such a thing,” says Colin P. A. Jones, professor at Doshisha Law School in Kyoto. “There is not a statute that is called Family Law.

“There have never been a lot of substantive rules clearly laid out somewhere in a statute, which say parents have to do this for their children… or after divorce this is what’s supposed to happen.”

Jones says the parent-child relationship in Japan is defined in terms of a marital relationship, so essentially, divorcing a spouse also means divorcing one’s children. In the rare cases where visitation is granted, Japanese courts usually limit non-custodial parental time to a few hours per month. The custodial parent retains the right to cancel visitation at any time without penalty. This policy differs greatly from Western countries where the rights of parents are maintained and enforced – even after divorce.

“For a number of historical reasons, Japan has never really developed the notion that there are Constitutional rights associated with the parent-child relationship,” says Jones. “That is why child abduction – as we would call it – within Japan has been a problem as long, if not longer, than the international abduction cases have been.”

Masako Akeo has only seen her son Kazuya three times in six years.

Critics say it’s a system that promotes and legitimizes child abduction and alienation.

Best Interests of the Child?
In denying or severely limiting visitation, Japanese courts often reason that children “need protection” from the “trauma of divorce.” For example, in 2003, a desperate mother looking to visit her son was told by an Osaka High Court that “the child is satisfied with his current established lifestyle” with his father and new step-mother. The court denied the mother’s visitation request stating that “exposing the child to different lifestyles and methods of discipline can have adverse effects on the feelings and emotional stability of the child.”

This opinion flies in the face of research by child psychologists, psychiatrists and child welfare experts worldwide who argue that, despite the conflicts inherent with divorce, children need contact with both parents to grow up as healthy, well-adjusted adults.

“Empirical and longitudinal studies show that maintaining contact with non-custodial parents is beneficial for children’s well-being,” says clinical psychologist Kazuyo Tanase, a professor at Kobe Shinwa Women’s University.

In an interview with NHK, Dr. Tanase said she believes the current visitation system in Japan does not serve children or parents well. “It should be changed. Parents with no custody should be able to spend substantial amounts of time with their children like weekends and long vacations with overnights, not just several hours a month. Secondly, couples shouldn’t be allowed to separate or get divorced without a parenting plan in place. Finally, couples should be able to choose between sole custody and joint custody.”

Happier days for Masako Akeo and her son Kazuya.

In recent months, diplomatic officials from the US, Canada and Europe have lobbied Japan to implement a joint custody system. Senior members of the Obama Administration including Secretary of State Hillary Clinton have also pushed Japan to join the 1980 Hague Convention – an international agreement that protects children from abduction. Japan is the only G8 country yet to sign the accord. The Japanese government has pledged to join the Hague Convention this year and the Justice Ministry has already released legislative proposals due to be submitted to the Diet this spring. However, critics say the proposals include so many conditions that the law will be virtually unenforceable.

“It’s pretty depressing,” says Jones, after reviewing the proposals. “It seems pretty clear that Japan is going to implement the Hague based on a number of assumptions that conflict with the assumptions of the Hague Convention.

“The implementation regime (in Japan) is basically going to assume that the taking parent has a good reason – they’re going to protect the taking parent until the left-behind parent proves otherwise.
“I don’t see it really getting anywhere – really making any changes.”

Black Hole For Child Abduction
Japan is a signatory of Article 10.2, the United Nations Convention on the Human Rights of the Child, which reads: “A child whose parents reside in different states shall have the right to maintain on a regular basis, personal relations and direct contacts with both parents.”

Yet personal relations and direct contact with both parents often does not happen in Japan. And, with its lack of respect for international court rulings and a decades-long reluctance to join the Hague Convention, some critics call Japan a “black hole” for child abduction.

In fact, the US State Department warns that “Abductions to Japan represent one of the largest portfolios in the Office of Children’s Issues and are among the most difficult to resolve. To date, the Office of Children’s Issues does not have a record of any cases resolved through a favorable Japanese court order or through the assistance of the Japanese government.”

Two high profile cases recently highlighted the need for Japan to get serious about child abduction. Last December, Wisconsin doctor Moises Garcia saw his nine-year old daughter returned after a four-year fight. The child had been abducted to Japan by her mother, who ignored a US court order granting the father custody. The child was returned as part of a plea bargain agreement when the mother was arrested in Hawaii on child abduction charges. In 2009, the Japanese ex-wife of American Christopher Savoie also ignored a US court order and took the couple’s children away. Savoie traveled to Japan to try and get the children back but was himself arrested on abduction charges. The charges were later dropped but Savoie was forced to leave Japan without his children.

In both of these cases, Japan failed to recognize US court decisions and experts say this highlights not only problems with Japanese law but also the country’s disregard for international court rulings.

Left Behind Parents
An organization known as Left Behind Parents Japan (LBPJ) has been campaigning for Japan to join the Hague Convention and to implement an enforceable visitation system. The group – which brings together foreign and Japanese parents who have lost access to their children – has taken its fight to senior levels of the Japanese government, including meetings with a former Japanese Justice Minister.

“Meeting with (former Justice Minister) Eda Satsuki was extremely important because he’s been a lawyer for over 40 years,” says LBPJ spokesperson Bruce Gherbetti. “He was a Family Court Judge early in his career, so he understands the issues at play.

“And I believe that he inherently believes that the solution is for Japan to sign the Hague Convention.

“Ultimately, Article 818-819 needs to be changed. That’s the (article of the) Civil Code that speaks to sole parental authority.

“Kyodo shinken is the answer,” says Gherbetti. “Kyodo shinken or joint custody.”

Not Only A “Foreign” Matter
From the attention given to high profile international abduction cases, one might assume the child abduction issue is a “foreign” matter in Japan. However, it is not. Japan’s divorce rate is now more than double what it was in the early 1970s and statistics show that nearly half of all marriages end in divorce (nearly 40 percent in 2010) – which means there could be thousands of permanently separated Japanese parents and children. At least 20 percent of the cases also involve left-behind mothers.

“If you’re a public school teacher, you’re looking at a class where one-third of the children probably have experienced a parental divorce,” says Jones. “Just nobody talks about it and the law really has not addressed what should happen to children after divorce. What is in their best interests after divorce.”

Despite all of the publicity surrounding the issue, it does not appear that help is coming soon from the Japanese government. In an interview with the Japan Times on February 1, 2012, Japan’s new Justice Minister Toshio Ogawa had this to say about modernizing the Civil Code: “If we allow dual parental rights, it will be difficult to decide which parent the children live with and to make other decisions. I believe a major complaint that people seeking dual parental rights have is that they don’t get to see their children enough. That can be largely solved by ensuring visitation rights.”

“The problem is that visitation rights are not enforceable under the current system,” says Gherbetti. “You could talk about visitation rights all you want, but if one parent still has veto rights over the other, then visitation provisions are essentially meaningless.

“To continue to disallow dual parental rights is a human rights violation, plain and simple,” says Gherbetti.

LBPJ member Dennis Gunn adds, “If one side has tyrannical power over the relationship with your child, then sooner or later – and usually sooner – that is going to be abused.

“They have devised a system here that is guaranteed to cause the parents… and the children to suffer.”

Photo by Louise Rouse

“I’m kind of an activist,” she says. “Maybe so my son can see TV or magazine or newspaper.

Okay, Mommy’s doing this for me. That’s why I’m doing this – for my son.”

Photo by Markus Langer - Fotolia

With the Financial Services Authority (FSA) and Tokyo lawmakers currently examining Japan’s rules around rights issues, it’s worth looking at the European model to see why rights issues are so often used for large-scale capital raises. The European model gives us insight into what factors authorities here could address in trying to streamline the Japanese process. Let us focus on three key factors behind European rights issues:

1. MANAGING DILUTION
A common misconception of rights issues is that the lower the subscription price of the offering for the issuing company and existing shareholders, the worse it is. This is not the case. The subscription price is irrelevant for shareholders who want to exercise their rights.

Consider this example: a company has 100 shares and 100 shareholders, each holding one share. Shares cost ¥1,000. The company wants to raise another ¥100,000, so it offers existing shareholders the ‘right’ to buy two new shares at ¥500 each. After the transaction, each new shareholder will own the same proportion of the company (one percent) but will now hold three shares rather than one, while the company will be worth ¥200,000.

Now consider the same facts, but where the company offers the shares at ¥100. Each shareholder has the ‘right’ to buy one share at ¥100 and, after the transaction, each shareholder still owns one percent of the company which is also worth twice what it was – i.e. the two scenarios lead to the same economic and ownership outcome.

The first example illustrates why rights offerings are so successful at managing dilution: the shareholders all have certainty as to their ‘right’ to buy a number of shares at a fixed priceor, if they don’t want to buy additional shares, the purchase price discount gives them something of value which can be sold, and this value creates a market in which to sell it. Whatever the outcome, the shareholders are not diluted economically, and at least have the option to avoid control dilution by following their rights.

2. CERTAINTY OF FUNDING
With rights issues being used primarily to raise large scale capital, bringing in cash is usually the priority for management. In acquisition financing, it can even be a legal requirement to have capital certainty in order for a bid to be made. Rights issues are very effective at guaranteeing proceeds for two reasons:

First, a discounted rights offering provides a significant incentive for existing shareholders to invest additional capital or, if not, for third party investors to do so. In the first example above, the rights have value, so shareholders who don’t want to invest will be highly incentivized to sell them. When there is no immediate value to the rights investors who fail to buy in have no incentive to sell the rights, which could then expire unexercised. That is fine for the shareholder from a dilution perspective but not for the issuer who needs a set amount of cash.

Second, the discounted offer makes it easier for issuing companies to get funding from banks at a reasonable cost. Rights offers are typically underwritten by a bank (or group of banks) agreeing to take on any rights left unexercised at the end of the process – paying the subscription price as any other investor would. The larger the discount, the easier it is for banks to underwrite. It is also more likely that shareholders will subscribe because their voting dilution will be greater and banks can base their underwriting decision and cost on both the absolute price they pay for the shares and the likelihood of taking up unexercised rights.

3. MAINTENANCE OF AN ORDERLY MARKET
In a fully marketed deal, a company will announce its intention to raise capital, publish an offering document, and then market the deal to investors. That usually happens over a period of roughly two weeks. However, no price is set for the offering until the end of the marketing period and, with the market being aware of the upcoming issuance of shares, there is an opportunity for investors to trade the stock opportunistically during that period to push the eventual pricing point down.

While there are situations where a rights issue can be ‘attacked’ by the market, it is much harder for opportunistic investors to have significant price influence because the subscription price is set up front and, as illustrated in the above examples, shareholders have an incentive not to sell shares – but to sell ‘rights.’ A rights issue only becomes a problem when the actual share price drops below the subscription price – and with a subscription price often at a discount of say 30-40 percent to the preannouncement share price, there would have to be a large slump in the market value of the issuing company to prevent the exercise of the rights from being economically rational.

HOW CAN JAPAN GET THE SAME BENEFITS?
In principle, it is very easy to agree with the concept and rationale of rights issues. However, the real challenge is in adjusting existing laws and regulations to allow a successful implementation of a rights issue process that works for Japan. We believe four key factors will help make sure the process works:

1. FOCUS ON THE END, NOT THE MEANS
It is easy to state in clear terms, the simple benefits of the rights issue process.

2. ELECTRONIC SHAREHOLDER COMMUNICATION
With Japan’s large retail shareholder population, the cost of ‘treating shareholders fairly’ can be prohibitive if an issuing company has to not only publish documentation but also send out thousands of physical copies to every shareholder. By requiring only electronic documentation – as they do in Europe – and putting the onus on shareholders to request hard copies (or that they waive their right for hard copies), managing the process for large retail shareholders becomes much more practical.

3. SPEEDY TIME FRAME
Europe works because the process is a complete package which includes the risk period and subscription period. A key practical part of this is risk management and the need for certainty of funds. Non-underwritten deals in Europe are typically viewed as a sign of desperation from an issuer, so having a time period that allows for underwriting at a reasonable price is very important. Most of Europe has a two-to-four week period during which rights trade and where banks are on hard risk. A trading period significantly longer than this—and obtaining underwriting from banks—will become much more of a challenge.

4. FLEXIBILITY
Rights issues for companies with large and liquid free floats (where there are no major shareholders) are typically the most straightforward. However, many situations are much more complex, such as InBev’s rights issue for its takeover of Anheuser-Busch in the US, where part of the large shareholders’ shares were sold and the proceeds used to exercise remaining subscription rights. This minimized dilution while limiting the additional cash invested. The process needs to allow for variation and adjustment to make sure specific situations are considered in a way that benefits all stakeholders.

One thing is certain: rights issues provide a very elegant and orderly mechanism for corporations to raise large amounts of equity capital while still treating all shareholders fairly. The proposals to adjust the rules in Japan to make rights issues more favorable should be welcomed by corporations, banks, individual shareholders and regulators alike. A workable process that is eventually employed will significantly improve international investor commitment in Japan.

Japanese Prime Minister Yoshihiko Noda made a surprise visit on day two

Yukio Edano, Japan's Minister of Economy, Trade & Industry

APCAC Entrepreneurship Panel: Robert Roche, Oak Lawn Marketing, Hiroshi Mikitani, Rakuten, Kenneth P. Morse, MIT Entrepreneurship Center, ACCJ President Michael Alfant & US Ambassador to Japan John V. Roos

John G. Rice, Vice Chairman, General Electric Company

Thomas R. Nides, US Deputy Secretary of State

Hiroshi Mikitani, Chairman and CEO of Rakuten Inc.

APCAC welcomed delegates from 27 American Chambers across the Asia-Pacific region

Kathy Matsui of Goldman Sachs moderated the APCAC Financial Panel

US Ambassadors at APCAC: Jeffrey L. Bleich (Australia), Scot Marciel (Indonesia), Sung Y. Kim (South Korea), Paul W. Jones (Malaysia), David I. Adelman (Singapore), William A. Stanton (American Institute Taiwan), David L. Carden (ASEAN) and John V. Roos (Japan)

ACCJ President Alfant welcomes Thomas R. Nides, US Deputy Secretary of State

Francisco J. Sanchez, US Under Secretary of Commerce for International Trade

Photography by Irwin Wong

Case in point – a story told by Asako Hoshino of Nissan at the ACC J panel event, “Leveraging Women’s Leadership to Drive Your Company Forward.”

“I had a woman in my department who refused to be considered for promotion into management,” says Hoshino.

“I asked the reason… she said when she got married she would like to stay at home. I asked her if she had any marriage candidates in mind at that moment. She said ‘no.’”

“So, I encouraged her to advance her career while she was waiting to get married, since sticking to a staff level job would not result in interesting or challenging work. She took the challenge, and now she is a General Manager in Hong Kong.”

“Reaching out to young women and explaining to them that they can be aggressively confident about what they are doing is critical,” added panelist Lorraine Hariton, US State Department Special Representative for Commercial and Business Affairs. “Being a mentor and seeking out (other) mentors is critical to giving women confidence to move ahead.”

In the January edition of the Journal, the article “Off-Ramps & On-Ramps” unveiled some startling statistics about the reasons why educated women leave the Japanese workforce. The article was about a study conducted by the New York-based Center for Work-Life Policy – which challenged the stereotype that Japanese women just want to “stay home and have babies.”

The study found 74 percent of college-educated Japanese women voluntarily leave their jobs, more than twice the number in the US or Germany. A total of 49 percent of these women quit because they feel stalled in their careers, pushed out by rigid work schedules or unsupportive employers. More than half of Japanese university graduates are women but only 67 percent actually in the workforce.

“Statistically there are far fewer women in powerful positions,” says event moderator Elizabeth Handover, Vice Chair of the CSR Committee. “Only eleven of the CEOs of the global Fortune 500 companies are women, which is less than three per cent. Women in the US comprise 34 percent of entrepreneurs.”

“Companies could increase their productivity by between 25 and 40 percent if they improved their diversity and empowered women.”

Women in Management
Nissan’s Asako Hosino says her company has been actively promoting gender diversity, “When I joined Nissan there were only 35 female managers out of 2,500 managerial positions in Japan. Now the number is 160, so four times bigger compared to 2002.”

Asako Hoshino, Nissan Corporate VP

Hoshino lists four key success factors at Nissan in the area of diversity. The first is the Diversity Development Office (DDO), which Nissan created in 2004 to monitor the commitment by each functional area to diversity practices. Nissan’s Diversity Development Office has proposed a wide range of innovations, starting from day-care centers to flexible work time programs.

Following that, the second key success factor is the Diversity Steering Committee which is targeted at developing diversity. The company knows that diversity development needs to be top-down.

The third key to diversity at Nissan is training, especially concerning empathy for working with different people. The fourth and final key is mentoring and networking, including with strong female leaders abroad, who provide a bench mark for the female career tracks in Nissan and who motivate the female young managers at the company.

Hoshino says, “Women can be a strong change agent in society and in organizations, toward achieving greater efficiency and competitiveness.” She urges young women to be “honestly aggressive. Don’t copy the aggressiveness of males, but at the same time, be assertive and bravely innovative.”

Women in Local Government
Japanese women are also severely underrepresented in politics. In fact, only 1.5 percent of all local governments heads are women. Yokohama’s Mayor Fumiko Hayashi is one of them. She was also the first mayor to come from the private sector, having carved out a solid career in auto sales. She served as President of Fahren (now Tokyo Volkswagon) and at BMW before joining Daiei as Chairperson and then CEO.

Yokohama Mayor Fumiko Hayashi

Hayashi says, “Frequently I am asked why I have been able to achieve top performance in any organization that I went to. Why is it that you are able to turn around a company with a very bad performance to a company with an excellent performance? What I did was very simple and straightforward. I would scrutinize each junior colleague and identify their positive aspects and simply praise them for their positive character.

“Most senior people scold their colleagues and tell them they are doing it wrong. They never praise their colleagues. After I became President, I still tried to stay very close to the people on the ground, since the actual implementation of this business plan really rests with people. That is why I feel it is important that I stay close to people and to communicate with everyone.”

Women in Senior Government
Hariton led the US delegation to the Women’s Leadership Network here in Japan when Japan headed up APEC and initiated a dialogue on women’s issues.

She says, “One of the things we find women are often doing is taking it into their own hands when they leave they start their own businesses. This is one of the reasons why APEC is focusing on empowering women entrepreneurs through access to capital, access to markets and capacity building, because the way we can really inspire change is through entrepreneurship. Almost all new jobs come from entrepreneurs. So when women start to build their own businesses, they gain power, and they change society.”

The Role of Government In Promoting Women
Elizabeth Handover asks the panelists, “What role can and should governments play in terms of forcing organizations to shift their policies?” Hayashi responded, “I think at minimum what the central or national government should do is to create a ministerial position responsible for women’s issues.”

She adds, “The first such challenge is to address the issue of the large number of children on the waiting list to get into nurseries and kindergartens. All the heads of municipalities and local governments said this is something that could never be done; (but) I have committed myself to reducing the number of children on the waiting list to zero.

Hariton responds that APEC provides a vehicle for 21 member countries to compare best practices and see what the others are doing. Measurement is a good way to understand what the situation is. Government can also support women by making sure the legal framework is positive and equal and by providing finance for women entrepreneurs in various areas.

Making the Shift to More Flexible Work Arrangements
Another question posed to the panelists: “What would you advise in terms of helping organizations make the shift towards more flexible work arrangements?” Hoshino sees a solution starting with “changing the organization from the top down, and having awareness among the top leaders that this issue is not just for the individuals involved, it is for the corporation. It is for the benefit of the company.”

Lorraine J. Hariton, US State Department Special Representative

Hariton says American companies in Japan are great role model. For example, IBM has flex time, and BMKK (part of Bristol-Myers Squibb) has an active program to encourage women back into the workforce after they leave. Hariton was delighted to hear that Vicki Beyer, ACCJ Vice President, has created a women’s business committee at the Chamber.

“A committee of really committed people really makes a difference in the world,” Hariton says.

Tish Robinson is a professor of Organizational Behavior and Systems Thinking at Hitotsubashi University. She co-chairs the ACCJ HR Committee along with Taka Miyawaki.

This is partly because one can easily create a non-profit organization in the US by simply filing a tax return describing the group’s intended activities – which might span a wide range – and agreeing to certain rules. In contrast, total giving in Japan runs at less than .1% of GDP (individuals: only .03%) and only about 17% of all citizens have given to a charity in the past year.

There are several reasons for this gap. One is the relatively flat income structure of Japan, which has far fewer high-paid people than the US – those who not only have the extra money to give but also are in high tax brackets where tax deductions are more valuable.

Another reason is the lack of a religious custom of “tithing,” or donating a fixed portion of one’s income on a regular basis.

But there is another reason; quite simply, it has historically been very difficult for Japanese private sector groups to create non-profit organizations which avoid paying taxes and to which donations are tax deductible. Most organizations have been either created by bureaucrats or required licenses and other approvals that were very hard to obtain.

A New System for “Public In terest Corporations ”
The quintessential case in point is the “public interest corporation” or koueki houjin (“KH”) in Japan. For years, KHs could only be created by government ministries, so they came to be viewed as quasi-governmental in nature.

Bureaucrats could form a KH easily and quickly; they would establish an organization whose intended activities linked closely to categories listed in the law; then, they would have their own Minister stamp some forms to make them official.

In many cases, officials would “suggest” that groups of corporations make the initial donations to get the organization started and presto – fund-raising occurred overnight. It was essentially assumed that if the bureaucrats in charge said so, the intended activity served “the public interest.”

As a result, there came to be thousands of “public interest corporations,” many of which – you guessed it – were staffed by amakudari officials and received hefty government subsidies.

However, with the budget-cutting pressures of the past few years, things have been changing. In 2006, after six years of deliberations, the government passed a law that not only allowed private people to set up KHs for the first time, but also outlined objective criteria that KHs would have to meet in order to ensure that their activities actually did serve “the public interest”.

The new law came into effect at the end of 2008 and, because there were actual criteria, the legal meaning of “public interest” was defined in detail for the first time. The main purpose of this was to cut all the waste – to set things up so that unless pre-existing KHs re-applied, met the new criteria and converted to the new system, they would automatically lose their KH certification and their beneficial tax advantages.

Now, several years after the new law was implemented, there are still more than 500 public-interest organizations waiting in a huge backlog of conversion applications

to the Cabinet Office alone. Additionally, there are more KHs that are “throwing in the towel” because they likely do not qualify under the new rules or because of the burdens of being a KH. [see fig I]

But another admirable – and explicit – goal of the new criteria-based system was to stimulate more charitable giving: to make Japan more of a donations-based society (kifu shakai, kifu bunka). In part, this is the other side of the coin from the goal of cutting wasteful spending. If private sector initiatives could establish KHs by themselves, and individuals and corporations simply “voted with their feet” by giving donations, government tax subsidies for “worthy efforts” could be reduced and the societal value of those new organizations would be seen in a new light by the fact that they were supported by private donors. Conversely, with actual clear criteria to follow, the private sector could be confident that applications might be accepted.

Thus in 2010 the nonprofit association that I lead, The Board Director Training Institute of Japan (BDTI), applied to the Cabinet Office become a private-sector initiated KH. The process was very long and arduous, but in April 2011, our application was approved.

To me, this was not just a matter of getting tax advantages. Much more importantly, it marked a major advance in the quest to improve corporate governance in Japan, because for the first time, the government had affirmed that training and information dissemination to improve corporate governance are activities that serve “the public interest”. This implicit “policy statement” was very important to me.

BDTI has obtained broad approval to conduct two activities as “public interest” activities: (a) offering training programs and E-learning courses about corporate governance, as long as they are open to the public; and (b) information dissemination, conducted mainly at seminars and on the bilingual discussion forum and data library on our web site, http://bdti.or.jp/english/. But it has also obtained approval to derive revenues from advertising, and for offering customized training programs and consulting to specific companies about governance and board practices. BDTI can offer these services at a profit as long as it spends less than one half of its total expenses on them. As long as it meets this condition and a few others, the entire entity of BDTI need not pay any tax and donations are tax-deductible for each donor.

Doubling the Tax Benefit of Donating
Last year, the Tax Agency did something to increase the tax incentives for Japanese individuals to give to worthy causes, creating a new system that, in the case of qualifying KHs, will essentially double the tax benefits received by donors who are in anything less than the highest tax bracket.

Generally, if you donate ¥100,000 to a KH, you can deduct that amount from your taxable income. Thus, if your marginal tax rate is 20%, your taxes will be reduced by ¥20,000 (because 20% x ¥100,000=¥20,000), so you will be able to help society to the tune of ¥100,000 by giving up only ¥80,000 of net cost to yourself.

The new tax credit benefit is a bit complex to calculate, but for anyone whose taxable income is less than about ¥50 million – which is to say, most Japanese taxpayers – the gist of it is that if you donate to a qualifying KH, you will be able to help society to the tune of ¥100,000 by only giving up about ¥60,000. In effect, the tax credit calculation assumes that your marginal tax bracket is very high even though it is not.

For the first time, in Japan’s exceedingly flat-income society, many ordinary people with mid-level salaries will have a real reason to make charitable donations, even if the amounts are relatively small. When combined with the fact that private sector organizations can apply under a criteria-based system, Japan’s new system sets the base for the growth of new grass-roots organizations that will benefit society and for individual donors to support them.

Japan’s hope of becoming a charitable-giving society could become a reality.

Kinks to Work Out
Having said this, the system still has some kinks to work out. Because the immediate primary goal of the new system is (understandably!) to eliminate the “old system”
KHs that do not deserve that status, the application process is exceedingly rigorous, time-consuming, and costly. It takes anywhere between five months and a year to get approval, and even before that, merely preparing the documents and figuring out the complex rules (and arcane accounting system) takes several months at least. Moreover, one needs to hire specialist advisors to do all of this.

In BDTI’s case, it took about one year to get approval. During that entire application period (and before it), donations were not tax-deductible, which made them harder to collect. As a result, many charitable organizations in Japan are so scared of this burdensome application process and the arcane accounting/operating requirements, that they shy away from applying to be a KH. When such persons read my name card and hear that BDTI has obtained KH status as a “start-up” association, they are amazed and ask, “How did you do that? It is incredibly difficult….” The sad answer is that they are right, it was incredibly difficult.

In contrast, creating a similar tax-exempt non-profit in the US – a 501(c) (3) organization – is as simple as describing the organization by filing a special tax statement (estimated time to complete: eight hours) and receiving an IRS recognition letter a few months later. Once the letter is received, any donations made after the filing date become tax deductible, retroactively.

It is easy to see that for newly-formed social entrepreneur groups like BDTI, which don’t have a lot of time to waste nor money to pay advisors, the Japanese system still needs some improvement. But once most of the old-system KHs have been weeded out, it should be more feasible to simplify the application procedures.

The good news is that, this new system is definitely a step towards creating a “giving society” in which private-sector, grass-roots initiative play a greater role.

Nicholas Benes is Representative Director of The Board Director Training Institute of Japan, a non-profit “public interest” organization certified by the Japanese government. (Contact: info@bdti.or.jp).

Photo courtesy of Kengo & Kuma Associates

The 20th Century’s rush to modernize pushed traditional architecture aside in favor of new technologies and today, Japan can easily be called one of the most exciting architectural landscapes on the planet. There are few architecture environments as adventurous as Japan: a place where microhouses are built on microscopic building sites, where skyscrapers rise on seismic quake lines and where material and form are pushed to revolutionary new heights. It is a constantly changing architectural landscape in which buildings rise and fall more often than prime ministers leave office.

Photo by Lorenzo Barassi

Pritzker-prize winning architect Fumihiko Maki has described Japan’s distinctive architecture as a result of its geocultural character: Japan has had to respond to its equally rich and volatile natural environment, as well as the push and pull of its own history and globalization.

This seems even truer in light of recent events: with global economic uncertainty and the triple disasters of March 11th, Japan has had to again rethink how it wants to go forward. It could just be the beginning of a
quiet architectural revolution, as architects and urban planners – as well as the general public – seriously question the country’s architectural ideals since 1945 and ask: howcan this be done better?

What kind of communities and structures should we be building? How do we balance issues like environmental suitability and sustainability, energy efficiency, safety and even beauty with economic and social factors? Generally, where do we go from here?

Now, with reconstruction in Tohoku only beginning, the need and desire to find innovative and sustainable ways of building is only growing. Even before the March disasters, many Japanese architects had already been looking for answers not only in new technology and design but in the past. Japanese architecture has traditionally prized and worked in response to nature, so it is unsurprising to see architects and their clients not only looking to new green technology but also back to Japan’s architectural traditions; a shoji screen can be as relevant as a solar panel in sustainable architecture.

REVIVING OLD JAPAN
One of the interesting trends in recent years has been contemporary renovations of historic buildings. For generations, especially in the expensive real estate market of Tokyo, an older building was viewed as a something to be destroyed and replaced by something newer, bigger, and more profitable. Safety concerns were frequently cited as a reason, but considering the expertise available in seismic retrofitting, restorations are often a choice.

Photo by Louise Rouse

Sensitive renovations of historic buildings have been a forte of architect Kengo Kuma. The architect has said his aim is to ‘recover the tradition of Japanese building” and reinterpret it for the 21st century. Many of his projects – from an elegant restoration of the 100-year-old Fujiya Ginzan Onsen in Yamamgata to the major remodelling of the much loved Nezu Museum and gardens in Tokyo – do just that; effortlessly blending history, contemporary style and the latest technology. These works carry the hallmarks of the best of environmentally aware architecture: respect for context and history; use of local craftsmanship and materials where possible; and innovative mixes of Japanese traditions and contemporary innovations.

SMART ENERGY DESIGN
Energy efficiency is a big issue in green architecture. As Japan grapples with questions about new energy sources, architectural experiments are trying to discover how to make smaller energy footprints using both low and high tech solutions.

Atelier Tekuto’s A-Ring House in Kanazawa Prefecture is an experiment with aluminium to create sustainable, energy efficient housing. Using geothermal energy and the natural heating and cooling of aluminium, the silvery structure is a high-tech, ‘zero operating cost’ house.

Less futuristic but no less experimental is Coal House designed by Terunobu Fujimori, a respected architectural historian and architect whose work challenges all preconceptions about contemporary Japanese architecture. In contrast to the polished seamless surfaces and forms common to contemporary architecture, Fujimori embraces the traditional and the handcrafted, and finds ways to bring them into a modern context.

Coal House was part of the Sumika Project in which Tokyo Gas enlisted four architects (Toyo Ito, Taira Nishizawa, Sou Fujimoto and Terunobu Fujimori) to each design an energy-efficient home based on ‘primitive’ living. Fujimori chose the cave as his inspiration, resulting in Coal House, a characteristically mix of playful experimentation, sophisticated craftsmanship and a broad frame of reference ranging from the Japanese teahouse to the caves of Lascaux.

More energy experiments are being attempted by hi-tech companies like Panasonic, which is working with other Japanese companies on an energy-efficient “smart town” on the outskirts of Tokyo. Fujisawa Sustainable Smart Town is being built on the site of an old Panasonic factory. The town’s design features an intelligent network of electricity grids that will permit energy conservation, sharing and storage. There will be a system of electric car sharing, solar panels, LED lights and smart appliances that communicate with a main network to conserve energy. Passive energy sources will also be tapped with “wind paths” and strategically placed greenery. When completed in 2014 (at an estimated cost of 60 billion yen), it will support 1000 households for approximately 3000 people and should, according to Panasonic, reduce normal carbon emissions by 70%.

THINKING ABOUT URBAN PLANNING
Dense and expensive urban landscapes mean that more of life in Japan is lived in public spaces. Where apartments and homes might be smaller, public spaces offer alternative places for people to work and socialize. Japan’s cities are leading the way in transforming urban infrastructure into extensions of the home, making public spaces – from schools to cafes – cozier, more sustainable and user-friendly.

A leading project is Klein Dytham Architects’s new T-Site Daikanyama . Designed for Tsutaya (the major Japanese CD/DVD/book seller), it covers a 12,000m2 site with a cozy, low-rise complex of shops, eateries and an art gallery organized around a public green space with old growth trees. The whole space acts like a public living room; cafes and patios are almost always packed with people working, eating and socializing. With its more subtle approach to commerce, generous amount of space for greenery, and user-friendly way of organizing public space, it has proved incredibly popular with both the public and the architectural cognoscenti. It is a prototype that will no doubt inspire similar projects in Japan’s dense and often chaotic urban landscapes.

Photo courtesy of Shigeru Ban Architects

GOING GREEN, LITERALLY
The lack of space in dense cities is also creatively addressed with Tezuka Architects’ extension to their awardwinning Montessori Fuji Kindergarten in Tachikawa, in greater Tokyo. Called “Ring around a Tree” , it is a language lab encircling a full-growth tree and makes going to school like playing in your backyard (something most children in crowded Tokyo do not have). Like the Fuji Kindergarten itself, the project uses the site’s trees as starting points for an architecture that inspires learning, imagination and play.

Code Kurkku, Photo by Louise Rouse

Tokyo’s popular Azabu Juban shotengai (shopping street) often sees buildings come and go as businesses look to attract customers with fresh buildings and designs. Among the latest crop is an elegant plant-clad project by Edward Suzuki Architects. Called the “Vent Vert” or “Green Wind,” its nine-storey facade will be covered by live greenery which, when completed this spring, will give both tenants and passersby the visual and tactile pleasures of a vertical garden on a dense city street. Similar walls of green can be found in projects around the city including Shigeru Ban’s Nicolas G Hayek Center- a commercial building owned by the Swiss company Swatch in Ginza – and the Yoyogi Village by Kurkku , a restaurant complex designed by Wonderwall as a tranquil, green filled retreat in busy Shibuya.

Hiroshi Nakamura and NAP Architects – who earlier created a house, House C , with a living roof in Chiba– are now attempting a small forest in Tokyo on top of the new Tokyu Plaza Omotesando. Opening in April, the shopping complex will feature a roof like a bouquet of trees, a symbolic nod to the famous zelkovas of Omotesando Dori and inserting an ecological note into a glamorous consumerist boulevard.

So despite the endless non-descript towers that continue to pop up all over the built landscape, the architectural mood in Japan looks to be moving towards a more subtle design aesthetic, reflecting a growing awareness of the need to always consider the environment, both built and natural. Post-March 11, Japan’s geo-cultural reality has again put it in the unique situation in which the country could potentially lead the way in green design and technology.

House C, Courtesy of Hiroshi Nakamura & NAP Architects

The seeds have been planted, but will they grow? Either way, 2012 may well mark the beginning of the next phase of Japanese architecture.

The ACCJ Journal is here to help you! Listed below are basic tips for filing your individual 2011 Japan tax return. By being mindful to these tips and rules, you should be able to reduce your tax burden and could even find yourself with a refund!

Of course, please keep in mind that the following are general guidelines; we strongly recommended you consult with a tax professional if you are not sure whether you are eligible to deduct certain expenses, or if you have other concerns about your financial situation.

Who Should File and When to File
Individual tax returns must be filed sometime between February 16 and March 15 in the calendar year that follows the taxable year. Extensions are not allowed.

Identify Your Tax Resident Status
The first step in preparing your return is to know your resident status. The scope of taxable income and taxability varies depending upon this status. People are divided into two categories: either “resident” or “non-resident.” The definition of a resident is a person whose domicile is in Japan or who has resided continuously in Japan for more than one year. A nonresident (“NR”) is an individual who doesn’t have a permanent residence in Japan.

Residents who do not have Japanese nationality and who have been living in Japan for five years or less (over the last ten years) are classified as “nonpermanent residents” (“NPR”). Residents who have lived in Japan for more than five years (over the last ten) are considered permanent residents (“PR”).

NRs should note that even if the amount of time you have been living in Japan is less than a year, if you have a job in Japan that requires you to reside here for at least one year, you are presumed to have a domicile in Japan. Also, remember that while your visa status and the length of your visa are important factors in determining your resident status, they are not the absolute deciding factors.

The Amount of Salary
One other factor that impacts whether you need to file a return or not is if, as a salaried worker, you earned more or less than ¥20 million in Japan source income. If your gross receipts from a Japanese company exceeded ¥20 million, you are required to file an individual tax return. Additionally, if you receive foreign source income paid in Japan or remitted into Japan, you need to file a return.

Suppose you are a NPR working at the Japanese subsidiary of the US parent company and receive all of your salary from the Japanese company. In this case, you should receive an annual withholding statement or Gensen Chosu Hyo for the previous year from the company sometime after the new year. If your gross receipts on the statement are ¥20 million or less AND you do not receive any salary out of Japan nor any foreign income, the tax amount on the statement will be the final tax since your employer has fulfilled the tax liability on your behalf through the year-end adjustment process.

However, you may still want to file an individual tax return if you have certain deductible items, such as medical expenses, that might qualify you for a refund.

Know Your Taxability
Determining the taxability of your earned income and capital gains depends heavily on your resident status and the source of the income. NPRs are taxed on Japan source income as stated in the Japanese tax code – including salaries – regardless of whether it is paid in Japan or abroad. NPRs are however not taxed on foreign source income that is retained outside Japan. Residents that have lived in Japan for more than five years (over the last ten) are considered permanent residents (PR), and all of their income – both Japan source and foreign source – is taxable.

Tax treatment for a NR differs according to the type of income and whether the NR has a permanent establishment – such as an office.

183 Days Rule
Suppose you are a US-resident salaried worker and are dispatched to Japan. If the number of days you work in Japan is less than 183 in any twelve month period in the taxable year, your salary is tax exempt in Japan, provided a few other conditions are satisfied. In practice, you should file the notification form for application of the US Japan tax treaty.

Working Outside Japan
Suppose you are a salaried worker and receive a portion of your salary in Japan and a portion overseas; in this case, you should include all receipts irrespective of where received. However, if you work outside of Japan for a certain period of time, you may separate the income generated while working outside of the country as foreign source income on a pro-rata basis. If the income computed as generated overseas is retained outside and not remitted into Japan during the taxable year, it will not be taxable. This rule however does not hold true if you are the director of a Japanese company.

US Source Income Treatment
NPRs are not taxed on rental income generated through rental properties abroad as well as capital gains generated through overseas stock or investment in offshore mutual funds that were made through overseas securities firms – as long as such income is retained outside of Japan.

Taxable and Non-taxable Income
Benefits provided by your company can also be deducted from individual taxable income. Some general tips on what can and can’t be deducted include:

Housing Allowance
When a company rents an apartment or house for an employee/director, it typically computes a certain portion of the actual rent (as determined by the tax code) and receives this amount from the employee/director. In this case, the actual rent is not taxable. However, should the residential space consist of more than 240 square meters with certain other conditions met, the full rent is then deemed taxable.

Education Allowance for Children
Any allowance for a child’s education paid to an employee is taxable. However, if a company makes a donation to an international school that has an accredited scholarship plan and the school provides free tuition to the children of the director/employee, the economic benefit of this free tuition is then considered non-taxable. You can confirm whether there is such an accredited scholarship plan with the school or with the tax office associated with the school.

Home-Leave Allowance
If you have been working at a company in Japan for approximately one year, company payments for round-trip air-fare and any layover hotel charges are nontaxable. This is allowed once per year.

COLA
This allowance is treated as taxable income.

Stock Options
When the parent company grants Stock Option (“S.O.”) rights and an employee/director exercises the S.O. and receives the stock, the difference between the exercised price and the market value of the stock as of the exercised date is regarded as the salary income. Note however that the US-Japan tax treaty has specific treatment for residents who work both in the US and Japan. Take, for example, an individual who is granted the S.O. of the US parent company during the time they work in America. Subsequently, the individual continues to work with the American parent company for 3 years before being transferred to the Japanese subsidiary and working there for 2 more years. At this point in time, after a total of five years, the individual then exercises the S.O. In this case, two-fifths or 40 percent of the income for the S.O. is regarded as Japan source income.

Other Major Deductible Items
Did you know that you can deduct certain other common expenses to reduce your tax burden? The following are major items that can be deducted when you file your tax return in Japan:

Contributions
When you have made a contribution to government, local authorities or a charitable organization specially designated by the Minister of Finance, such as the Japan Red Cross Society, this contribution can be deducted from your income; the amount that can be deducted is the lesser of the contribution amount or 40 percent of your total income minus ¥2,000.

People who made contributions to support the recovery efforts following the devastation of last year’s earthquake and tsunami can deduct these costs if the recipient organization is a designated organization or the Japan Red Cross Society. Although the original receipt issued by the organization is required in principle, bank receipt for remittance is sufficient for contributions made to the Japan Red Cross Society.

Contributions to persons or organizations outside of Japan however do not qualify for a deduction. Donations to your alma mater for example do not qualify.

Medical Expenses
Expenses related to medical and dental care are deductible. Commuting expenses that are required in order to receive medical care, meals and lodging furnished by a hospital, and special equipment (such as artificial teeth) are all deductible. Eyeglasses and contact lenses are in principle nondeductible except for special glasses after cataract surgery. Most cosmetic surgery and procedures, complete medical check-up, and vitamin pills for promoting health are non-deductible. Medical expenses include not only yourself but also your spouse, as well as any dependents and kin who are in your household.

Deductible amount: total medical expenses paid minus amount reimbursed through insurance minus (the lesser amount of 5 percent of your total income or ¥100,000. The maximum amount that can be deducted is ¥2,000,000.

Social Insurance Premiums
Premiums for social insurance which you have paid or have had deducted from your salary are deductible. Premiums for foreign social insurance systems are not deductible and thus premiums for 401(k), for example, are not deductible.

Tax Amount
Taxable income is computed from all Japan source income minus any deductions. The rate (composed of national and local tax) is progressive – starting from 15 percent and running as high as 50 percent.

Tax Credit
If you are a permanent resident and are taxed in the US for American rental income, you can receive foreign tax credit that is deducted from your tax burden.

Local Tax
My last tip concerns the local tax system. If you are a salaried worker and either file an individual return on your own or have your company file it on your behalf, basically you do not have to file the local tax return since the Ward Office computes your local tax. The Ward Office withholds the local tax from your monthly salary in twelve installments starting from June the following year through the following May. If you are not a salaried worker, you will receive an invoice from your Ward Office requiring quarterly payments for June, August, October and the following January.

Local taxes are levied on individuals who reside in Japan as of January 1st. For example, 2012 local taxes (the tax is computed based on the income of 2011) are levied on any person who is a resident of Japan as of January 1st, 2012. Accordingly, on your last year of assignment in Japan, if you leave Japan by the end of December, your local tax for the last year will not to be levied.

So now that you are armed with these tips and hints, there are no more excuses for waiting to finish getting your finances in order!

Jun Nagamine CPA, founded accounting firm Nagamine & Mishima more than 20 years ago.

“I needed to make a presentation in English and I was interested in learning a foreign language among its native speakers,” says Sugano. “Basically the environment that you are immersed in is good in terms of learning English and (Western) culture while reflecting on your language and its culture.”

The prospect of studying at a foreign university can be intimidating for Japanese students unaccustomed to Western-style learning. Even Sugano, who speaks English fluently, admits to feeling “a little awkward in class” at first. He says the biggest difference is the way that Western students are called upon to participate and not merely sit back and take notes.

“Most professors at an American university seemed to encourage students to ask a lot of questions, while (Japanese) counterparts didn’t seem to encourage students to ask a lot of questions,” says Sugano.

“The teaching style at an American university is a two-way street. Students sometimes openly express their doubts to professors,” he says, adding it is not considered a sign of disrespect.

“Students at a Japanese university rarely ask a question (of) their professors, much less openly express doubts to them,” which can be construed as demeaning to the professors.

Sugano’s situation as an Easterner in a Western classroom is not uncommon. In fact, dozens of Japanese students have signed up for courses at foreign universities in Japan over the past few years. Schools such as UMUC, the University of Phoenix, Temple University, Central Texas College, McGill University and Lakeland College offer various undergraduate and graduate programs in the Tokyo area.

Temple University, Japan Campus
Temple University, Japan Campus bills itself the oldest and largest foreign university in Japan. Established in 1982, TUJ’s downtown campus offers ten core undergraduate programs along with graduate degrees in law, business and education. According to its website, TUJ is home to about 3,300 students from more than 60 countries including Japan, the US, the Middle East and Europe. Temple also offers corporate and continuing education classes at its central-Tokyo based campus.

“We believe that the TUJ educational experience is unique in Japan,” says Masami Nakagawa, Temple Japan’s Chief Communications Officer. “We are the only true university (i.e. undergraduate and graduate programs) that teaches all of its courses in English and that provides a truly international liberal arts education which nurtures the kind of qualities required by today’s multi-national enterprises.”

“All programs (except for the LLM) can be completed at TUJ so that graduates can earn well-recognized American degrees without having to leave Japan.”

TUJ was the first educational institution in Japan to be officially recognized as a Foreign University by Japan’s Ministry of Education. This status allows TUJ to sponsor student visas, enabling international students to attend the university either on a short-term (one or two semesters) or a longterm basis (full four-year program).

Temple University President Ann Hart congratulating a 2011 graduate

“One of the most important reasons for students to come here is that our placement rate is typically about 90% as Japanese and multinational corporations value the liberal arts-based intellectual skills, such as critical thinking, and the communication skills of our graduates,” says Nakagawa.

Studying at a foreign university in Japan is not cheap. However, taking courses in Japan can actually be less expensive than studying Stateside. At Temple, a full-time undergraduate pays ¥730,700 in tuition per semester, or about $19,200 per year. The annual full-time tuition at the main Temple campus in the US is $23,032. That of course does not include living expenses and other costs associated with studying in America. On the downside, TUJ is not considered a Japanese university so it does not benefit from tax exemptions or subsidies from the Japanese government. However, Nakagawa says TUJ has been “working to address these issues to ensure fair competition through various channels.”

Along with undergraduate programs, TUJ also offers MBAs, LLMs, Masters and Doctorate degrees in TESOL in Tokyo.

“These advanced degree programs each serve specific needs of the respective markets,” says Nakagawa. “(The) TESOL program especially, as TUJ’s oldest program, enjoys a high reputation among English teachers in Japan.”

Lakeland College, Japan Campus
Lakeland College is another US-based school that offers degree programs to Japanese and non-Japanese students in Tokyo. Affiliated with the home campus in Wisconsin, Lakeland began offering classes in Japan in the early 1990s. Today, the school boasts graduates at more than 60 universities and colleges in the US, Canada, the UK, France, Switzerland and Australia.

Lakeland’s Associate of Arts undergraduate degree program helps students make the transition to a foreign university from high school in Japan. A student takes courses for two years in Japan and then finishes with two years at the Wisconsin campus or another foreign university.

Lakeland College student La Roy Cotton

“For many students, taking advantage of our two-plus-two program allows them to enter competitive universities that they may not have been able to enter as high school leavers.”

The Lakeland program, like the other foreign universities in Tokyo, helps ex-pat parents keep their children closer to home – at least for the first two years of university, which can be the most difficult. The transition from high school to university does not have to be done far away from family, friends and other support. Also, like Temple, doing two years of university in Japan saves money.

“Parents can save money on air fares, housing and higher tuitions fees by having their children studying in Japan for two years before going to the States or elsewhere for the final two years,” says Brender.

“Since the Japanese Ministry of Education also recognizes us, the students can also stay in Japan and transfer to a Japanese university if they wish. Our college is conveniently located in Shinjuku, so it is an easy commute for most students no matter where they reside in the greater Tokyo area.”

Lakeland College students hard at work

“As part of our community outreach program, we offer a monthly free lecture,” says Brender. “These tend to be eclectic.

Among the lectures we have offered recently are Tokyo Architecture in the 21st Century, the History of Pizza in Japan, International Negotiating Techniques, the Future of North and South Korea, the abduction issue of children by Japanese spouses.”

“We even had a lecture by an 82-year old former kamikaze pilot.”

Like most universities in Japan, Lakeland College is dealing with the ‘demographic issue.’ Every year, there are fewer 18 year-olds enrolling in university or college programs, so the pool of prospective students is shrinking and the competition is fierce. But Brender says Lakeland is facing this challenge by offering students something different: “if the counselors would look more closely they would see that we serve a niche market from which some of their students could greatly benefit.”

“We had one student who graduated from St. Mary’s High School. His parents sent him to the States to study. He was of mixed heritage (American and Japanese) and felt lost there and failed most of his subjects. He returned to Japan and enrolled at our school where he excelled. He ended up with the second highest GPA when he graduated with his AA degree. He is now enrolled at NYU and doing well.”

McGill University, Japan
Executives are often looking to upgrade their qualifications, especially with an MBA. However, many professional people are not able to find time for classes during their busy work-week. Montreal’s McGill University has a solution: a weekend MBA program. The prestigious Canadian university offers a unique program in Japan where students can earn a full MBA by attending classes on Saturday and Sunday. Best of all, again, the McGill program is significantly less expensive than similar programs.

“We charge 4,800,000 yen for the whole program,” says Philip O’Neill, Director of the McGill MBA Japan Program. “That is about 94,000 yen per credit.”

“It includes all the materials, coffee, books, access to materials, etc. At the moment, this is quite a bit less than the cost at the home campus.”

O’Neill says the strength of the McGill program is that it brings in professors from its Canadian campus. McGill was recently named the 17th best university in the world in the QS World University Rankings, meaning it is not only the top-rated university in Canada, but one of the best universities in the world (Tokyo University ranked 25th).

“Our professors are at the forefront of research and teaching in their areas,” says O’Neill. “So, we think this is important for the students’ learning experience.”

“We also have very stringent entrance requirements for our students, because they need to be able to perform at a very high level, and very intensively, during our program. Our program really caters to students who want to have a very intense and rigorous program.”

O’Neill says McGill’s Japan MBA program has proven popular with not only Japanese, but students from all over the world.

“Historically, about 40 or 45% of (our) students are Japanese. We also have students from Mainland China, Hong Kong, Taiwan, Korea, Canada, the US, Europe, South American and sometimes from Africa.”

“This is probably one of the most diverse groups of students anywhere.”

University of Maryland University College Asia
The University of Maryland University College has been offering programs in Asia for more than 60 years. Operating under a US Department of Defense contract, UMUC appeals mainly to members of the US military who want to complete their education on Uncle Sam’s dime. However, while soldiers, sailors and airmen remain UMUC’S bread and butter, the university has started reaching out to civilians.

“UMUC Asia’s mission is to offer academic programs to US military communities throughout Asia and the Pacific,” says Ted Loya, Regional Enrollment Manager for UMUC Asia. “So our students are mainly military students, with a small percentage of host-country students, and an even smaller percentage of third-country students.”

UMUC offers 17 undergraduate degree programs and an advanced online learning program, where students can earn degrees without ever attending a face-to-face class. A full-time UMUC student can earn an Associate’s Degree in two years, just like at a college in the US.

There is one major consideration with UMUC: its campuses are located on military bases in Japan, Korea, and Europe, where security restrictions are enforced. Students from countries on less-than-friendly terms with America are not allowed on the bases.

“UMUC Asia is a guest of the military, so it is required to adhere to local military rules and regulations concerning off-base guests,” says Loya. “In this regard, the different services (Army, Navy, Air Force, Marine Corps) have different policies, so there will be times when a student will not be able to attend UMUC classes at one base, but will be able to attend classes at another base. Basically, restrictions apply on a case-by-case basis.”

In an effort to reach out to Japanese students, UMUC offers an ESL “bridge” program which is designed to help Japanese and other non-native English speakers improve their oral and written English skills, in order to transition into the American educational system. Japanese students need an official certificate of English proficiency such as TOEFL or EIKEN before being admitted into UMUC’S Bridge Program. Students who went to an American high school or college can be admitted without a proficiency test.

Dr. Alan Brender, Lakeland College; Philip O'Neill, McGill Japan; Dr. Bruce Stronach, Temple University Japan; Ted Loya, UMUC Asia

“The idea of keeping kids ‘closer to the nest’ is certainly a selling point,” says UMUC’s Ted Loya. “The uneven American economy has forced a lot of teenagers, and their parents, to reconsider stateside college plans, and once they find out about UMUC’s Asian Division and its competitive tuition rates, they realize that it makes financial sense to begin classes in Asia.”

Best of all, foreign university programs allow Japanese and non-Japanese students the chance to mix and learn together, exchanging ideas and philosophies. Masanori Sugano says that is why he would recommend a foreign university to a Japanese student – it is a great way to foster cultural understanding.

“I definitely recommend an American university to other Japanese students,” he says.

“It is a good option for them, because they recognize their own identity anew as well as improve their English. Moreover, they could play a key role in reducing friction between the US and Japan through mingling with American students.”

Illustration by Louise Rouse

Michael Marquardt, President of the World Institute of Action Learning, shared the concept with an ACCJ audience. The event was hosted by the ACCJ CSR Committee led by Charles McJilton, Elizabeth Handover, and Ako Serizawa, and the HRM Committee led by Tish Robinson, Taka Miyawaki, Ginger Griggs, and Keiko Suzuki. (Elizabeth Handover and Fumiyo Seimiya were keys to organizing the event).

This following article will give you a taste of action learning – in action. Briefly, action learning offers a way to solve the most complex problems, and helps one learn relationship skills, teamwork and how to start changing corporate culture. Here in Japan, many large corporations now use action learning to develop leadership among employees. They also use action learning to develop their culture based on continuous improvement in quality and relationships. One reason that action learning is so highly regarded is that it does many things well and does them cheaply.

Action learning stems from the belief that you cannot become a great leader or develop leadership skills except when you are working on real problems with real people in real time. You cannot be a leader if you don’t know how to work in teams, nor can you get a team to work well together. You cannot solve a problem in isolation and apply it to an organization, either.

Marquardt sets out six interactive components of action learning: the urgency of the problem, the diversity of the group, the questioning and reflection process, the commitment to taking action, the commitment to learning and the facilitator.

1. WORKING ON AN URGENT PROBLEM
First, you cannot get learning or action of any importance unless there is urgency. So action learning starts with a problem – an urgent problem. The more complex the problem, the more learning, creativity, and leadership skills are needed and the more team skills have to develop. Also, the more systems you have to understand. A problem is an opportunity – a positive thing. It provides the challenge and overcoming the challenge is where learning takes place. Learning only comes from that effort.

Illustrating the power of urgency, Marquardt gives an example: the need for the UN environmental program to build an energy-neutral headquarters in Nairobi in twelve months. An action learning group was assembled in Nairobi that included senior people from Microsoft, UN officals and a learning coach. The group met to develop initial strategies and formulated a plan. Twelve months later, they came up with something they didn’t think was possible – a solution to an urgent problem.

2. HAVING A DIVERSE GROUP
The second component of action learning is that you need a large and diverse group of people to get the best ideas, the greatest synergy and the maximum creativity. The more complex and difficult a problem is, the less valuable a single person’s expertise becomes. We know that. Research has shown that a difficult problem cannot be solved by an individual. It is too complex. One person cannot see the whole picture. Having different perspectives and seeing a problem from new angles is what helps us come up with a strategy.

In an action learning group, you want between four and eight members. You need four to get enough synergy and energy but you don’t want more than eight because it is too complex. We have all been in groups of ten or twelve or fifteen people, or twenty-five people, for political reasons. Have any of you been in a successful problem-solving group of twelve or fifteen people? It never happens. It is not because people are not trying but that problems are too complex. What is the difference between eight people interacting and nine people interacting? Thousands more interactions. For action learning to work, there needs to be time and space for everybody to be fully engaged in the learning, as well as in the decision making. So the group cannot be too big.

Also, it is important that everyone is present at every meeting. Whenever we have had poor group performance, it is often because somebody doesn’t show up. Also, ideally, we want diversity in a group. If you have a marketing problem and you only use marketing people, you get a slight improvement. If you want a great strategy, you need to get other people, maybe customers, engineers, or other outsiders, because you want to get questions that are not asked by the experts. Most organizations, or people, don’t want anyone with different ways of thinking in the group because they think it can cause too much conflict or that people will push their agendas. Action learning deliberately seeks people with different perspectives.

Some organizations like IBM use action learning to break down silos. One way to break down a silo is to put together people who don’t normally work together on a project important to everyone involved. When people from different departments need each other to be successful, silos start to disappear.

Some action learning groups deliberately seek to include someone who knows nothing about the project or the organization. This ensures that there are people involved who aren’t afraid of asking dumb questions. A lot of times when everyone is an expert, they are afraid to ask stupid questions. Remember the story of the Titanic? Its engineers all secretly doubted that the ship would stay afloat during a crisis. No one had the courage to ask what if it hit an iceberg. They were afraid they would be ridiculed by their colleagues because they might not have known something that everyone else did. What they needed was freshness in perspective, and the ability to ask essential and sometimes “stupid” questions.

Illustration by Louise Rouse

3. UNDERSTANDING THE IMPORTANCE OF ASKING QUESTIONS
The third component of action learning is the way people work together. Here, the essence of action learning is that group members focus on questions. Typically when we have a problem, we each have an idea how to solve it. We think we have a solution that is going to work. We spend our energy trying to convince others how our solution will solve the problem. In contrast, action learning asks us to put our energy into asking questions to solicit everyone’s ideas.

So I ask what is your idea? What is your experience? Do you have any ideas on this? If I give you an opportunity to hear your ideas, what are you more likely to do with me? You’ll ask me back – well what do you think? Then, the four to eight people, their ideas and their background perspectives all get heard. Usually, when a group comes together faced with a difficult or complex problem, no one has the full answer. It is usually something that emerges from the group. They work and they listen to each other. In action learning, the focus is on asking each other questions – then hearing and reflecting.

Questions are so powerful, they generate creativity in groups, as well as cohesiveness. They cause people to be better focused and to develop leadership skills. Asking questions is the central guideline because it provides the most powerful, positive group norm in the world. Statements can be made only in response to questions. That is not negotiable in action learning where anybody can ask a question at any time. A great question might generate an hour of responses. Or a truly great question might get reflection. But statements can be made only in response to questions.

Asking questions not only gets us good information, it also changes relationships, since we all like people who ask us questions. Moreover, if you are in a group and you hate each other, you are not going to get a great idea. There’s a lot of research to show that norms and group culture determine the group’s performance. Ask questions and the norm transforms a group in front of your eyes. At first group members may fumble because they are not sure how to proceed focusing on questions. But within twenty or thirty minutes, they will start to get it. Questions are the way we learn.

4. TAKING ACTION AT THE END OF EVERY MEETING
The fourth component of action learning is that the group always sets an action to take at the end of every session. The group might meet once a day for four days and on the fourth day the executive comes waiting for the strategies. Or, they might meet three hours a week for six weeks, or even over the course of three or six months. Whatever the timeline, the group knows when it comes together that the problem has to be solved in a certain amount of time. By the end of every session they have actions they are going to take between the session and the next time they meet. Never end a session without actions to be taken. In action learning, unless there is action there is no learning. If you can’t apply the learning it is not really learning. You learn from every action, and in every learning you try to find a way to apply the results.

5. FOCUSING ON LEARNING AS WELL AS SOLVING PROBLEMS
The fifth component of action learning is that when a group comes together it is formed as soon as it begins, and you are in that group for two purposes. First, you are there to come up with some breakthrough strategies on an important corporate problem. And second, you are there to learn. Each of you is an important member of the organization. You have developed your leadership skills. Whether you are high potential, mid-level or even a secretary, you have to have leadership skills. Each of you is there to develop those skills. This changes the dynamics very quickly; because if we are in a group to learn as well as to solve problems, it changes everybody’s dynamics.

Often one or two members of a group think they know the answers; they can be arrogant, pushy and attack or undermine other members in various ways. But in action learning, as soon as we begin, each person identifies the leadership skill that they are going to practice in the session. At the end of the session, each person is asked how they did in their leadership skill. Then other members of the group are asked to give them examples of how they did in their leadership skills. People who are not normally group members become good group members because they respond to expectations.

Action learning creates an atmosphere which predisposes people towards positive, creative and new kinds of behavior. In one situation, the group had been working together for fifteen years, and their action learning group was the first time in which they worked well together. They got a lot of results. It was fun! That is the power of the culture created by focusing on learning.

6. EMPLOYING A FACILITATOR
The sixth component of action learning is that there is a facilitator responsible for the learning, someone responsible for improving the performance of the group through learning. This person manages the time to ensure that there is both action and learning at the end of every session.

All of us are familiar with the ‘Tyranny of the Urgent’. If you are confronted with something urgent and something that is important, what do you do? You always do the urgent. When we are working on a complex problem that urgency will take the entire meeting time and there won’t be any time left for learning. The facilitator has the power to ensure that there is learning and that there is responsibility for it.

When the facilitator leans forward, people stop talking and they listen to the facilitator’s questions. The facilitator only asks questions that help improve the performance of the group and develop its leadership skills. In the final five or ten minutes, the facilitator ensures we develop our leadership skills and how we can work better as a team.

The facilitator manages the group’s time. If the group has two hours to meet, the facilitator lets the group know they’ve got another half hour before he’ll be asking everyone if they are sure of their actions between now and the next session. In the last ten or fifteen minutes the facilitator will ask what have they done here that they can learn and apply to their work, life and people outside of this session.

A skilled coach will enable a group to make great progress in a short period of time, especially in situations where there might be a conflict or the group is stuck. However, if a skilled coach is not available, someone could be appointed from within the organization or the coach could rotate among the group. The important thing is that before the group begins working on the action, they are clear who the coach is for the session.

That coach/facilitator has special power, responsibility and accountability to lean forward if they see an opportunity to help improve the performance of the group. The group won’t resent this. Being an action learning coach is a great way to develop yourself and your personal skills as a leader.

IN SUMMARY
In summary then, action learning occurs when groups learn in action. Every time team members make a decision, they are interacting with each other and they become smarter. So everyone develops their leadership skills while they are working on the problem. They also learn how to work as a team and solve problems together. You cannot solve those problems without working well together and integrating ideas with each other in a certain way. So it’s a way to solve the most complex problems, learn relationship skills, learn how to work as a team, and begin to change the corporate culture. In this way, action learning kills two birds with one stone: realtime problem solving and concurrent leadership development.

(Tish Robinson is a professor of Organizational Behavior and Systems Thinking at Hitotsubashi University. She co-chairs the ACCJ HR Committee along with Taka Miyawaki).

Japolia - Fotolia

According to a major study released by the ACCJ, the costs associated with disease and unhealthy lifestyles cost the Japanese economy at least ¥3.3 trillion per year in lost productivity, a major drag on economic competitiveness and growth. For a country that is already ailing, this loss amounts to a prescription for economic ruin.

GROUND-BREAKING STUDY

The ACCJ study, spearheaded by the Chamber’s Healthcare Committee, was released in conjunction with a comprehensive White Paper on healthcare, containing policy proposals to reduce the economic burden of disease. Suggestions include better promotion of screening, prevention and early detection by the government, health insurance providers and employers. Healthcare systems and health policies in Japan have traditionally focused on treatment of medical conditions after they occur, rather than on prevention and early detection. However, since medical experts believe that many forms of infectious and chronic disease can be prevented or detected early in a cost effective manner, the ACCJ believes its proposals could boost productivity and prevent excessive increases in healthcare costs.

The ground-breaking “ACCJ Survey on Prevention, Early Detection and the Economic Burden of Disease in Japan” was an 80-question national survey. It was sent out in November to 5,000 members of the Japanese public; a cross-section of men and women across all regions and age cohorts.

Based on responses, the ¥3.3 trillion nationwide productivity loss was calculated from Absenteeism (the economic value of sick time off), Presenteeism (the economic value of health-related productivity impairment at work) and Disability Loss (the economic value of salary income lost due to changing or quitting jobs). However, this total is considered a conservative loss estimate, because the data did not include the costs of medical treatment, which were outside the scope of the survey.

ECONOMIC BURDEN OF DISEASE IN JAPAN ESTIMATED AT ¥3.3 TRILLION

“The ACCJ Survey is the first comprehensive estimate of the economic costs of disease ever conducted in Japan, and shows that chronic pain and mental health are greater burdens on economic productivity than expected,” according to Bruce Ellsworth, Vice Chair of the ACCJ Healthcare Committee.

“The large economic impact of these chronic diseases does not show up in statistics about mortality rates, but the survey shows that they deserve special attention.”

Health issues were categorized under five headings: pain, mental illness, physical injury or disability, non-infectious chronic disease, and infectious disease or viral infection. The survey found that the two leading causes of Absenteeism and Presenteeism among workers were pain (including chronic back or neck/shoulder pain, migraine, arthritis and other causes of pain) and mental illness, including depression.

TYPE OF HEALTH ISSUES THAT CAUSED RESPONDENTS TO TAKE SICK TIME OF DISABILITY LEAVE

The survey also found that the top five future medical concerns among people in Japan in descending order are cancer, chronic back or neck/shoulder pain, stroke, influenza, and diabetes. The survey indicates that a significant proportion of Japanese people are not fully aware or taking advantage of the benefits of screening, prevention and early detection. It also showed low participation rates in many relatively easy prevention and early detection measures, such as regular exercise and annual health checkups, despite a general interest in more information and increased participation.

HEALTH AS A COMPETITIVE ADVANTAGE

The “Survey on Prevention, Early Detection and the Economic Burden of Disease in Japan” was released in conjunction with major ACCJ Healthcare White Paper called “Investing in Health as a Competitive Advantage.” This report covers twenty-seven disease areas, ranging from hepatitis and breast cancer to chronic pain and healthcare associated infections. The White Paper offers an analysis
of ways to improve government healthcare policy and includes a number of case studies of successful policies in other countries.

ACCJ Healthcare Committee Chair William Bishop says the policy recommendations were made “in conjunction with the Chamber’s own Growth Strategy Taskforce initiative and based on the belief that investing in the health of the Japanese people would not only result in a higher quality of life, but would also result in an increase in labor productivity and boost economic competitiveness.”

“Further, we believe these policies could boost the efficiency of healthcare spending and prevent excessive increases in healthcare costs,” says Bishop.

The White Paper’s overarching goal is well stated in the following excerpt, “Japan is well known for having one of the lowest infant mortality rates and the longest life expectancy in the world. Although life expectancy in Japan continues to rise, the often diminished quality of life during the later years places a burden on patients, families, healthcare practitioners, healthcare systems, society and the economy. These burdens can be relieved through programs to promote prevention, early detection and wellness. However, as in many other developed countries, the healthcare systems and health policies in Japan have traditionally focused on the treatment of medical conditions after they occur, rather than on their prevention.”

The policy recommendations in the Heathcare White Paper: “Investing in Health as a Competitive Advantage” are aimed at helping employees take fewer sick days off (less absenteeism) and being more able to better perform while at work (less presenteeism). Other benefits would come from decreasing the burden of care on family members and by avoiding an increase in the burden of health care costs.

Citing World Health Organization (WHO) estimates, the report says that chronic diseases are the leading cause of disability and death in Japan. Treatment of chronic disease also accounts for the majority of healthcare spending, mostly involving older patients with two or more chronic diseases. In 2009, medical expenses for people aged 70 or older amounted ¥15.5 trillion, or 44% of the nation’s total. In 2012 the Japanese government will finalize the next round of Kenko Nippon 21 (Healthy Japan 21) initiative, a national campaign designed to raise awareness, to promote the benefits of health and wellness and motivate the public to take action, set to be rolled out in 2013.

A main thrust of the White Paper advocacy will be to provide evidence-based global base practices as policy recommendations during the final phase of drafting. As part of this effort, the ACCJ White Paper recommends that the Japanese government create further incentives for people to change their behavior, in conjunction with more traditional public health and wellness educational efforts which have been principally aimed at raising awareness building. Incentives should also be created in the health insurance system to “motivate more people to undergo health risk assessments and adopt healthier lifestyles and behaviors long before the onset of illness and while the risk of disease can be reduced.”

The White Paper is in many ways a series of preventive interventions spanning the preventive health and wellness continuum, from diet, and wellness to vaccination, screening and environmental infection control. At the ACCJ Press Conference held on November 25th, several sections of the White Paper were highlighted. The following is a series of brief snap shots of each.

GREATER UTILIZATION OF HEALTHCARE INFORMATION TECHNOLOGY

With the massive growth of the elderly population, coupled with the shortage and uneven distribution of physicians and other healthcare practitioners, Japan must consider a fundamental change in how healthcare services are delivered to its citizens. healthcare information technology (IT) will be at the core of this change, producing improved efficiency, better outcomes, and higher quality of life. Many governments outside of Japan are investing heavily in healthcare IT, and are already gaining tangible benefits.

During the aftermath of the Tohoku disasters, many believed that, had there been an efficient electronic healthcare record (EHR) system in place, emergency medical care would have been much easier for doctors and patients.

One area where enhanced use of IT would be of benefit is in addressing the emergency needs of stoke victims. The most frequent causes of death in Japan are cancer, stroke, and heart disease.

Stroke alone accounts for 10% of total medical costs, and the number of patients is expected to grow from 1.5 million to 3 million by 2020. Stroke patients must receive thrombolytic therapy (“clot busting”) with a tissue plasminogen activator (TPA] within three hours for it to be effective, but the rate of usage in Japan is less than 2%. The shortage and uneven distribution of physicians, coupled with inadequate utilization of IT, often results in uncoordinated emergency care. If not afforded access to expert care, stroke victims can be left immobile, incontinent, and unable to speak. As a result, stroke patients account for 40% of bedridden care in Japan. Challenges also exist in sharing information between physicians and caregivers on rehabilitation needs, which can have a significant impact on a patient’s quality of life after suffering a stroke. Stroke care creates a significant economic burden and lost productivity for the supporting families and their communities as a whole.

Eriko Asai, Chair, Health IT Subcommittee, summed it up by saying, “Japan has the potential to establish a world class program for stroke prevention and as the world’s leading IT economy has the potential to innovate and lead the future of healthcare IT globally.”

INCREASING CERVICAL CANCER SCREENING LEVELS

Early detection and early intervention are critical for the prevention of cervical cancer. In Japan, out of the 8,000 cases of cervical cancer diagnosed annually, roughly 2,500 women will die. Japan has seen a sharp rise in the number of patients with cervical cancer in their twenties and thirties, and a growing mortality rate. Cervical cancer is the only type of cancer whose incidence can be reduced with a vaccine that is already in use in more than 100 countries and has recently become available in Japan.

Because the human papilloma virus (HPV) is the dominant cause of cervical cancer, regular Pap testing, early HPV testing when recommended, and early vaccination can work together effectively to prevent cervical cancer. In the United States, regular Pap testing has been successfully adopted and recognized as one of the most effective cancer screening tests. The cervical cancer screening rate in Japan was 24.3% in 2010, which is less than half the Organization for Economic Co-operation and Development (OECD) average of 64%.

Frank Florio, President and Representative Director, Nippon Becton Dickinson Company says, “Uniquely, there is no drug, device or diagnostic lag in the case of cervical cancer prevention in Japan. Japan now has all the tools necessary to fight and win. There is however a considerable degree of confusion by many women on how best to prevent cervical cancer which was further substantiated in the recent Health Survey.

There is a real need to better promote the use of the latest technologies to fight cervical cancer in Japan, including HPV vaccination, HPV testing when recommended and, most critically, the latest Pap Testing technology using liquid-based cytology cancer cell screening to increase accuracy and reduce the amount of retesting for cervical cancer.”

INCREASE EARLY DETECTION THROUGH COMPREHENSIVE EYE EXAMS

In Japan, based on Japanese medical standards, 1.64 million people are visually impaired and 188,000 are blind. Of the total, 72% are aged 60 or older. According to a September 2009 study released by the Japan Ophthalmologists Association (JOA), vision problems result in estimated social costs and labor productivity losses of ¥8.8 trillion per year. The JOA estimates that by 2030, the number of people with vision problems and the resulting social costs are expected to increase by roughly 25%.

Comprehensive eye exams by ophthalmologists are important for far more than just determining the prescription for vision correction. They are also important for the detection and diagnosis of eye diseases, including glaucoma, diabetic retinopathy, macular Degeneration, cataracts and eye coordination problems that can cause a range of problems from blurry vision to blindness.

Early detection and timely treatment is crucial to prevent visual impairment and progression of conditions leading to blindness, especially for children under the age of six and adults aged 40 and older. Comprehensive eye exams by ophthalmologists are also valuable for detecting signs of systemic health problems that show early warning signs in the tiny blood vessels and optic nerves in the eyes, including hypertension, diabetes, high cholesterol and heart disease. A recent survey showed that, although 82% of adults in Japan have had some type of vision or eye test, only 28% have had a comprehensive eye exam performed by a physician.

The reasons given by adults for not obtaining eye exams are that they have not thought about it (33%), they do not have time (33%), or they believe they have no vision problems (29%).

According to David R. Smith, President, Johnson & Johnson Vision Care Japan, “The problem in Japan is that the current Kenko Nippon 21 does not include any goals related to eyes and vision though these are included in similar initiatives in the US and other developed countries. There is a real need to add goals for eye and vision health topics to governmental health policy to improve healthy vision.”

PROMOTION OF A HEALTHY JAPAN

ACCJ Healthcare committee members present the survey to Japanese health minister Yoko Komiyama

“The economic burden of disease is likely to increase as Japan’s society continues to age. But by investing in health, Japan could increase productivity and lengthen the average healthy life span (before the need for home nursing care) in a way that supports economic growth,” says Bishop.

“We sincerely hope our Survey and White Paper are seen as a solid contribution to the healthcare and economic policy debate in Japan.”

[The full contents of the White Paper and Survey results are available to view or download in both English and Japanese PDF files on the ACCJ website] ]]> http://accjjournal.com/on-call-for-an-ailing-economy/feed/ 0 http://accjjournal.com/off-ramps-and-on-ramps/ http://accjjournal.com/off-ramps-and-on-ramps/#comments Tue, 17 Jan 2012 03:32:49 +0000 ACCJ Journal http://accjjournal.com/?p=5506

Illustration by Louise Rouse

As a highly qualified professional, Nobuko Suzuki (Ed note: name changed at subject’s request) spent many years working in Tokyo’s publishing industry. However, once she left her job to raise three daughters, Suzuki was unable to return to her previous career field. The only position that the university-educated Suzuki could find when she wanted to return to full-time work was a job in a candy factory. Had Suzuki lived in the Unites States, Canada or Europe, she might have used her educational background and experience to find a more senior position. But in Japan, she is yet another case of a highly qualified woman “off-ramping” to a life outside the working world.

Suzuki’s case is not unique. In fact, it’s the norm in Japan. A new study by the New York-based Center for Work-Life Policy (CWLP) found that a majority of highly qualified, university-educated women in Japan “off-ramp” early on and never find “on-ramps” to resume their careers.

The study, entitled: “Off-Ramps and On-Ramps Japan: Keeping Talented Women on the Road to Success” was compiled through focus groups and oneon-one interviews with more than 1,500 respondents. And the results shed new light on some traditionally held beliefs about working women in Japan.

“This study definitely challenges conventional wisdom,” says Laura Sherbin, co-author of the report. “(The study) goes to show how deeply engrained traditional views have the power to limit the career opportunities for educated Japanese women.”

While conventional wisdom suggests that Japanese women are more “family-oriented” than their Western counterparts and are more likely to quit their jobs to raise children, the “Off-Ramps” study proves otherwise: a vast majority of Japanese women don’t choose children over their careers but are forced out by workplace pressures.

“Only 32 percent of Japanese women cite childcare as an issue in their decision to quit,” says Sherbin. “It’s also worth noting that 43 percent of college-educated Japanese women over 40 don’t even have children, so childcare is not an issue for nearly half of the women surveyed.”

Among the pressures cited in the survey were the rigid workdays, a lack of career advancement opportunities and gender bias found in Japanese companies. These workplace pressures also drive many highly qualified Japanese women to jobs with US or European companies, which they feel are more sensitive to their needs than Japanese firms. That is bad news for a country facing a growing
demographic crisis.

AN EXODUS OF TALENT

Female labor participation in prefectures around Japan (%)

“This is an astonishing figure,” says Sherbin. “We were very surprised to find that childcare and eldercare are not the main forces driving this exodus. Just under half of working women in Japan quit because they feel stalled in their careers.”

Japanese women who want to re-enter the workforce after having children also report that their chances are slim. Most of them (77%) wanted to resume their jobs but only 43 percent succeed in getting their careers back on track, compared to 73 percent in the US and 68 percent in Germany.

Even those lucky enough to find a job faced serious penalties in terms of earning power and job advancement. Forty-four percent said they were forced to take a pay cut, while others reported fewer management responsibilities or possibilities for promotion.

One final obstacle to higher female employment has been the prevailing myth that if more Japanese women work, the further the birth rate will decline, exacerbating Japan’s demographic pressures. However, if one plots female labor participation rates against birth rates for various countries, there is a distinctly positive—not negative—correlation between the two.

GETTING BACK ON TRACK

What would keep highly qualified Japanese women on the career track? Study coauthor Sylvia Ann Hewlett says two things:“the Availability and (the) de-stigmatizing of flexible work arrangements.”

“The majority of women who took an ‘off-ramp’ say they would not have quit their jobs if they had the option to choose a flexible work arrangement,” says Hewlett. “While some form of flexibility is available in most large companies, in reality, 69 percent of the women surveyed (say) that managers are not supportive of employees who utilize flex options; a substantial number say that people who have flexible schedules don’t get promoted and suffer career backlash.”

The majority of the report’s respondents say they would not have “off-ramped” had more flexible work arrangements been available; options such as the ability to work from home more or to arrive and leave the workplace at more flexible times of day.

HELP FOR THE JAPANESE ECONOMY

Ratio of females aged 25-64 with college degrees who are employed (2007), %

“It’s like trying to run a marathon using just one leg,” says Kathy Matsui, Chief Japan Equity Strategist with Goldman Sachs Tokyo.
Matsui has been researching the issue of Japan’s untapped female workforce since 1999, publishing several studies on the topic including Womenomics 3.0 in 2010.

Matsui herself is a good example of an educated senior executive who returned to the workforce after having children. However, she says the “push” factors don’t only apply to women with children but to non-mothers and single women as well.

“In many ways it (the “Off-Ramps” report) validated our original thesis from 1999 that there is a vast pool of talented and experienced women in Japan’s workforce who are simply untapped,” says Matsui.

With Japan facing a demographic crisis, this lack of utilization of a talented and highly educated resource is not merely an oversight; it’s an incredible waste of an economic opportunity. Women tend to be bigger spenders than men, consuming clothing, cosmetics, food, restaurant meals and other items. They are also becoming larger consumers of big ticket items such as holidays and real estate than ever before. Therefore, against a backdrop of anemic consumption, allowing more women into the workforce would provide a huge cash injection for the ailing Japanese economy. Matsui estimates that Japan’s GDP would grow by as much as 15% if the country could close its gender employment gap.

“It is simply because of an 8 million person increase to Japan’s workforce—from closing the gender gap in female versus male employment rates (with no productivity increases assumed). More workers mean more income, more consumption—a virtuous cycle.”

However, in a country notoriously resistant to change, closing the gender employment gap will not be easy, nor will it happen overnight. Cultural beliefs that keep women out of decision-making positions must change and the so-called ‘glass ceiling’ that prevents women from earning salaries equivalent to their male counterparts must also be addressed.

Other opportunities must also be created to close the ‘push’ factors cited in the “Off Ramps” study.

“This is a case where change can be driven by employers, without waiting for government policies to shift traditional mindsets,” says Hewlett. “Companies can create a female-friendly workplace by implementing initiatives that enable and encourage women to advance in their careers. These include formalizing flexible work arrangements, providing career development opportunities and leadership training for both women and men, training male managers to recognize the importance of diversity, showcasing female role models in director-level positions, and creating support/advocacy groups that enable women to build powerful networks.

WOMENOMICS 3.0 RECOMMENDATIONS

Some of the Womenomics 3.0 recommendations involve changing legislation, while others involve social changes and new cultural thinking from top to bottom in Japan’s rigid corporate culture.

“HR departments of companies also tend to quietly “discriminate” against employees (women and men, but especially women) who have large time gaps in their CVs,” says Matsui. “If the Equal Employment Opportunity Law were properly enforced, such discrimination would not be allowed. “Also, I used to be wholly opposed to diversity ‘quotas,’ but watching the positive impact that Norway’s mandatory/legal quota that females must account for at least 40% of boards of listed companies has made me re-think quotas, and as a first step, I think given where Japan is today, I think it may be useful to start a dialogue about introducing similar quotas in the public sector, such as in the Diet. Otherwise, I fear it will take far too long to “move Japan’s needle.”

While some might consider the “Off-Ramps and On-Ramps” report a case of “foreigners telling the Japanese what to do,” report co-author Sylvia Ann Hewlett disagrees. She says the study was actually a result of interviews with Japanese subjects, and it’s their views that are represented in the report.

“We wouldn’t presume to tell any country or culture how to behave. Our research reports are based on large surveys; in this case, we conducted in-depth anonymous interviews with more than 1,500 college-educated men and women. It’s their responses that illustrate the issues confronting women in the workplace and that suggest solutions.”

Sherbin adds, “We hope to follow up this report by focusing on the role of powerful career advocates – namely, high-level sponsors – in advancing and retaining women.”

“Not to diminish Japanese women’s sense of obligation to their families. But consider these figures: 63 percent of Japanese women say that they quit because their career wasn’t satisfying—compared to 26 percent in the US—and nearly half feel stalled in their careers, compared to 16 percent in the US,” adds Hewlett. “Given entrenched workplace traditions that still shunt women into dead-end ‘office lady’ jobs, salary inequities, and lack of role models, it’s a no-brainer for well-qualified Japanese women to “off-ramp” to focus on family for a period of time.”

Ultimately, including more highly qualified women in the workforce benefits everyone – employee, company, country and the economy. Resisting changes to the gender employment gap no longer makes sense for a country like Japan that badly needs all the talent it can find to get its economic house back in order.

Fotolia.com

First, why is the foreign pharmaceutical industry so interested in Japan? Japan represented 11 percent of the global pharmaceutical market in 2005, 11 percent in 2010, and forecasts say it will be 11 percent in 2015. During the same period, the US share of the global market dropped from 41 percent to 31 percent and all of Europe was shrinking from 27 percent to 19 percent. Japan represents a consistent percentage of a pie that has been growing 75 percent over this decade. Further, Japan’s growth is focused on new, innovative medicines, which is what our companies discover, develop, and manufacture.

Japan’s major challenge in the pharmaceutical area is its continuing drug lag where a drug is available to Japanese patients generally three or four years after it is available in the United States or Europe. Change over the last half decade is beginning to reduce that devastating gap.

One improvement happened in 2010, when the Japanese government introduced a major reform in the drug pricing and reimbursement system. Its purpose was to provide a predictable and stable return for the enormous investment put into drug development. (Note — It takes 10-15 years to develop a new drug with an investment of over $1.3 billion.) This new system will provide incentives for drug companies to speed up development activities in Japan, which translates into earlier availability for patients. This new system will contribute to a reduction – and the eventual elimination – of the drug lag and will also help reverse the hollowing out of the Japanese pharmaceutical industry.

Unfortunately, this program was introduced only as a two year pilot project and needs to be made permanent. Uncertainty in the pricing and regulatory environment makes development decisions more difficult. Innovative foreign and Japanese pharmaceutical companies are aligned in this objective, which will allow us to serve Japanese patients better. It appears that this pilot program will be extended for two more years, after which the government will evaluate its impact, before deciding whether to make it permanent in 2013.

A second significant development was a PMDA five year plan to reduce the delays in review and approval for new drugs. (PMDA is the Pharmaceuticals and Medical Devices Agency – Japan’s equivalent of the FDA). As the fourth year of the plan draws to an end, we are seeing a reduction in review times, further increases in PMDA’s staff numbers, and additional improvements in the review process. PMDA has now committed to another increase in the number of drug reviewers, integration of the activities of its review and safety staff, and an expansion of its training and education programs for reviewers. PMDA has hired several dozen physicians, a critical change needed to improve the overall capability of the agency. Last year, a group of younger PMDA staff members produced a set of recommendations for change inside PMDA. Implementation of those recommendations would move PMDA toward becoming a world-class drug approval agency. PMDA’s leadership has embraced this report and we welcome that development.

An important change that our industry has been encouraging for many years is a tightening up of the final bureaucratic stage of the approval process for new drugs. We have been told repeatedly that elimination of superfluous committee approvals was impossible. The industry recommendation was adopted in the report I just mentioned, and within six months that change was adopted. The result is that new drugs will be on the market one or two months earlier than in the past. This might not seem like much – unless you are a patient in need of a new drug and you have waited years for it to become available in Japan.

Despite these improvements, no one can rest until the goals are fully met – a steep reduction in review and approval times and a system where development of drugs can proceed simultaneously everywhere. Japanese patients deserve the best medicine available in the world.

A third major change has been progress toward the goal of eliminating the vaccine lag and bringing the world’s newest vaccines to Japanese children and adults. This progress included approval of five foreign-origin vaccines – after a decade where none were approved – funding in a supplemental budget for several of those vaccines to maximize the uptake of these critically important disease prevention measures and a set of strong recommendations by an MHLW advisory committee that included expanding the list of recommended vaccines, developing a Japanese version of ACIP (the Advisory Committee on Immunization Practices which is part of the US Centers for Disease Control and Prevention) and creating a National Vaccine Plan.

Vaccination is recognized worldwide as one of the most cost-effective measures for improving public health. Changes we hope to see include full government funding for all approved vaccines. In the case of many vaccines today where government funding is not forthcoming, the penetration rates can be as low as 20-30 percent – far below the threshold necessary to see a significant decrease in disease burden.

Diet members in the ruling and major opposition parties have been proactive in increasing public awareness of the vaccine lag and in pressing Ministers and bureaucrats to take early action. Their direct and forceful action in this area is a development almost unimaginable a decade ago.

A fourth major change relates to how the government looks at the pharmaceutical industry, having identified the medical care, nursing care and health care related industries as one of the key drivers of future economic growth in Japan. The pharmaceutical industry will be an important part of that. Our industry invests more R&D per capita than any other sector in the global economy. A recent study showed that of the five companies spending the most on R&D worldwide, three are pharmaceutical companies. (The other two are Microsoft and Toyota.) The economic contribution of the innovative drug companies is enormous.

As part of this new policy, the Cabinet Office created an Office for Medical Innovation last year to develop policies that will promote innovation in the healthcare area. We hope the result will be improvements in the areas of pricing and reimbursement, regulatory processes, organizational structure, and tax policies.

The foreign-sourced share of drugs in Japan is approaching 40 percent. Foreign companies supply three-fourths of all cancer medications in Japan. The government, in its policies, has supported both Japanese and foreign pharmaceutical companies equally in improving the drug development and market environment and we hope this continues as new initiatives are made to promote our industry so we can contribute even more to the health of Japanese patients and the health of the Japanese economy.

Finally, let’s look at the budget. Japan’s total healthcare spending is in the low range among OECD members, despite being one of the wealthiest countries and having the fastest aging population in the world. There is a broad understanding that this percentage needs to increase, and some political leaders see ten percent, as compared to about 8.5 percent at present, as more appropriate to deliver the healthcare that Japanese society needs. It is encouraging to see an emerging consensus that the consumption tax, whenever it is increased, will be devoted to social welfare costs, which include healthcare. We must remember that spending on healthcare is not a cost; it is an investment – an investment in people living longer, an investment in the quality of life of citizens, and an investment in the workforce through improved productivity.

There have been many other changes over the last few years too numerous to include in this article. The commitment to improve the healthcare environment, including the pharmaceutical sector, is strong and widespread among policymakers. Together, these will have a profound impact on the health of Japanese society and on the attractiveness of Japan for investment and development of new drugs. The ultimate winner of these changes is each one of us – we are all, or will be patients in the future.

Photography by Lorenzo Barassi

Hiroshi Mikitani started his career at the Industrial Bank of Japan (which is now part of the Mizuho group) shortly after graduation from the Harvard Business School. However, the Kobe native changed direction at age thirty following the tragedy of the Great Hanshin Earthquake. Mikitani has called the 1995 disaster a life-changing moment for him: “I started to realize that life is short, and that anything can happen.” Mikitani had no clear business plan when he left IBJ but was convinced Japan needed new ideas and innovation because there had been little since the early days of Sony and Honda.

Mikitani’s desire for innovation led him to the Internet which was still new to Japan at that time. Rakuten Ichiba (Rakuten Internet Shopping Mall; the characters forming “Rakuten” can be translated as “fun” and “heaven”) was founded in 1997. Now Rakuten Inc., it’s one of the top ten Internet companies in the world, ranking alongside Google, Amazon, Baidu, Yahoo! and eBay. Rakuten operates in a variety of different fields: it’s an online marketplace with tens of thousands of merchants and 2010 sales figures of some 346.1 billion yen. Rakuten is a payments and credit operations – the Rakuten group now includes an online bank, consumer credit, and card issuance as well as an e-money operation. And the company also operates online securities, an online travel business and even a professional baseball team.

In all the online areas where Rakuten does business, it occupies the top or second market position, even beating Amazon’s Japanese operations for overall online commerce (though it’s currently second in book sales).

Mikitani’s imagination and energy have obviously paid off, and his emphasis on providing services rather than manufacturing has given the Japanese market exactly what it needs.

LOOKING OVERSEAS

Rakuten is not only making waves in the Japanese market, it’s also finding success overseas. Mikitani started with the purchase of a Taiwanese shopping site in 2008 then added other acquisitions such as Buy.com in the United States and France’s PriceMinister. He has also formed joint ventures such as Rakuten Belanja in Indonesia (with Global Mediacom)and with Baidu in China.

Other recent moves have included purchases in Brazil (formerly Ikeda, but now re-branded as Rakuten Brazil), Germany (Tradoria) and the UK (Play.com) as well as a minority stake in Russian Ozon.ru. Rakuten’s reach now expands outside Japan around the world, fulfilling Mikitani’s dream of owning a company with global reach.

Photography by Lorenzo Barassi

Rakuten is poised to make yet another significant change to Japan’s landscape, this time in the field of ebooks and electronic publishing. Amazon has been the major player in the e-commerce market with tributaries in most countries including Japan. However, Mikitani’s company is slowly wading into the Amazon-dominated waters.

Kindle devices and the ebooks produced for them have proven wildly popular in the USA, where ebooks now make up a significant proportion of titles sold, but have yet to make an appearance here. Indeed, the ebook market in Japan is heavily fragmented by hardware manufacturers producing ebook readers (together with their own proprietary formats for ebooks), who are often unable to attract a critical mass of publishers to the online bookstores serving their hardware. The fragmentation is compounded by publishers using their own applications to allow the reading of only their own titles on common devices such as Apple and Android. In November 2011, Rakuten announced the purchase of Canadian ebook maker Kobo Inc. for $315 million, with the deal expected to close early this year (Kobo is an anagram of “book”). Like Amazon’s operations in this area, Kobo’s business includes both the production and sale of ebook reader devices and an online bookstore selling the content to go on them, as well as publishing operations. The company holds lead position in its home market of Canada and is a major player in both the French and UK markets.

“At first, I thought all functions would be integrated into tablets,” Mikitani says of his reasons for buying a hardware producer. He changed his mind after realizing that dedicated devices are quite often preferred by customers over “Swiss Army knife” type gadgets. The Kobo readers, like their Kindle competitors, feature highly legible “e-ink” displays, and a battery life that can be measured in weeks, rather than hours. A color Kobo was also recently introduced, which will prove a strong competitor for Amazon’s latest offerings.

Rakuten hopes to also provide the sales infrastructure to publishers, allowing them to sell their Kobo titles through the Rakuten sites. However, Mikitani would like to see other distributors in addition to Rakuten, thereby making Rakuten/Kobo a universal standard for ebooks in Japan.

Certainly when Kobo and its associated infrastructure hits Japan early this year — with Amazon’s Kindle and Kindle Store rumored to arrive at about the same time — we can expect to see a change in the reading habits of Japanese as they ride the trains. Mikitani also has his eyes on another large opportunity for Kobo in Japan — the educational textbook market — which could produce a small revolution in the industry.

PRACTICING WHAT YOU PREACH

One key to Mikitani’s business beliefs is an emphasis on the provision of services, either as an adjunct to hardware (as in the case of Kobo) or the replacing of manufacturing activity. Another key is the belief that the borders of a business should not be limited to Japan.

“Japanese companies are good at creating hardware,” says Mikitani, “but hardware will become a commodity.” Even products which are currently perceived as solid now, such as Apple’s mobile devices, will become mere commodities in the future, he believes.

In addition, the line between hardware and services, as represented by the recent crop of smart phones and tablets, is becoming blurred. Mikitani says it is vital for Japanese companies to move away from a hardware-only base to an “information service plus hardware” business, with the hardware possibly moving offshore. While some Japanese executives are concerned about the rise of the yen against the dollar and other currencies, Mikitani says, “It’s a good opportunity for us (Japan) to shift in two ways: from domestic to truly global; and from manufacturing to value-added services.”

Calling Japanese people “hard-working” and “trustworthy,” Mikitani sees these characteristics as great advantages: “The only way to differentiate the country will be intellectual property and culture, including the working style of the people.”

Certainly Rakuten seems to be proving this assertion. The latest figures available (for Q3 2011) show a year-on-year gain of 11.9% in the consolidated sales of the Internet Services Segment, which includes the Rakuten Ichiba business and Rakuten Travel. The profits for the segment in the same period are even more impressive: a 17.5% year-on-year increase, figures to marvel at, given the generally sluggish economy and the disasters of March 11, which have dealt strong blows to many other sectors.

THE TPP: THREAT OR OPPORTUNITY?

There have been concerns raised about Japan’s participation in the Trans-Pacific Partnership (TPP). Such worries have typically concerned the agricultural sector which Mikitani does not dismiss entirely. However, he sees it as the tip of the iceberg.

“In reality, (the TPP) is a great opportunity for us to destroy the ancien régime of Japanese industries,” he says.

Mikitani is not merely referring here to manufacturing industries but to business sectors that have benefited in the past from a protected environment. In Mikitani’s view, industries that need to adopt global standards and expose themselves to global competition include the telecommunications sector, medical services and healthcare, cloud computing services and electricity generation.

The advent of the TPP is a time for change, Mikitani feels: “It’s a ‘black ship’ moment,” he explains, referring to the arrival of Commodore Matthew Perry’s American fleet in the 1850s, often seen as the start of Japan opening up to the modern world.

“But my point is not about the US or China invading Japanese industry. This will create opportunities for Japanese companies. Looking back on it, people will say this is a great event.”

This is a very different point of view to those often expressed about the TPP, but Mikitani is confident that, “Japanese products and services are very competitive, but they (the companies providing these products and services) have not been trained to think of a global market, which is a shame. [TPP] will force them to think more globally.”

Mikitani says one example of the “Galapagos” mentality isolating Japanese companies from the rest of the world is NTT Docomo’s push forward with the next-generation network, which he characterizes as “a huge waste of money.” Instead, Mikitani would like to see more affordable high-speed access throughout the country to every household.

“We pay high amounts for access right now – sometimes up to 20 percent of disposable income.” Affordable high-speed access will increase the nation’s productivity, by providing more access to information and content. “The cheaper the network, the better for the country,” Mikitani says. “We can build very strong businesses that we can export to other countries.”

For Japanese companies, which typically have concentrated their strengths and focus on a narrow field, Mikitani says there is a need for more overall coordinated efforts rather than one point or product. He adds that Rakuten is trying to do exactly this.

GLOBALIZATION AND RAKUTEN

As far as future links between Japan and the US are concerned, Mikitani is a great believer in the power of modern technology to help break down international barriers. “It’s not just about Japan and the US,” he says, “because the notion of countries is changing.”

The cheap and easy methods of communication and distribution of media around the world mean that there will be big changes in the way that Japanese people view and enjoy media. Specifically, he sees an increase in the Japanese consumption of American content and media. As he points out, “there is no wall with regard to information and content anymore.”

Along with this change, he sees the future strengthening of economic ties, including free trade agreements between Japan and other countries such as the US, as being a very positive thing for Rakuten as a whole.

In line with the breaking down of global barriers, Rakuten has determined that English should be the official language of the company and employees will be required to meet a certain linguistic standards in the future.

This is a bold and highly controversial move; one that has attracted considerable attention. “So many CEOs have a lot of interest in this project,” says Mikitani. “Not just Japanese CEOs, but now we are drawing attention from all over the world.”

The matter is more than simply a linguistic one. “We need to prove it can be done, and it’s part of a project to change Japan.”

But he adds, “this is not just a Japan issue, it’s an issue for every single global company,” even, as he points out, for American companies doing business overseas. “We need to open the eyes of younger people,” he says, adding that he hopes to see new leaders of Japan from a variety of areas. “We need change.”

So far, the experiment appears to be successful. Though the deadline for the language proficiency ranking is the middle of this year, Mikitani can already claim that 85 percent of his employees are able to meet the standard which will be expected of them, or will be able to meet the standard in the future. For the remainder, “we are trying to help those who are still struggling.”

FORECASTING THE FUTURE

It is difficult to predict what direction Mikitani will take Rakuten in the future. With a wide range of interests commanding his attention, including his enthusiasm for Kobo and his pride in the Tohoku Rakuten Golden Eagles baseball team and the Vissel Kobe soccer team – it would be foolish to make predictions and try to second-guess Mikitani’s visions. However, one thing is certain – Hiroshi Mikitani’s example will continue to serve as inspiration to would-be entrepreneurs in Japan, who will be expected to lay the foundation for a new economy that will carry the country forward into the future.

Photo Courtesy of White & Case

He was known for his dynamic leadership, intellect and sense of fairness. Yet Bob Grondine was more than a top legal mind; he was also a friend, family man, colleague, mentor and a leading voice for the ACCJ. Grondine, a former ACCJ President and Chairman, passed away October 20 at the age of 59.

“The first word that comes to mind when I think of Bob is wisdom,” says current ACCJ President Mike Alfant. “He was a deep thinker, very articulate, practical and focused on what was best for his clients and the people around him.”

Grondine served as a senior partner at the law office of White & Case in Tokyo for nearly two decades. But he was more than just a lawyer. Fluent in Japanese, Grondine was an international legal expert who represented dozens of high profile clients including General Motors, Sony and Fuji Heavy Industries. He also promoted legal reform in Japan, which many consider one of his greatest contributions.

Photo Courtesy of White & Case

Grondine was born in the small town of Oxford, Massachusetts who, despite moving to the world’s largest metropolis, never forgot his small town roots. Grondine was one of Japan’s most successful lawyers, yet he never grew too big to listen to people.

“Bob would always take time to speak with as many ACCJ members as possible; not just from large companies and organizations, but everyone,” says Alfant. “That made him a great role model.”

Current ACCJ Chair Kumi Sato remembers the efforts Grondine put in for the organization’s 50th anniversary. Sato says Grondine was busy with his own work, yet still took on the responsibility of organizing the anniversary events. He worked long hours behind the scenes to make the event a success. Sato says this was typical of Bob, who was always prepared to do everything to the best of his abilities.

IMPORTANT TO SLOW DOWN

Despite his often high-profile and professional obligations, Grondine took time to enjoy life. He loved golf and treasured the time spent with his wife Aiko and daughter Michelle. Grondine even counseled others on the importance of spending time away from the office. Sato says Grondine sent her a message as she was about to assume her ACCJ duties. The note read: “We must take care of our health. Work is important, but it’s important to slow down. Remember you’re only human, and your health comes first.”

Sato believes Grondine was instrumental in understanding how Japanese officials work. He studied the Japanese legal environment extensively and, as a result, understood the differences inherent in — and the complexities of — the Japanese system. Sato says Grondine made the ACCJ more conscious of Japanese interests and of putting the Japanese public at heart.

“He was interested in the public,” she says. “Not just in the ‘Chrysanthemum Club’ style, but in legal expertise. He helped us increase the quality of our dialog.”

Grondine graduated from Boston University Law School in 1980 yet, even as a student, recognized Japan as an opportunity. He studied Japanese in university, eventually landing at White & Case in Tokyo in 1992. The company had only three lawyers at the time of Grondine’s arrival but today is one of the largest law firms in Asia. Colleagues say Bob was instrumental in building the firm into a world leader.

Grondine would also return to the US regularly to lecture and mentor young lawyers and law students. A gifted orator, Grondine spoke regularly at Harvard, Columbia and Cornell. He also taught law classes at Tokyo’s Keio University for seven years.

Grondine’s reputation as a mentor was known far and wide. Brian Strawn, a partner at White & Case, remembers hearing about Bob from a professor before coming to Japan. Strawn says he was told “you should definitely seek out Bob Grondine – he’s a guy who really knows the ropes when it comes to being a lawyer in Japan.”

Taking this advice, Strawn regularly conferred with Grondine on important matters while clerking at the White & Case office in Tokyo. Strawn ended up working with his mentor and friend for 13 years. Strawn says Grondine was “a role model who paved the way for dozens of lawyers to come to Japan and build their lives and careers.”

Past ACCJ President Tom Jordan also has fond memories of Grondine. The two met in 1994 when White & Case was a fledgling company with only a handful of employees. Yet even in those early days, Grondine had a strong desire to contribute to the ACCJ. He worked tirelessly in support of ACCJ goals and objectives, serving on the Board of Governors for nearly a decade. Grondine was elected ACCJ President in 2000 and 2001 and served as Chairman in 2002 and 2004-05. Jordan feels Grondine’s efforts to organize the Chubu Chapter were his most significant contribution.

“Bob’s personal persuasion and statesmanship led to the establishment of the third ACCJ Chapter in Japan and the rapid growth of the American business image and presence in Nagoya,” says Jordan.

Yet it wasn’t all serious business. Jordan adds that “At the same time, Bob’s golf improved to a highly competent level, which contributed to ACCJ victories in the annual golf competition against the Europeans.” Grondine became known as one of the few people who could argue a complex legal case one day, then hit a golf ball nearly 260 yards the next.

UNDERSTANDING JAPAN

Grondine’s expertise in commercial law and in dealing with international issues helped many American businesses make in-roads in Japan. In particular, Grondine was a key to opening up Japanese capital markets to foreign participation. Don Westmore, former ACCJ Executive Director, remembers Grondine’s leadership during this process, which resulted in a move away from simple trading with Japan to doing business on an equity-owning basis.

“Bob had a deep, unsentimental understanding of how the Japanese system works, and how to maximize ACCJ influence on it – without having it backfire,” says Westmore. “I don’t think an issue ever came up about which Bob was not completely versed in the nitty-gritty details.”

“Bob had a finely honed appreciation of the need for collaboration in heading a voluntary organization, especially one whose business interests sometimes clashed,” adds Westmore. Grondine’s patience, energy and passion were key qualities of his “leadership through persuasion,” helping drive the ACCJ forward during the years he was at the helm.

Leadership through persuasion might have been Grondine’s style, but it never made him difficult to deal with. In fact, colleagues say the opposite – that Grondine was warm and personable, always ready to offer support and encouragement to others. ACCJ Governor Nicholas Benes remembers meeting Grondine as a young law clerk in the mid 1990s. Benes anticipated meeting a “hard-nosed lawyer,” but instead found Grondine to be a “much nicer and more personable individual than I had imagined.”

Benes and Grondine worked on a variety of ACCJ-related projects together including corporate governance reform and FDI policy. Benes says Grondine’s contributions include “diehard policy advocacy, high professional standards, and a cheerful spirit which was beyond words.”

Benes adds that “you wished Bob was on your side of the desk” when working on M&A projects outside the ACCJ.

Grondine’s influence wasn’t just felt by his fellow Americans. Japanese lawyers also admired his easy-going style and sometimes mistook him for a native speaker. Former ACCJ Governor John Kakinuki remembers first hearing Grondine on the phone speaking casual and colloquial Japanese. Kakinuki recalls feeling that Japanese lawyers were remarkably informal, until he saw the “light-haired, blue-eyed person” who was speaking.

Kakinuki worked with Grondine on the foreign lawyer issue in Japan. He says Grondine’s no compromise attitude helped get the Foreign Lawyer’s Law passed and that Bob was the “single person who accomplished the most for foreign lawyers” in Japan. When the Japanese Federation of Bar Associations Nichibenren celebrated the law’s 20th anniversary, Grondine was the keynote speaker. 

Kakinuki followed in Grondine’s footsteps as Chair of the ACCJ’s Legal Committee, a member of the Board of Governors and a Vice President.

“These were big footsteps to follow,” Kakinuki says. “I could not have been as successful without Bob’s legacy.”

MORE MEMORIES

Many of Bob Grondine’s other professional and personal friends also have nice things to say about their distinguished colleague.

Richard Collasse, Chairman of the European Business Council says “as a professional, Bob was the most impressive, knowledgeable and acute person I ever worked with. And, when he was the Chairman of the ACCJ and I was in charge of the EBC interacting with the Japanese Administration, he was wise, visionary and tough but always considerate.”

ACCJ President Emeritus Debbie Howard remembers that “Bob had a masterful way of explaining complex topics” which made him a key spokesperson for the ACCJ on various issues such as FDI, privatization, growth strategy and other regulatory matters that helped American and European companies make the most of their efforts in Japan.

She adds that “Bob’s enthusiasm and ability to create change inspired me to feel that we all have a role to play in making a better business environment for foreign businesses here in Japan.”

David Case, a partner at White & Case and former ACCJ Governor, says when he moved to Tokyo in 2002, he discovered that “working for Bob was the greatest mentoring experience a young attorney could have.” Case cites Grondine’s extensive knowledge of virtually every aspect of the law and describes him as “the hardest working attorney one could ever meet.”

Case vividly remembers acting as the lead associate in one case and sitting in on a teleconference from Grondine’s office. There, he learned many lessons on how to counsel clients, how to handle surprises and “how to guide clients to practical, common-sense solutions.” Case says Grondine’s impact was “enormous” on all the attorneys in the White & Case office.

Grondine served on former Prime Minister Junichiro Koizumi's task force on increasing foreign direct investment into Japan

“I can say with confidence that the Chamber is what it is because of Bob,” says Lake. “It would be a completely different – and certainly less effective – organization if Bob was not a part of it. We lost a great leader and friend. Bob’s passing came too soon, and the Chamber will never be able to replace the kind of leader he was.”

Bob Grondine may have been passionate about law and the ACCJ. But that wasn’t his only love. He also felt strongly about golf. Grondine spent many afternoons on the course, eventually becoming one of the ACCJ’s better playing members. He loved to get others involved and retained a competitive streak that often put the ACCJ on top of international competitions.

Former EBC Vice-Chairman Erik Ullner remembers Grondine’s competitive fires sparking an idea on the course in 2001. Ullner says Grondine developed the idea of a Ryder Cup style event, where ACCJ members would challenge their European counterparts. Originally called the Daimler-Chrysler Cup in Japan, the Mercedes-Benz Cup is now very successful. Ullner says this year “Bob’s brainchild will celebrate its 10th anniversary. Bob will be truly missed by all of us. However, he left us such a wonderful legacy that Bob will always be remembered through this golf tournament.”

Grondine’s organizational skills, leadership and reputation as a lawyer crossed international borders. Even the highest-ranking diplomats sought him out for advice. Former U.S. Ambassador to Japan Thomas S. Foley remembers Grondine this way: “When I was appointed, President Clinton made it clear that support of American business must be a priority. As soon as I arrived in Tokyo, I met with Bob and other senior ACCJ leaders. Bob was always upbeat and energetic and a wonderful source of knowledge. At regular Embassy briefings and events with the ACCJ, Bob often sat across the table providing inside information on what our companies needed. On many other occasions we sat together at breakfast, lunch or dinner sharing insights into the intricacies of trade negotiations. His affable manner and his encyclopedic knowledge of Japan made my time more pleasant but also much more productive.”

“Bob’s knowledge of Japan was not just confined to commercial and legal matters,” says Foley. “I recall a party we hosted where Bob joined me for the ceremonial breaking of the wooden cover of the traditional sake cask. Rather than one of the standard brands of sake, that year we decided to use special sake from a small local brewer. At the first sip Bob recognized and appreciated the difference. Bob not only understood the finer points of the law and of trade policy, he also had a refined appreciation for so many things. We will all miss Bob and should recognize and celebrate his many contributions to the rich bilateral relationship between Japan and the United States.”

Photo Courtesy of White & Case

“Bob was also deeply committed to the US-Japan relationship. Indeed, he lived a life dedicated to this,” says Porte. “In the 1990s, the considerable deficit of US students studying in Japan was recognized and it was determined that action was needed. Bob responded to this issue by chairing the Japan Committee of the US-Japan Bridging Foundation, an American foundation which raises funds to provide scholarships to US college students for study in Japan. Since inception in the late nineties, over 1,000 scholarships have been awarded.  It could be a fitting tribute to Bob to join together to support the Foundation and provide scholarships to students who can be inspired by Bob’s example.”

That is how Bob Grondine will be remembered: brilliant, inspiring, hard-working and competitive. He was a mentor and role model for aspiring lawyers, and a credit to his native country and to his adopted home of Japan. But most of all, Grondine was a friend and leader to the ACCJ. He will be missed.

Special Lifetime Service Award

The American Chamber of Commerce in Japan has been blessed with outstanding leadership since its founding 63 years ago. Over the years a handful of individuals stand out even among this elite group. Bob Grondine is one such leader. The Board has determined that Bob’s service to the Chamber and his dedication to promoting the Chamber’s mission deserves special recognition.
As Bob wrote when he took over as ACCJ President as the new millennium began, the ACCJ’s focus would be on: market access through deregulation; foreign direct investment; implementation of trade agreements; and business infrastructure improvement through corporate governance, corporate standards and professional services. In all these areas Bob had already made major contributions to advancing American business interests, tirelessly advocating with strategic vision, broad knowledge, and flawless Japanese, but also rolling up his sleeves and working day in and day out with the committees and task forces that were engaged in the daily details which are so important to member companies. During his two very successful, perpetually active years as President, Bob became a well-known and respected statesman of the business and policy-making community in Japan, and further improved the ACCJ’s advocacy “game” and organization with his relentless commitment to quality in every respect. After his time as President, he continued to be a major contributor across the wide range of Chamber activities, not only leading the charge in arcane areas such as competition, but also as one of very few Chamber policy experts to also drive a golf ball over 260 yards and help the ACCJ to victory in our annual shootout with the Europeans.
The ACCJ is a better organization in every respect because of Bob’s involvement. As a leader, a mentor, a colleague and a friend we have all benefitted from Bob’s dedication to the ACCJ. And the Board joins all our members in thanking and commending Bob Grondine for everything he has done, and the example he sets, for the ACCJ.

Mike Alfant
ACCJ President

Photograph: Wrangler - Fotolia

Prime Minister Yoshihiko Noda has announced plans to double Japan’s consumption tax from 5% to 10% over the next decade. The government plans to introduce enabling legislation by the spring. This month, the Journal takes a look at what the increase will mean for consumers and business in Japan.

CONSUMPTION TAX HISTORY

Introduced in 1989, Japan’s consumption tax (JCT) is a value-added levy imposed on transactions carried out within the country. Originally set at 3%, the rate was raised to the current 5% in 1997. The government is now looking to raise the tax in phases to 10% in order to fund ballooning social welfare costs and reconstruction efforts in the disaster hit areas of northeastern Japan.

Taxable transactions for JCT purposes are broadly classified into two categories – domestic taxable transactions and import taxable transactions. Domestic taxable transactions are defined as the sale/lease of assets or provision of services conducted by a business enterprise (including both corporations and individual proprietors, regardless of whether they are residents or non-residents) for consideration within Japan. Certain domestic transactions (i.e. sale/lease of land, transfer of securities) have been classified as nontaxable to reflect social policy and other considerations. Some import transactions are also taxable, including the removal of imported goods from bonded areas.

As with the VAT system in Europe, although the end-consumer is the ultimate bearer of taxes, the obligation to declare and file for JCT lies with the business enterprise engaged in the taxable transactions. Taxable enterprises must remit to the government the difference between the JCT received on taxable sales and the JCT paid on taxable purchases (including import transactions).

Transactions that fall outside the scope of the previously defined taxable transactions, such as export and overseas transactions, are generally exempt from JCT. However, practice and interpretation of the JCT Law in this area has become complicated in recent years due to increased complexity in international transactions. Following are some basic conditions and cases where enterprises are not required to file for JCT (and in some cases even apply for a refund). There are also some cross-border transactions that need careful attention.

EXEMPTION FOR SMALL ENTERPRISES

Under the JCT Law, small enterprises with taxable sales of ¥10 million or less in the base period (e.g. the period two terms prior to the current tax year) are exempted from filing a JCT return. This is only an exemption from filing, and as such, tax-exempt companies are still required to pay JCT to the vendor or service supplier when purchases are made. Likewise, the JCT Law does not prohibit tax-exempt enterprises from charging JCT to its customers. Tax-exempt enterprises are, in effect, allowed to keep the collected taxes less the JCT on purchases, which may for some businesses result in significant windfalls – albeit subject to corporate income tax. This loophole may appear unjustified in the eyes of the end consumer, but there is no illegality involved here.

For newly established firms that do not have a base period, taxpayer status is determined based on the capital size of the business. Specifically, new businesses with capital of less than ¥10 million are exempt from filing a JCT return for the first two years of operation. This means that new businesses may lawfully retain the excess JCT collected over JCT paid for the first two years by keeping their initial capital under ¥10 million. It should be noted, however, that amendments have been made in the 2011 tax reform to tighten this tax loophole. For fiscal years starting on or after January 1, 2013, the JCT exemption for small businesses will not apply if taxable sales in the first six months of the prior business year are ¥10 million or less.

APPLYING FOR A REFUND

Companies that do not qualify for the small-business tax exemption are required to declare and pay JCT collected on taxable sales minus the JCT paid on taxable purchases. However, firms are entitled to a refund if JCT paid exceeds the JCT collected on sales. A good example of this case is a domestic company exporting products manufactured in Japan to a foreign entity. Since export of goods from Japan is treated as a JCT-exempt sales transaction, the domestic company can claim a refund for the domestic taxable purchases (e.g. procurement of raw materials and parts).

An important thing to note here is that the refund can only be obtained by filing a JCT return, meaning that a tax-exempt company with no obligation to file is not eligible for JCT refund. If a refund is expected, tax-exempt small businesses should change to a taxable enterprise in a timely manner. A common pitfall is where new businesses with large outlays in the start-up phase (e.g. first two years of operations) are barred from claiming JCT refund because they have forgotten to register as a taxable enterprise. Owners should carefully consider their business model and investment plans in advance when deciding on their JCT taxpayer status.

DOMESTIC VERSUS OVERSEAS TRANSACTIONS

As mentioned earlier, JCT is not imposed on transactions that are conducted outside Japan. So how do we distinguish between a domestic and overseas transaction? For the sale/lease of assets, the distinction is made based on the location of the assets at the time of the transaction. Let’s look at a case where a domestic company enters into an agreement with another Japanese company to transfer goods that are kept overseas. Although it’s a transaction between two Japanese companies, JCT is not assessed because the goods are physically located outside Japan at the time of transfer. In such a case, foreign taxes must of course still be taken into consideration. Likewise, off-shore trade involving a Japanese company exporting goods purchased or manufactured overseas directly to a third country is also considered a JCT-exempt transaction.

Different criteria are used in cases where the physical location of the assets is difficult to determine, such as intangible assets. For instance, classification of royalty rights (industrial property) is decided according to the location of the official agency that registers the rights. Software license fees (license of copyright) are determined based on the place of residence of the transferor. Software licensed from a foreign company is not subject to JCT.

Provision of services is classified as a domestic taxable transaction if the services are rendered in Japan. Accordingly, even a non-resident will be liable for JCT if he/she performs services in Japan. For example, a foreign professional golfer playing in Japan would be treated as a domestic taxable transaction. However, the golfer’s obligation to pay and file for JCT depends on whether he/she qualifies for the small-business exemption discussed above. Even if the golfer wins ¥20 million in a Japanese tournament, he/she would not be required to declare JCT if taxable sales in the base period (two years prior to the current tax year) are ¥10 million or less. However, if the golfer collects prize money two years later, he/she is obligated to declare JCT on any amount of money earned in Japan as a taxable enterprise.

TAX EXEMPTION FOR EXPORTS

JCT is an inland tax and therefore not assessed on export transactions and export-related activities where goods and services are consumed overseas. Examples of export-exempt transactions include the export of goods, transfer of foreign cargo, international transport/communication and provision of most services to non-residents.

For instance, a Japanese attorney sending legal advice to a foreign client by email would be treated as an export-exempt transaction. An advertising agent in Japan placing an advertisement in a Japanese magazine at the request of a foreign client also should not charge JCT to that client. An important thing to note here is that the JCT exemption on services to non-residents does not apply if the non-resident has a permanent establishment (e.g. branch) in Japan, although certain exceptions to this rule exist which are somewhat complicated. In any event, if services are rendered for a foreign client, the service provider must check to see if the client has a PE in Japan, although such investigations are in practice quite difficult.

As far as the provision of services to non-residents, it should be noted that the following transactions do not qualify as export-exempt transactions: (a) transportation or storage of assets in Japan, (b) food/beverages and lodging in Japan, and (c) services provided in Japan which are similar to (a) and (b). Accordingly, foreign tourists to Japan can reclaim JCT paid on goods bought in Japan other than meals and accommodation.

NOT AN IMPEDIMENT TO GROWTH

An increase in consumption tax is considered by many a necessary step to deal with Japan’s spiraling amount of debt. From a macroeconomic viewpoint, such a policy change – while potentially decreasing the amount of consumption in the short term – will help reposition Japan as an attractive destination for foreign investors. On first glance, an increase in consumption tax to 10% would seem to be a major concern for anyone just considering starting a business or who is still in the first couple of years of operation. However, if you take the time to understand the tax laws in Japan, you will find that the consumption tax should not be an impediment to the initial growth of a company.

Photograph by Irwin Wong

The March 11 natural disaster was of unprecedented scale, resulting in feelings of shock and disbelief that still resonate in offices and boardrooms across Japan. The tragedy forced company leaders and human resources managers to address employee morale in the post 3/11 workplace. On October 3, the ACCJ’s Human Resource Management Committee held a roundtable on this topic. HRM Committee leaders Tish Robinson, Taka Miyawaki, Ginger Griggs and Keiko Suzuki hosted the event.

INITIAL SHOCK AND AWE

“More than six months past 3/11, the disaster remains a once in a lifetime event that is not going to be erased from any of our memories any time soon,” said Aston Bridgman, Director and Deputy Head of Communications of Deutsche Bank Group Japan.

Elizabeth Handover, President of Lumina Learning Japan, added that “my concern is ‘How are people doing now?’ The crisis gave us the adrenalin and the will to do a lot of things but there is still a lot that is not working. And now we have the floods in Thailand and Europe on the brink. It just seems that there is one thing after another.”

Handover continued: “This leads me to reflect on people’s inner emotional life. The crisis allowed people to express their feelings and talk about what they were going through. But now I wonder if it isn’t more deadly that people still have all kinds of anxieties. I still hear people talking about radiation. The feeling is that we are really in for the long haul with more problems mounting up. In some ways, life has sunk back into normalcy but now some companies are shedding employees so that is another anxiety. It seems like there are layers and layers of fear and anxiety to bring morale down and it is essential that we continue to find ways to have employees engage with their feelings and be able to share them.”

Jiana Leung, Director and Head of Human Resources of Deutsche Bank Group Japan said in response: “In the current macroeconomic environment, there needs to be a greater focus placed on talent management and retention. We need to put our arms around our existing top talent, and we need to drive our talent management agenda to retain, develop and cultivate leadership from within.”

IMPROVING EMPLOYEE MORALE

In terms of retention, David Swan, Managing Director of Robert Walters Japan and Korea, said “one thing that has had a profound effect on retention is volunteering. Volunteering demonstrates that Robert Walters is a company that cares about its employees and cares enough about its community to take an active role in social responsibility. I think that this initiative is something that has really helped a lot.

“In addition to that, we use volunteering in our own recruitment efforts as well. We hire a lot of workers in their twenties, and that generation in particular is very conscious of CSR initiatives; more so than my own generation. We didn’t really think about it very much before but this generation sees it as very important. You often find volunteerism on their resumes. They often talk about CSR activities they would like to get involved with. If we can demonstrate that we are a company that takes an active role with our CSR initiatives, we have found that that can often leave a positive impression on both our current and potential employees. In our experience, volunteering is a much more effective way of getting people engaged than just donating money.”

Kayoko Blake, Human Resources at Morgan Stanley shared “I went to Tohoku twice in summer with an NGO. It was a very rewarding and worthwhile experience. By mixing with the tsunami survivors and volunteers who came from all over Japan and overseas, I had an opportunity to reflect on my situation and to realize how lucky I am. After the 3/11 disaster, Morgan Stanley provided a lot of support to employees, including on-site counseling sessions, an emergency hotline service, several open sessions and seminars with the company doctor and nuclear specialists, distribution of bottled water, promotion of flexible work arrangement, and so on.”

“For volunteers, the company expanded its volunteer leave and the Volunteer Committee organized several initiatives for fund raising and three Tohoku volunteer trips in cooperation with an NGO. As an employee, I felt even more proud and thankful to my employer after my volunteer trip. I think volunteer activities can be good opportunities to foster leadership skill. I was impressed with a lot of young volunteers in their twenties taking lead in various projects. If employees volunteer with their colleagues, they can build further rapport with fellow workers, which may eventually enhance employee morale and loyalty and lead to good employee retention.”

Keiko Suzuki, Vice Chair of the ACCJ HR Committee added “Definitely, volunteering is meaningful. It really deepened relationships among employees. You can’t imagine the magnitude of the damage the earthquake and tsunami made unless you actually were there. When you see the endless debris, you really experience a sense of despair. To share that kind of feeling with other volunteers created a sense of oneness. The experience left a lasting impact. And it was good have my family involved in the volunteer work, also. I brought my husband and I thought that was really something worthwhile – to be able to share the experience with family as well.”

Aston Bridgman of Deutsche noted “We had a number of employees take up their own initiatives. Employees led the way and we have backed them with recognition, and given them the air time to go and recruit for donations or volunteers. That is a great way of recognizing staff and their concerns, and of rewarding their initiative. It is a morale booster, too, that if employees take the right initiative at the right time in the right direction, the company will see and respond to that behavior positively.”

“One employee here, who was very concerned about the whole disaster, got in his car and drove as far as he could, with a couple of other volunteers and supplies. They ended up in a town called Tagajo and started volunteering, getting to know locals and hearing more about where the real damage was. So he kept moving further up the coast and ended up in Ishinomaki, where he and a number of employees have been volunteering on a regular basis since as ‘Nadia’, a group he helped co-found and which is now applying to be an NPO.”

Several HR directors observed a surge this autumn in the use of volunteer leave, with more employees taking volunteer leave now than last spring or summer.

Vicki Beyer, Executive Director at Morgan Stanley, noted “The thing that I see is how much pride in the company is actually engendered by the company’s support of volunteering efforts.  So many people have said ‘this makes me proud to work at Morgan Stanley.’  We hear it again and again in the many contexts of Morgan Stanley-sponsored volunteerism and certainly since the disaster with the various things that we have done we have heard that a lot from employees.”

David Swan agreed. “When we talk about the positive feeling that we get from the company, I had a couple of our team tell me that their volunteer trip to Tohoku was the best thing that they have ever done hands down. Not just within the company, but ‘ever.’ We were able to give people a paid day off that wasn’t annual leave and pay for their trip from housing and food to transportation as well. They seemed very pleased that the company was prepared to do this.”

Photograph by Irwin Wong

“Volunteering really empowered members of my staff. They were so excited to be able to make a contribution. This was also true in our emergency committee following the earthquake. We changed a lot of business practices, led by employee suggestions. The people who did it said ‘Yeah, we did that! What can we do next?’ There was a new self-confidence because they were empowered to do things in a real situation.”

Ginger Griggs, vice chair of the ACCJ HR Committee, added “Spouses — particularly those who aren’t working —can also benefit from being brought into company volunteering.  Psychologists agree that in turbulent, frightening times, purposeful activity gives us a sense of control, and that sense of control bolsters our courage and ability to cope.  The period around 3/11 was a scary time for everybody, and I think many of the unemployed wives who remained in Tokyo may have felt very isolated in those initial weeks while their spouses were at work. 

“I think that for many employees who continued to show up for work even when their companies gave them the option to stay home or temporarily go elsewhere, the workplace provided a support network and an important distraction from anxiety.

“Even so, I remember one Japanese colleague poignantly telling me after 3/11 that when he would get ready to leave for work each morning, it was very painful for him to hear his six-year-old start crying, “Daddy, don’t go!”  Realizing that the little boy was very likely picking up his anxiety from the adults around him, the thought struck me like a bolt of lightning – we need to involve both spouses in company volunteering!  It’s a mutually reinforcing morale booster.  So volunteering and including, extending to the families can also be very helpful, and companies who did that I think experienced potentially even a higher peak of morale from the volunteer experiences.”

GOING FORWARD

Brasington said “going forward, vision is critical. Like many companies, we had experienced three years of restructuring prior to the earthquake. Employee fears at the time were that more would follow as a result of the economic upheaval. Will our US corporation keep investing in Japan? My responsibility now is to set a vision of the future and engender excitement to deliver it. We have focused on new products and new markets in our town hall meetings. We are sowing the seeds of a dream. But it’s got to be a dream that people can believe in and that is the leadership needed now in terms of bringing this country back to life. It is quite easy to be in the helpful mode. It is not very easy to be in the growth mode. And that is what I am looking at right now.”

Elizabeth Handover asked “how do we go forward? How do we create the vision? How do we keep everybody together? I think one thing we can’t go backwards to is what I call “Task-focused” leadership. There is only one way forward, and that is toward “People-focused” leadership. And I think volunteering is a great way to developing this kind of leadership.

“Volunteering is great for women’s leadership too actually. If you can then bring that back in to the company and link it to the way people connect with each other and do their jobs you can begin to transform an organization. I think it is communication, communication, communication. We just have to do more and more of it.”

Volunteering might be just the ticket to enhance communication and provide one way of laying the foundation for people-focused leadership.

Kayoko Blake, Morgan Stanley

Jiana Leung, Deutsche Bank

Keiko Suzuki, ACCJ HR Committee Vice Chair

David Swan, Robert Walters

Aston Bridgman, Deutsche Bank

Akemi Nakagawa, Hartford Insurance

ACCJ HR Round Table Participants

• Glynn Brasington, Pitney Bowes
• David Swan, Robert Walters
• Aston Bridgman, Deutsche Bank
• Jiana Leung, Deutsche Bank
• Kayoko Blake, Morgan Stanley
• Vicki Beyer, Morgan Stanley
• Elizabeth Handover, Lumina Learning
• Akemi Nakagawa, Hartford Insurance
• Taka Miyawaki, ACCJ HR Committee Co-Chair
• Tish Robinson, ACCJ HR Committee Co-Chair
• Ginger Griggs, ACCJ HR Committee Vice Chair
• Keiko Suzuki, ACCJ HR Committee Vice Chair

About the Author

Tish Robinson is a professor of Organizational Behavior and Systems Thinking at Hitotsubashi University. She co-chairs the ACCJ HR Committee along with Taka Miyawaki. Ginger Griggs and Keiko Suzuki serve as vice chairs. The ACCJ HR Committee is currently planning a series where companies can get advice on complex organizational problems anonymously from experts in the field. If your company is interested in participating, please email Tish at: probinson@ics.hit-u.ac.jp

Illustration of Steve Jobs, Co-founder and CEO of Apple Inc., 1955-2011

After decades of trials and tribulations including an acrimonious resignation from the company in 1985, a triumphant return as CEO in 1997, mainstream hits such as the iMac, iPod, iPhone and finally the iPad, Jobs’ legacy as the man most responsible for popularizing technology products among non-technical consumers is secure.

When I interviewed Apple co-founder Wozniak back in 2002, he confirmed this legacy of mainstreaming technology, saying, “Steve Jobs has been acknowledging the computer as the home digital hub in more than just words and concepts. Apple has come out with software that truly brings home the advantages of a more convenience-oriented lifestyle, and that makes these tasks easy for average people.”

But for a few twists and turns, the history of computing might have turned out quite differently. Many years after his return to Apple, Jobs said that being gradually pushed out of his own company might have been one of the best things to happen to him. But in 1985 the urgency and concern about his future was pronounced. In a letter to Newsweek, Jobs went public with his resignation and wrote:

“I find myself both saddened and perplexed by the management’s conduct in this matter which seems to me contrary to Apple’s best interests. Those interests remain a matter of deep concern to me, both because of my past association with Apple and the substantial investment I retain in it… As you know, the company’s recent reorganization left me with no work to do and no access even to regular management reports. I am but 30 and want still to contribute and achieve.”
And achieve, beyond anyone’s wildest imaginings, is exactly what he did.

“Your time is limited, so don’t waste it living someone else’s life. Don’t be trapped by dogma, which is living with the results of other people’s thinking. Don’t let the noise of others’ opinions drown out your own inner voice, heart and intuition. They somehow already know what you truly want to become. Everything else is secondary.” –Steve Jobs

Although most focus solely on Jobs’ work in the world of computing, it must be noted that he is also responsible for essentially saving American animation with his acquisition (during his exile from Apple) and careful curation of Pixar, the most successful animation studio on the planet. Aside from the astounding technological progress delivered by Pixar’s masters of computer animation, it was Jobs, Ed Catmull, and John Lasseter, working as a team and focusing on story over marketing and effects, that turned the small studio into the industry defining powerhouse it is today. When the inevitable Pixar theme park is established, like Disney, it will be the spirit of Steve Jobs watching over the children cavorting with the costumed versions of Buzz Lightyear and WALL-E.

Such a mix of art and technology is what truly distinguishes Jobs from his peers. Indeed, many valuable contributions made by others in fields of technology, science and art have improved many of our lives in ways Jobs never could have. But the marriage of a kind of “philosophy of technology” and product excellence is the reason so many non-business people have taken such great notice of the largely media shy innovator. Some have raised comparisons to Thomas Edison, or even Henry Ford, but the truth is that Jobs was far more similar to Walt Disney. By creating an entire ecosystem of products and readily definable operating practices, Jobs, much like Disney, invented not just products, but “experiences.”

At the foundation of the Jobs story lay the roots of what would later become staples of the simplicity and ease-of-use now common to all Apple products—his fascination with ideas behind Zen Buddhism. In this way, Asia, and Japan in particular, had an overwhelming and far-reaching influence on Jobs and everything he produced. Though Jobs himself never publicly confirmed a strict adherence to the practice, he was indeed very open about his admiration of its various tenets. In fact, in 1991, when Jobs married his wife Laurene Powell, the ceremony was presided over by Zen Buddhist monk Kobun Chino Otogawa, a Japanese man from the small town of Kamo, in Niigata Prefecture.

Jobs’ fascination with Zen Buddhism is so engrained in the American business community’s psyche that just months before his death, Forbes announced a graphic novel tribute to the man titled “The Zen of Steve Jobs.” And even when making the rare on-the-record comment for a reporter, somehow, Zen seemed to slip though. In a 1998 Businessweek interview, responding to a question about the simplicity of Apple products, he told the reporter, “Simple can be harder than complex: You have to work hard to get your thinking clean to make it simple.”

But Jobs’ interest in Japan wasn’t limited to the spiritual realm, he was also a devout fan of one of the country’s electronics giants—Sony. In an interview last year, former Apple CEO John Sculley offered deeper insight into Jobs’ obsession with the Japanese company. Recounting the 1985 version of Jobs that he knew (the last time the two had any meaningful connection), Sculley said, “The one that Steve admired was Sony. We used to go visit Akio Morita and he had really the same kind of high-end standards that Steve did and respect for beautiful products… Steve’s point of reference was Sony at the time. He really wanted to be Sony. He didn’t want to be IBM. He didn’t want to be Microsoft. He wanted to be Sony. Akio Morita was clearly one of his great heroes.”

Morita’s influence on Jobs even extended to his attire. According to Jobs biographer Walter Isaacson, in the early ’80s Jobs, in a bid to emulate the uniforms worn at Sony at the time, recruited the talents of Japanese designer Issey Miyake. But when his uniform idea fell flat with Apple employees back in the U.S., he decided to create his own uniform. Jobs said, “I asked Issey to make me some of his black turtlenecks that I liked, and he made me like a hundred of them… That’s what I wear,” he said. “I have enough to last for the rest of my life.” That’s right, even Jobs’ iconic black turtlenecks are, essentially, of Japanese origin.
The irony of this deep, multi-tiered connection to Japan is that many of the Apple fans that rushed to Apple’s stores in Ginza and Shibuya with flowers, candles and messages of thanks to show respect to his memory probably have little awareness of how much of a direct impact Japan had on the American brand and innovator they’ve come to love.

Of course, while many are still mourning his death, and singing his praises, there are those who remain skeptical of the man and his overall approach. Some cite the fact that there is no discernable charity associated with the late billionaire, an observation that would seem to fly in the face of the widely held belief that true charity happens outside of the spotlight, without any public recognition. We may never know what, if any charity Jobs associated himself with.

What we do know about his non-business pursuits is that Jobs had an active connection to President Barack Obama, meeting to discuss technology, jobs and the state of the country. Jobs himself was largely careful about striking any particularly public political profile, but his wife Laurene Powell Jobs, the co-founder and President of the Board of College Track (an after-school, college preparatory program), was appointed by President Obama in 2010 to be a Member of the White House Council for Community Solutions.

“You can’t connect the dots looking forward. You can only connect them looking backwards, so you have to trust that the dots will somehow connect in your future. You have to trust in something— your gut, destiny, life, karma, whatever—because believing that the dots will connect down the road will give you the confidence to follow your heart, even when it leads you off the well-worn path, and that will make all the difference.”
–Steve Jobs

Interestingly, when I asked Wozniak about the prospects of tablet computers becoming mainstream, a full 8 years before the debut of the iPad, he said, “I do think they have a place in the world. They may someday even predominate over laptops. But today’s laptops are so good, and so important, that it’s almost impossible to give up. You get used to one type of machine and it’s like a tablet will be a secondary machine. Kind of like a PDA, something maybe I carry for other purposes. I prefer one laptop doing all my major functions in the world… So where’s the room for the ‘second car,’ you know. I don’t have that room in my life anymore to have too many computers. They all take too much time.” But, as you might guess, today Wozniak has confirmed that he owns several iPads.

This brings us to what may be the most important aspect of Jobs’ legacy, the ability to divine a future that many, even those close to him, simply could not envision. Microsoft was the first major technology company to show us a working tablet computer, but Apple figured out how to actually make it a practical part of our everyday lives. Sony revolutionized portable music with the Walkman, and a series of digital music players, but Apple cracked the code on how to popularize the dynamic of digital music downloads in your pocket. Smartphones existed before the iPhone—most notably a myriad of feature-rich Japanese handsets, once the envy of the entire industry—but Apple unraveled the mystery of how to make these powerful mobile devices simpler, and thus more accessible to even the most inexperienced consumer.

Given up for adoption as a child, dyslexic, a college drop-out, pushed out of the very company he founded…these challenges were all central to making Steve Jobs the man he became. Without that specific set of challenges, it’s possible that Apple might not even exist today. It’s true that there have been a number of successful technology companies founded in an attempt to change the way we live and interact in our daily lives. But were it not for Apple, the reality of our relationship to digital technology would likely look very, very different.

Overcoming his own set of personal challenges, Jobs managed to excel in a way that transcended business and reached into the arena of life philosophy and basic human endeavor. Thus, despite his great many technological and business accomplishments, in the wake of his death last month, the one idea that resonated most powerfully across the Internet and on pieces of paper stuck to the windows of Apple stores in Hong Kong, Shanghai, Australia, and Japan was a simple phrase Jobs once borrowed to sum up the source of his power, and life philosophy: “Stay hungry, stay foolish.”
He will be missed.

On October 3rd a panel discussion on radiation and food safety was hosted by Jonathan Kushner and Jay Ponazecki, Co-Chairs of the ACCJ Tohoku Revitalization Task Force. The panel included Wade Allison, nuclear expert and medical physicist, emeritus professor of physics at Oxford University, and author of the book, “Radiation and Reason, The Impact of Science on a Culture of Fear,” Akira Tokuhiro, professor of nuclear and mechanical engineering at the University of Idaho, with additional comments from Noriyuki Shikata, Director of Global Communications in the Prime Minister’s Office.

Engineering Challenges at Fukushima

“We live in a post-Fukushima world. That is clear,” stated Professor Tokuhiro. “We have challenges…right now and for many years ahead… However, it is not a daunting task in terms of the technical aspects.” Tokuhiro started the evening with a list of engineering challenges. “First, there are certainly time-sensitive issues…challenges [that] will be here for years to come [and] multi-year expenses.” Tokuhiro noted, “The technical challenges are really not impossible…Fukushima is certainly larger than the U.S. experience at Three Mile Island. And it is relatively a new experience in Japan. However, we do have experience all over the world in the clean-up effort.”

He also noted there are safety issues in terms of the nuclear plant site weathering and waste challenges. These challenges are on-site as well as in terms of waste management, storage and clean up. A large workforce is needed for the clean up, and it will be important to monitor such workforce’s radiation exposure and post-exposure health.

Tokuhiro continued, “We are still doing hot-spot mapping. Actually it is going pretty well, I think. It certainly needs to be a continued effort…More data provides more resolution. People who are close to [or living in] the hot-spot areas…should have options for radiation monitoring. Some villages or cities will be taken off the list of contaminated areas I think. There is a bit of a disconnect between 10, 20, 30 kilometers and where the actual fall-out is. So south of Fukushima there are certainly villages and cities that are relatively free from contamination.”

Regarding topsoil, Tokuhiro commented that clean up “certainly needs to happen…to make the area safe. [Professor Allison will address] whether it is actually needed in terms of [current] radiation levels… Locations for the safe re-deployment of the soil must be established. We saw that, where some of the playgrounds have topsoil taken out, there are tarps on the contaminated soil that cannot sit…for an indefinite amount of time.”

Tokuhiro reminded everyone that food safety generally is now a global issue; it is not just a Tohoku issue. He also discussed how risk is relative to each individual and involves the balancing of benefit and risk perceptions. In weighing the risks of food consumption, one also has to factor in human resiliency. Tokuhiro said “It is self evident that each individual’s biological makeup is unique,” and resiliency is the “ability of a body to accommodate and mitigate the negative health effects of the toxins to which one is exposed.”

He noted that individuals ingest many toxins in today’s polluted world and suggested that one should not single out radiation, highlighting that it is important to weigh the risks after considering updated information based on confirmed and independent measurements.

Radiation in medicine and the Envrionment

Professor Allison began, “I come entirely from the outside (having no links to the nuclear industry), having looked at this problem independently of the Fukushima experience. Having been to Minami Soma last weekend, I was immensely impressed that after six months you can see all of the [deserted] shops and houses… One can only imagine the human suffering, stress and the disconnect in families.”

Allison explained how the effect of radiation depends on the dose and the period over which the dose is administered. According to the professor, just like Paracetamol (aspirin) tablets, if one took 100 tablets all at once, one would have to be hospitalized, whereas, if one took 100 tablets spread out over two or three weeks, one would experience pain relief. So, from his viewpoint, just like the Paracetamol tablets, one should not be surprised that body can cope with certain levels of radiation exposure spread out over time.

He went on to explain that today there are many benefits from radiation diagnostic scans such as a CT scan, which is basically an external dose of radiation. To get a clear CT scan, one needs five to ten milli-sieverts of external radiation. A PET scan involves an internal dose as one’s body is injected with radioactive material, which is then imaged. Both procedures come into wide use within the medical profession. Allison further elaborated by detailing that CT and PET scans involve whole body doses of about 15 milli-sieverts, and pointing out that the types of radiation exposure resulting from Fukushima involve internal and external sources of radiation. Thus his contention is that while technically they are not the same as medical purpose radiation, their effects on the human body are not that different.

So how does this compare with the risks of food safety in Japan? Based on current readings, Allison believes food in Japan is safe for consumption, but did not get into a discussion of meats, seafood and produce on an item-by-item basis. He referred to the regulations published by the Japanese government on July 27, which stated that eating one kilogram of meat with a regulation limit of 500 becquerels per kilogram is a dose of 0.008 milli-sieverts. Professor Allison independently confirmed this calculation.

Allison also said, “When you ingest cesium, it does not go to any particular organ; it more or less moves out of the body, just like the radioactive fluorine in a PET scan.” To get the same dose as in a CT/PET scan, one would have to eat 2,000 kilograms of contaminated beef. Allison commented, “The regulation as it stands is unreasonable. That does not mean to say that it is wrong; because regulations are to do with what people accept, not just from the scientific point of view. Basically we all marched, demonstrated and voted during the Cold War era to reduce any radiation in our lives to an absolute minimum. So they…drew up advice to reduce radiation to as low levels as reasonably achievable…15 milli-sieverts is not a dangerous level. We get it in CT/PET scans; which we are quite happy with.”

Allison continued, “At Chernobyl, some workers received fatal doses of radiation in the initial putting out of the fire, but no worker with less than 2,000 milli-sieverts died of acute radiation syndrome; which is the illness where the body gets so much radiation that it shuts down. At Fukushima, the TEPCO figures, which have been accepted by the American Physics Society, recorded that 30 workers received doses between 100 and 250 milli-sieverts. That is one-tenth of the lowest dose at which a worked died at Chernobyl. So we can see that there would be no deaths from acute radiation syndrome at Fukushima.”

Evacuation Criteria & Medical Applications

To put current levels of radiation into context, Allison further discussed radiation exposure in medicine because most people trust the medical profession. When radiation is used to treat cancer, a fatal dose of radiation is given to kill the cells in the cancerous tumor. The tumor gets a dose of 2,000 milli-sieverts per day over a period of several weeks. Healthy parts of the body also get a dose of up to 1,000 milli-sieverts per day which comes to approximately 20,000 milli-sieverts per month.

That is five times the fatal dose experienced at Chernobyl. Allison remarked that is possible because “The healthy organs are getting 1,000 milli-sieverts and have just enough time to recover most of their functions and get repaired before…the following day[’s treatment]. The cancerous tumor cells do not have enough time to recover and after several weeks most of the tumor cells are dead and most of the healthy cells are still in business. Radio-therapy would not work if biology did not in fact repair damage from radiation.”

With regard to the evacuation criteria applied around Fukushima, Allison noted “The level at which decisions were taken, we are looking at 20 milli-sieverts per year which is a lot different to 20,000 milli-sieverts per month. Although admittedly that is 20 milli-sieverts a year to the whole body whereas the 20,000 milli-sieverts a month is to a relatively local area. But it is still true that the radio-therapy equivalent is very, very large compared with people being forced out of their homes with enormous personal damage and stress levels. So the way that these criteria have been set up according to the international committee makes no concession for the damage to personal, social and economic health associated with evacuation.”

Further Comparisons With Chernobyl

Allison continued, “When you have a look at the literature… as recently as February 28th, just a few days before the earthquake, when the latest U.N report on Chernobyl came out, it confirmed the conclusions of the IAEA report and others of 2006, that there was far more damage done to the social structure and people’s mental health, stress levels and so on and that this was a far bigger health problem than any possibly due to radiation. One wonders whether these reports have been read and the lessons applied to Fukushima. Certainly the advice from the ICRP has not been updated in this respect.”

Cancer Research on Atomic Bomb Survivors

The most extensive radiation-induced cancer research has been on the survivors of Hiroshima and Nagasaki, whose records have been followed for 50 years with a large sample size. On average Hiroshima and Nagasaki survivors were exposed to 160 milli-sieverts, and their average cancer risk increased by one in 15. Higher exposure does show increased risk. At high exposure levels, the extra risk per 1,000 milli-sieverts is up nearly ten percent. Allison noted, “But for those who received doses of less than 100 milli-sieverts, the extra risk is consistent with zero; even in this extraordinary large set of data, which I hope is never repeated. So…it is perfectly sensible to consider that below 100 milli-sieverts there is no radiation risk.” (Refer to Table 1)

Solid cancer deaths among Hiroshima and Nagasaki survivors 1950-2000, separated by dose range (Preston et al, 2004)

Table 1

“Expected” means the number of deaths predicted from those in other cities. Doses highlighted have risk compatible with zero (final column).

Below is an illustration (Refer to Figure 1) of various radiation doses. The big red area is the dose to a tumor in cancer therapy which is greater than 40,000 milli-sieverts per month. The tan rectangle shows the dose per month for healthy tissue which is tolerated by the public. The little arrow at the bottom is pointing to the ICRP public lowest achievable level which is one milli-sievert per year or 0.1 milli-sievert per month. Allison noted, “My suggested level for a vision for the safety level is 100 milli-sieverts per month which is 200 times lower than that tolerated willingly by radio-therapy patients…But it does represent a relaxation of radiation safety levels by a factor of about a 1,000 from levels which were designed to reassure people to levels which actually show where danger sets in.”

Some Monthly Doses Shown by the Areas with ALARA and AHARS

In conclusion, Allison commented, “I expect that there will be no deaths from radiation at Fukushima. I expect that there will be many, many, many deaths from fear of radiation at Fukushima. It is fear that is the problem. In particular, appeasing fear by lowering the regulations and telling people not to worry does not work. People are quite capable of making their own decisions. Radiation…is a problem we should learn to live with.”

Note From ACCJ Tohoku Revitalization Task Force

Figure 1

The ACCJ Tohoku Revitalization Task Force recognizes that each person has to weigh the risks of food safety — both in Japan and overseas, but it hopes, through the sharing of information and expert opinions, we can make informed decisions. It is important to better understand and test the assumptions underlying our fears. Based on the panel discussion and questions from the audience, it also is very apparent that the public’s trust in government communications needs to be restored.

For a look at the presentations and a link to a video recording of the event, please check out the ACCJ website: http://www.accj.or.jp/user/detailNews.php?newsid=506&file=/user/210/index/

Tish Robinson is a professor at Hitotsubashi University ICS. She is co-chair of the ACCJ HR Committee and head of the ACCJ Volunteer Affinity Group. If your company has been doing CSR in response to the Tohoku Disaster, please share what you are doing with her at tishintokyo@gmail.com.

Jonathan Kushner is a partner with Kreab Gavin Anderson, an advisory firm specializing in crisis communications, financial PR, and public affairs. He is co-chair of the ACCJ’s Tohoku Revitalization Task Force and vice-chair of the Trans-
Pacific Partnership Task Force.

Jay Ponazecki, a Morrison & Foerster partner, specializes in cross-border business transactions and with her bengoshi colleagues advises clients on key strategic issues associated with doing business in Japan and investing in Japanese companies. She is co-chair of the ACCJ’s Tohoku Revitalization Task Force and vice-chair of the Membership Relations Committee.

Photo by shibuya246 on flickr

Only in Japan does the image of a larger-than-life robot resting idly in a park against a backdrop of modern skyscrapers seem less like a fantastic image out of a science fiction movie, and more like a part of the everyday workings of ordinary life. Standing at a whopping 18 meters (59 ft), the giant robot was estimated to have attracted over four million tourists over the course of a short, two-month exhibit.

Fast forward to summer 2011. After a short stint outside of Bandai’s factory in Shizuoka, organizers have returned the now dismantled Gundam to Odaiba by popular demand. This time around, thousands of enthusiasts have returned in order to get up close and personal with the individual pieces of the original robot. Most opt to pose for a picture whilst sitting inside of its gigantic robotic hand. A few stations away, in the futuristic halls of the aptly named Miraikan (roughly meaning “Museum of the Future”) lives the world’s most famous humanoid robot. Everyday for two, ten-minute demonstrations, Honda’s ASIMO—which standing at 130 cm (4.3 ft) tall and weighing in at 54 kg (119 lb), vaguely resembles a miniature astronaut—captivates spectators of all ages as it walks, runs, responds to questions, banters with staff and even waves at audience members.

From miniature battery-operated robot mascots designed to run triathlons in Hawaii to robotic dogs capable of playing soccer, Japan has long captured the world’s imagination as an international ‘tech mecca.’ And as pop culture icons such as Astroboy and Doraemon prove—robots are as much a part of Japanese science as they are a part of its cultural identity. So much so, that it comes as no real surprise when a Japanese company or researcher steps onto the world stage as the creator of the latest technological innovations.

What is a surprise is when they don’t.

A Conspicuous Absence

As the initial shock following the Great Eastern Japan Earthquake and tsunami subsided and the nation refocused its attention on the crisis unfolding at the Fukushima Dai-ichi nuclear power plant, the stage seemed set for Japanese robots (and by association, Japan’s technological prowess) to shine. Given the increasingly dangerous conditions at the plant, it seemed unthinkable that the world’s foremost ‘Robot Nation’ wouldn’t showcase its supposed arsenal of advanced robots, ready to perform emergency work where humans could not.

Instead, TEPCO workers first turned to the PackBot, a remote-controlled robot built and developed by U.S.-based robotics firm iRobot, perhaps more famously known for its popular house cleaning robot Rumba. Where workers could not go, the PackBot and other robots measured radiation levels, temperature, as well as took photos and cleared debris. Yet as the days passed and news about the courageous workers dubbed by the media as the ‘Fukushima Fifty’ continued to dominate headlines, Japanese robots remained nowhere to be seen.

Now, roughly seven months after the earthquake, it would be misleading to suggest that Japanese robots and researchers have yet to contribute toward ongoing efforts in Fukushima. According to Satoshi Tadokoro, a robotics specialist at Tohoku University known for his expertise in rescue and disaster robots, Japan-made robots have been active in Fukushima since the end of March in the form of 60 remotely operated, unmanned construction system units boasting efficiency rates of 80 percent. However, he also noted that limited coverage in the media has lead to greater confusion amongst the public.

Since June, another Japanese robot called Quince, a robot jointly developed by Tadokoro and the Chiba Institute of Technology, has also helped workers in the efforts to work toward a cold shutdown of the Fukushima reactors. Capable of remote monitoring and light manipulator tasks, Quince has at times, been utilized to obtain readings in areas the PackBot cannot reach due to its greater mobility.

While overshadowed by more immediate concerns such as providing aid for victims and radiation contamination scares, the initial absence of Japan-made robots during the crisis and its direct aftermath did not go unnoticed. While economists publicly debated the course of the nation’s recovery, another unanswered question lingered in the minds of many Japan watchers—where were the Japanese robots?

The Robot Nation

“Japan has been regarded as a leader in the robotics industry both inside and outside Japan—a fact that researchers have been proud of since before the quake,” says Minoru Asada, a Professor of the Department of Adaptive Machine Systems at Osaka University and internationally renowned robotics expert.
Though the first commercial ‘high-tech’ robot was first introduced in the 1980s, Japan’s robotics industry can be traced all the way back to the late 1960s. Since then, Japan’s reputation for both technology and industry has been cemented through product innovations ranging from the Sony Walkman to the Toyota Prius. According to statistics from the International Federation of Robots, in 2010, Japan was the most automated nation in the world, boasting a robot density of 306 robots per 10,000 employees in the manufacturing industry. Moreover, in 2006, a report from the Japan External Trade Organization (JETRO) projected that Japan’s robotics industry would exceed an estimated six trillion yen by the year 2025.

So given the numbers and Japan’s status as an industry leader, the early absence of Japanese robots at Fukushima becomes even more perplexing. Surely, wouldn’t one of the world’s most technologically advanced, robot savvy nations be prepared for exactly such an occasion?
Thus far, the general consensus among experts is that the original lack of Japanese robots had less to do with actual preparedness, and more to do with a lack of practical experience in addition to differing approaches between Japan and the West in regards to robotics research.

According to Asada, Japanese researchers had thought about developing rescue robots for nuclear accidents with the KYOKUGEN SAGYOU (Advanced Robot for Hazardous Environment) robot over 20 years ago. However, believing that such accidents were unlikely, the government and METI instead shifted project’s focus toward developing robots for power plant maintenance. While the project went on to produce a number of robots, none went on to actually participate in any drills.

“Simply speaking, Japanese robotics has lacked sufficient practice in real life situations, even though the level of the technology is quite advanced,” explains Asada. “TEPCO adopted iRobot’s robots first because U.S. robots have been used so often on the battlefield.”

“I know that researchers and research rescue robots were waiting for a dispatch call after the earthquake. It might have been TEPCO’s decision not to use unreliable research robots that were not well documented or cataloged. Or it might simply be a lack of information at the front line about available Japanese research robots,” agrees Yoshihiko Nakamura, a Professor at the Department of Mechano-Informatics at the University of Tokyo. “The U.S. robots were not only well documented and cataloged, but also suggested by the Japanese government in accordance with an offer from the U.S. government.”
Another factor was that military research is effectively prohibited in Japanese universities. Conversely, the U.S. funds roughly $660 billion into hi-tech companies to fund military research. The PackBot, for instance, was deployed for a number of life-saving tasks in Afghanistan before it ever landed in Fukushima. The result is that while Japan excels at creating industrial, civil engineering and entertainment-based robots, the U.S. has the advantage in fields such as aerospace, exploration and nuclear power robots.

“The link between advanced robotics research and military industries in Japan is at the very minimum,” says Nakamura. “Therefore, if the military business in Japan is closed and already matured, business opportunities in military technology are not attractive for small industries. The deployable robots for disasters and incidents could have been equipped if guided by national policy as they were in France and Germany after the Chernobyl incident. However, there has been no visible robot market in Japan led by military demands or such policy initiatives.”

Instead, Japanese researchers have focused their attentions on developing consumer robots designed to assist in everyday tasks in order to usher in a more Jetsons-esque vision of the future, where robots both coexist and collaborate with humans.

Industry of the Future

In 2005, 340 teams of amateur and veteran robot developers spanning 31 countries gathered in Osaka to participate in that year’s RoboCup conference—an experimental, project founded by Japanese robotics experts aiming to build a team of 11 humanoid robots capable of winning against a champion FIFA World Cup soccer team. On the sidelines of the event, a team of Sony’s Aibo, a robotic dog, wowed spectators and garnered positive buzz with their capability to learn, adapt and play competitive soccer games.

Photo by mujitra on flickr

“Japan has only industrial robots and robot ‘toys’ as an industry. Some companies are struggling to open new areas, but are not very successful. Therefore, there are many types of research robots, but [they] are not commercially available,” explains Tadokoro.

“[There] is the lack of dynamism to grow small businesses, which was seen 50 years ago in companies like Sony, Panasonic, Honda and so on. The major industries are too large to wait for the growth of business in markets under $100 million, even if they have the technology within the company,” agrees Nakamura. “The industries that have robots as their main business are mostly for factory automation in automobile companies and are less aggressive for new applications of unclear business opportunities.”

Furthermore, experts agree that economic challenges stemming from the events of March 11 will likely pose new challenges for researchers as they try to turn their futuristic visions into reality. To what extent, however, still remains unclear.

Following a strong year of growth in 2008, statistics from the Japan Robot Association indicate the Japanese robotics market plummeted 53.6 percent due to the effects of Lehman Shock in 2009. While the market has made significant strides toward recovery since then, the global economic downturn has left its imprint on the industry. For the first time, Japan slipped one spot to the world’s second largest robotics market in 2010 despite increasing production by 103.9 percent from 2009. Neighbor and economic rival South Korea claimed the top spot, with significant investment in China boosting the country’s ranking to fourth place.

“Industrial robots were definitely affected by the current recession. Its impact on research innovation of service robots is unknown, however, because such robots are developed by governmental funding, and are only research robots. Any serious effects would take place from the next fiscal year starting in April,” says Tadokoro. “As for the response robots, the situation is foggy. Research will go forward, but I do not know what first responder organizations and military will decide.”

“The earthquake struck Japanese industry supply chains, including the automobile industry and caus[ed] their current hardship in regards to sales. This then affected the robotics industry, whose main customers are based in the automobile industry. The economic recession stemming from not only the earthquake, but also global financial instability, will force the government and the industries to cut research budgets in the short term,” says Nakamura.
Despite the short-term setbacks, industry experts are quick to point out that they remain focused on the future and are committed for the long haul. Undeterred by negative publicity, Japanese robotics experts formed the Robotics Task Force for Anti-Disaster (ROBOTAD), a community of volunteers dedicated to discussing and exchanging ideas to utilize robots for recovery efforts in Tohoku. Additionally, researchers are also keen on continuing ambitious experimental projects aimed at pushing boundaries and fostering innovation.

“The leading industries conducting future robotics research will continue their investments as far as I understand,” asserts Nakamura, who also serves as ROBOTAD Anchorman alongside both Asada and Tadokoro. “For this reason, activities pursuing advanced robot technologies have not been affected for now, and will maintain their focus toward building social applications for robots.”

“In spring 2013, a new town will be opened just north of the JR Osaka station, and I had a plan to develop a RoboCity CoRE (Center of RT Experiments),” says Asada. “But due to the quake and strong yen, some companies gave up investing in such experiments with us.”

RoboCity CoRE, Asada explains, is an experimental joint research project developed by the city of Osaka with help from Osaka University professors aimed at building inner city labs for symbiotic experiments between humans and robots—a sort of ‘future city’ where researchers, artists and companies can collaborate on new technological developments and ideas.

“A non-industrial robotics market has not been established, yet. Therefore, we need some experiments that are open to public like RoboCup to test how future robot products can be accepted by society,” says Asada.

“The Fukushima nuclear power plants will take multiple decades to decommission,” says Nakamura. “New technologies developed while decommissioning these plants must be retained for the future disasters and incidents. The international network and collaboration developed through these efforts among scientists and engineers are essential for this goal.”

Illustration by Phil Couzens

Perhaps nothing explains this shift better than the concept of “monozukuri.” If one were to break the word down into its roots, it directly translates as the “making of goods.” However, for many iconic Japanese manufacturers, monozukuri implies much more than the simple production of goods. In short, it refers to a chain of processes, both tangible (physical assembly) and intangible (organizational structure), before a product reaches a user. It also emphasizes a sense of artistry, dedication and craftsmanship. more importantly, monozukuri is a metaphor for the strength of industry that is an essential component of Japan’s economic spirit. In other words, it’s what makes Japanese products…well, Japanese.

However, these days there’s also a good chance that if you flip over a new purchase and read the small print, the three small words stamped into the plastic is more likely to read “Made in China.” Over the last few decades, the monozukuri culture that dominated the 1980s has given way to a more globalized marketplace. In recent years, calls for Japan to open its borders and seek growth overseas have grown more urgent as the nation has largely failed to shake off its economic malaise from the ‘90s. A recent survey by the Ministry of Economy, Trade and Industry (METI) recently revealed that 69 percent of Japanese manufacturing companies believed that production could be relocated outside of Japan at an increasing rate following the Great Eastern Japan Earthquake. And the reasons are becoming increasingly obvious.

NAVIGATING BLACKOUTS AND THE YEN

In the five months since the earthquake and subsequent tsunami, the yen has sharply appreciated against the dollar. As of this writing, the exchange rate hovered in the range of 77-80 yen against the dollar, and dropped as low as 76.30 yen on August 1. Given that many manufacturing companies drafted business plans and earnings projections on the assumption that the yen would trade at roughly 80 yen to the dollar, the stronger-than-expected yen creates a myriad of problems. Should the current rate remain unchanged, it would mean that manufacturers would not only lose profit once earnings are repatriated from overseas, but products made in Japan would be less price-competitive compared to exports from neighbors China and South Korea.

“This surge in value exceeds the capacity, at the corporate level, to address such drastic appreciation through cost-cutting and other measures,” says Toshiyuki Shiga, Chairman of the Japan Automobile Manufacturers Association. “A protracted continuation of these forex trends will put into jeopardy the ability to maintain the domestic foundations supporting Japan’s manufacturing craftsmanship.”

“In addition to the amount of appreciation, the rate of appreciation is also important,” adds Toyota Senior Managing Officer Takahiko Ijichi. “One year ago, the yen was at 93 yen to the U.S. dollar. this has appreciated 15 yen in just one year. this amounts to an almost 300,000 yen profit loss per 20,000 dollar vehicle in the U.S.”

On top of the skyrocketing yen, anxieties regarding Japan’s energy policy may be the last straw for many recovering companies contemplating moving production operations overseas. So far, experts agree that the latest data shows promising signs that Japanese industry is on its way to recovering losses caused by the earthquake by september or October. Japan logged a mere 1.6 percent decline in exports for June compared to a 10.3 percent decline reported in may. However, recovery has yet to be set in stone and that alone is enough to persuade some companies to hedge their risks.

“Companies are concerned whether the 15 percent reduction in energy use will, firstly, become permanent or will have to continue for a long time. Secondly, what happens if there’s a significant, continued degradation or loss of energy generation should Japan fail to restart its nuclear reactors?” points out Michael Auslin, Director of Japan Studies at the American Enterprise Institute. “Many companies simply do not want to deal with that uncertainty, and instead will choose to locate at least some of their productive capacity overseas.”

WEIGHING THE PROS AND CONS

Fears that Japanese companies might move production overseas have flared up periodically over the past two decades— most recently after the bubble burst in the early ‘90s and again after Lehman shock in 2009. Furthermore, while electricity shortages may be a relatively new challenge for Japanese firms, they are certainly no strangers to the difficulties presented by the strong yen.

So if these fears are, for the most part, well known and understood, why does it seem that more Japanese companies are deciding to offshore production at a faster rate than before?

“The disruption caused by the earthquake and tsunami has made manufacturers all over the world rethink the need for geographical diversification,” says William Grimes, Chair of the Department of International Relations at Boston University.

“Japanese manufacturing companies were increasingly moving their production overseas anyway, but the earthquake, tsunami, electricity cutbacks, radiation- related concerns, and the sharp rise of the yen are greatly accelerating that trend,” agrees Marie Anchordoguy, author of “Reprogramming Japan: The High Tech Crisis Under Communitarian Capitalism” and Professor at the Jackson School of International Studies.

Given these difficulties, manufacturers would appear to have a lot to gain by moving production bases overseas. After two decades of economic stagnation, Japan’s rapidly aging population and weak domestic demand have gradually pushed corporate Japanese to look outward for growth. To that end, offshoring production is an extremely attractive solution. Not only does it cut labor costs, it also gives companies a chance to directly enter prospective markets at a fraction of the cost.

“Japan has been very slow to negotiate free trade agreements with its major export markets. As a result, Japanese firms have an incentive to relocate abroad to gain better market access,” says David Weinstein, Associate Director of Columbia University’s Center for Japan Economics and Business.

“[If] Japanese companies are building small cars and trucks in India for that market, it makes a lot more sense to build plants in places like Chennai where labor costs are low, quality is fairly high and they can export right into the market,” agrees Auslin.

THE BIG PICTURE

But how might an accelerated hollowing out of industry affect the Japanese economy as a whole?

Though companies have been gradually offshoring for the past twenty years, manufacturing and industry still play a significant role in Japan’s economic growth plan. Aside from the traditional, big name manufacturers, there are also a number of smaller, more specialized firms that produce intermediary parts and products that feed into these larger companies. But outside of the global supply chain, these firms also provide thousands of jobs for Japan’s workforce. In the long run, an increase in companies shifting operations overseas may have serious consequences for employment prospects and growth.

“The question of offshoring is that of the Japanese labor market and on some level,keeping skills and brainpower in Japan,” Auslin explains. “You may have a situation where Japanese engineers and expats live where the jobs are with companies that offshore. Or they could be completely out of a job, which also means they’re going to be losing their skills, because the firms will be hiring locally.”

“Japanese companies and their shareholders will be among the winners,” says Anchordoguy. “the big losers will be Japanese people who will have diminished job prospects and incomes, and the Japanese economy, which will likely continue to grow at sluggish rates, undermining confidence and exacerbating Japan’s already high national debt.”

On the other hand, an accelerated hollowing out of industry need not be the harbinger of economic doom and gloom. While manufacturing plays a critical role in Japan’s export strategy, services have accounted for an increasing percentage of Japan’s GDP. Like the U.S., as the Japanese economy matured, dependence on intensive manufacturing has gradually given way to a more robust service industry.

“Exports are actually a relatively small part of total Japanese economic activity—16 to 18 percent in most recent years,” says Grimes. “manufacturing as a share of GDP has also declined considerably over the last three decades or so to about 20 percent, but it is still higher than in other developed economies. The services sector accounts for the largest share by far.”

Experts also agree that hollowing out is also likely to have an impact on recovery efforts in Tohoku. Recent figures from METI indicate that 93 percent of production bases damaged by the earthquake have already been restored, with 80 percent of those facilities at, or exceeding pre-quake levels of production.

“It could be a drag on Japanese recovery, but the scale of job outflow will be quite small compared to the scale of activity created by rebuilding tohoku and to a lesser extent, the return of manufacturing activity as companies rebuild their supply chains and face more favorable conditions with respect to electricity and transportation infrastructure,” says Grimes.

MADE IN JAPAN?

So, given the current market forces in play, is it realistic to imagine a day when the iconic “Made in Japan” identifier will be considered a relic of the past?

Left up to Toyota president Akio Toyoda, the answer would be a resounding “never.” Both Toyoda and Executive Vice President Atsushi Niimi have repeatedly stated that Japan’s top automaker will continue to produce at least 3 million units a year in Japan. To do so, Toyota has not only shifted its weekends to Thursdays and Fridays, to reduce electricity consumption during peak hours, it has also launched the “Kokoro Hakobu project” to make the tohoku region its third Japanese production center.

“This is not an all or nothing situation; we will work to keep a balance of overseas and domestic production,” said Ijichi. “The quality of Korean cars is improving, and so the only way we can compete is to have superior technology. To maintain our technological edge, we need to keep a 3 million-unit level of production in Japan.”

Nissan and Canon have also issued similar sentiments, reaffirming the well-worn tenets of monozukuri. Like Toyota, Nissan has also made a pledge to produce at least one million vehicles in Japan to maintain its competitive edge. Meanwhile, Canon Chief Financial Officer Toshizo Tanaka stated at a recent press conference that while the company lost 16.4 billion yen in the second quarter, it was unlikely that they would shift any more production overseas. He went on to explain that the company strictly produces lower-end, labor intensive goods at its overseas factories, while its higher-end products are primarily made in Japan.

But the pledges of a few fail to shed light on the confusing, and often mixed messages from their industry peers. A July 12 report in the Daily Yomiuri indicated that leading microchip maker renesas electronics Corp., which currently outsources 8 percent of its production operations, was contemplating accelerating plans to increase that number to 25 percent by 2013. However, a Renesas spokesperson stated that the company had no plans to move any production bases overseas, and declined to comment further on the topic.

And as Japanese automakers make public statements of loyalty, they have also made it clear that the strong yen has taken its toll. In July, Nissan announced an $8 billion investment to expand its manufacturing capacity in China. In the same month, toyota announced that it would invest more than 30 billion yen in India to double production capacity, aiming to make 300,000 cars locally by 2013. On the whole, Japanese firms have spent a record of 3 trillion yen in foreign M&A in the first half of 2011 alone, a 59 percent increase from the same period last year and a 14 percent increase from all M&A deals in 2010.

Experts also remain on the fence as to whether or not, and to what degree, an accelerated hollowing out of industry will occur in Japan over the next year. “Obviously not everyone is going to move abroad. the smaller companies are not able to—they can’t afford it. For big manufacturers like Toyota, it would be very difficult to completely forsake production in Japan because of the tradition and history,” says Auslin. “I think we would have to wait about a year to see. but I don’t think the companies are going to hang on much longer than that because they’re going to have to make a decision, one way or the other.”

“Given the earthquake and its aftermath, as well as the high yen, an acceleration of ‘hollowing out’ is inevitable,” says Anchordoguy. “I don’t see any way to prevent it. to survive, Japanese manufacturing firms need to operate where costs are lower, energy supply is assured, and where they can get an ample supply of young labor.”

STRIKING A BALANCE

Japan can ill afford to ignore public statements from major Japanese companies echoing the same message: the yen is too strong, uncertainty is too high, and it’s too difficult for us to handle this on our own.

Five months after the earthquake, the government’s comprehensive strategy for the rebuilding of Japan’s manufacturing infrastructure remains unclear to many observers. Currently, 35 of Japan’s 54 nuclear reactors remain offline, and power crunch concerns have now expanded to the Kansai region. Political deadlock in Parliament may also hamper legislative efforts to create a third, extra budget for reconstruction. Given this heightened sense of uncertainty, even the most seasoned firms are asking new questions surrounding their manufacturing futures in Japan.

But despite the concern from industry, the government has taken steps toward significant action. metI’s Industrial structure Council has proposed a number of subsidies to entice companies to remain in Japan. the package would include subsidies to companies that bolster their disaster preparedness by upgrading factories, and dispersing production within Japan as opposed to moving them abroad. Among the government’s other options such as corporate tax breaks, creating special economic zones up north and engaging in free trade agreements, most domestic market analysts agree that the government can also take this chance to encourage innovation and entrepreneurship.

“We are moving into an era in which what is good for Toyota or Honda is not necessarily good for Japan,” explains Anchordoguy. “To have a healthy economy over the long run, Japan needs to encourage risk-taking to create new businesses and industries to replace the many manufacturing businesses that are moving offshore, and it needs to stop propping up firms that are not economically viable over the long run.”

The consensus appears to be, if Japanese industry is to thrive, both the government and individual manufacturers must also find a way to strike a balance between seizing international opportunities and sharpening its current economic strengths.

“The basic idea is that you want to expand the business base, and not simply clump it to one area or another,” says Auslin. “Innovation is extraordinarily important, entrepreneurship is important, but manufacturing is also important because it’s skilled, its high wage and Japanese quality is very high—you don’t want to lose that in the global supply chain.”

Photography by Jeremy Sutton-Hibbert

One problem is that we look down on developing countries. We should be willing to learn from companies in these countries if they are better than us. But we lack the willingness to learn because we have been so successful before. That holds true for managers and employees alike.

Another problem is that Japanese business people and companies are lacking in individuality. too many people think that everyone must be the same. That’s a basic fault.

Finally, Japanese companies seem to have their eyes in the rearview mirror. They have become introspective. I think we should get back to something more like we were at the end of the war when Japan rose to prominence from a situation in which it had nothing. (It was during this period that Fast retailing got started, in 1949.)

We’ve lost that spirit, maybe because we are under the illusion that we are rich and superior. But many countries are just as rich, and in Japan, income has stagnated for many people for a decade or more. Japan is still very comfortable to live in, if you are Japanese. But there’s a difference between being comfortable and being viable. We are gradually losing our viability.

In short, Japan has been utterly defeated as an economy. We’re losing the economic game. So why are we being so foolish? Or, more precisely, why aren’t we learning from our mistakes?

Learning from mistakes is something that Uniqlo has had to do—several times, unfortunately.

We opened our first store outside Japan in 2001, in London. And we failed spectacularly. We quickly opened 21 outlets in britain—and shut down 16 of them by 2003. In retrospect, that was probably good, because we learned so much. Our big mistake was to try to do things the British way. We never capitalized on our strengths.

For example, we let Uniqlo’s UK president create a compartmentalized management team, with area managers, store managers, assistant store managers, and then the sales staff. Store managers only spoke with other store managers. We don’t have that kind of class system in Japan. Our organizations are flat.

China, the second overseas market we entered, was a failure at first, too. We faltered in China because we went too far in adapting to China. Per capita income is low—about 5 percent of Japan’s—so we figured we should sell at much lower prices. That was a mistake. Uniqlo has a Japanese identity; no one wanted a Chinese Uniqlo.

Vegetables were a disaster too. We saw food distribution as a backward sector, so we went into partnership with a food group, Ryokuken, in 2002. but vegetables are not an industrial product; you don’t know exactly when they will be ready or in what volume. We eventually understood that it would be impossible to succeed unless we ran our own farms, and we did not want to be farmers. After two years, we shut operations down.

The important thing is not so much that we failed in these instances, but that we learned and eventually succeeded. In Britain, we now have more than a dozen stores, including a flagship on London’s Oxford street, and are doing well. China is our fastest-growing market, with almost 100 stores. By 2020, we hope to have more stores in China than in Japan (1,000 plus). Uniqlo’s international operations are growing fast. We now have stores in 10 countries, with Thailand, Brazil and India in our sights. By 2015, most of our employees could be outside Japan.

Failures are always unpleasant; from the right perspective, though, they can be useful. Our travails in Britain and China fostered resilience and led us to understand three important things. First, to create the best possible Uniqlo in other countries, we had to use the best aspects of our own organization. Second, while globalization is difficult, it is also essential. And third, to succeed outside Japan requires understanding other markets on their own terms.

In short, Uniqlo has to be both Japanese and global. the analogy to Japan as a whole is obvious.

One thing Japan has to get rid of is the idea that things are one way here and different everywhere else. The Japanese are really strong at home, and incredibly weak away from home. We need Japanese who are strong away, or who don’t distinguish between home and away. We’re trying to build this idea into Uniqlo’s culture. For example, English is spoken at business meetings with foreigners, and we want all emails to be in english in a few years.

Most ordinary Japanese industries are bound up by government regulation, or by agreements (tacit or explicit) within the industry. The idea is to create a union or association or something and then use it to start imposing regulation and preventing competition. I hate that sort of approach. We do our best to avoid the government industrial structures so typical of much of the Japanese economy. These are meant to be safety nets; in fact, they are shackles on global competitiveness.

My advice for young Japanese is simple: get out of Japan. One of our weaknesses as Japanese is our ineptness at communicating with other cultures. Even people who speak english well are closed off psychologically. They don’t speak frankly like I do. there’s this uniquely Japanese standoffishness, this hesitancy to become too involved. And it’s detrimental to globalization.

Tadashi Yanai is the founder and president of Fast Retailing, the parent company of Uniqlo

If we give it everything we’ve got and start to move in the right direction, I’m confident that we will succeed. Even if we experience failure, we can pick ourselves up and try again. That’s what Uniqlo did— and that is what Japan can do.

What started as a small operation by the Australian and New Zealand Chamber of Commerce in Japan to help foreign companies enter the Japanese market, is now one of Tokyo’s best kept secrets for supporting foreign organizations’ business expansion in Japan and fostering the career development of foreign and Japanese young business professionals.

Since its inauguration in 1993, 848 participants from 45 countries have gone through the program. They have produced 159 business plans for JMEC project clients, some of which have become repeat JMEC clients. NRW Japan K.K., the Economic Development Agency of the German Federal State of North Rhine-Westphalia, for example, was a project client for three consecutive years in JMEC 13, 14 and 15.

JMEC participants are often among the most international in Tokyo. This year’s 51 participants came from 20 countries, including the U.S., Canada, Australia and New Zealand, as well as various European and Asian nations.

The 18 women and 33 men, average age 33, included not only sales and marketing professionals, accountants, recruiters, engineers and IT specialists, but also teachers, an architect and a designer. Most work for private companies or public organizations, but some already run their own business.

Holders of a bachelor’s degree with at least two years of work experience and good working English, may apply to join the JMEC program. Some participants this year, however, held higher qualifications. There were eight master’s degrees, three MBA’s and one Ph.D. At a participation cost of 125,000 yen, with lectures taking place on Saturdays, this is a time-and cost-efficient way to level up one’s career in Tokyo. Over the years, the number of Japanese applicants has been increasing. Forty-five percent of participants in JMEC 17 were Japanese.

Some of the JMEC participants are employees at JMEC sponsoring companies. Sending up to seven employees at no cost, depending on the level of sponsorship, is part of a sponsorship deal for JMEC’s 35 corporate sponsors. Hewlett-Packard Japan, a JMEC Platinum Sponsor for some years, has been using this career development option for their staff on a regular basis.

The seven-month JMEC training consists of a series of lectures and workshops followed by a teamwork phase when participants in groups of five or six research and write a professional business plan for an assigned JMEC project client. The document is submitted to the project client and the JMEC judges at the end of April, which is followed by oral presentations to both audiences. The judges then determine the winners of the competition, who are announced at the annual Awards Ceremony at the beginning of June.

“The JMEC process of lectures, team interaction, building a business plan and presenting in English offers a fantastic way to provide more opportunities to internationalize Japanese staff at ACCJ member companies,” says Thomas Whitson, a partner in Transaction Services at KPMG FAS Co., Ltd., and also Chairman of the JMEC Executive Committee.

Each year there are about 10 project clients, including SMEs, global corporations and NPOs. This year’s clients included businesses as diverse as multinational diversified technology company Sumitomo 3M Ltd., start-up Zava Holdings K.K., design and construction management services provider Lend Lease Japan, telecommunications provider PBXL and childhood-cancer charity The Tyler Foundation. Other project clients were Hafele Japan K.K., ERCO Lighting Ltd., TÜV SÜD Japan Ltd. and Honka Japan Inc.

Dr. Andreas Stange, president and CEO of TÜV SÜD Japan Ltd., said, “We experienced a highly motivated team, which brought us valuable insights into the Japanese market place.”

Mark Ferris, co-founder of The Tyler Foundation, said, “Our JMEC team’s business plan provided a lot of well-researched and carefully thought out information. Many suggestions we had already considered, but to see them presented by an external party, backed up by statistics and logic, was a powerful way to help us better understand our priorities.”

Jim Weisser, co-founder and CEO of PBXL K.K., agrees, “I strongly recommend JMEC to other organizations looking at expanding in the Japanese market. We received a mix of insights that we could not have found internally, as well as a ready-for-production business plan.”

“Our general impression was that the clients did get some very good ideas and good value,” says Rike Wootten, president of K.K. Gotairiku Partners, and one of three JMEC judges.

This year’s JMEC teams spent on average 1,400 hours on their plans, but four teams each spent more than 1,600 hours, with one close to 2,000 hours. JMEC participants and nearly 200 invited guests waited in anticipation for the announcement of the winners JMEC 17 at the annual Awards Ceremony on June 10 at the Tokyo American Club.

This year’s first place went to Team 8 who wrote a business plan for Sumitomo 3M Ltd.; second place was awarded to Team 3 and their business plan for TÜV SÜD Japan Ltd., and in third place came Team 4’s plan for Honka Japan Inc.

Mary Fidler, born and raised in Washington State, is a member of the first-prize winning team whose members each won an HP laptop and a one-year membership to the ACCJ, along with free admission to ACCJ events.

“We all felt very positive after the presentation to the judges, but I also knew that the competition was very strong. My expectation was to get as much out of the program as possible. Winning is pure icing on the cake,” says Fidler.

According to Fidler, her motivations for participating in JMEC were to broaden her knowledge of business practices in general and to gain more specific knowledge of business practices in Japan, as well as the opportunity to meet seasoned entrepreneurs and people like herself who start their own companies.

Fidler, who is a jewelry designer and the director of Mokumedo, a jewelry brand that incorporates ancient Japanese metal techniques with a modern design, now hopes to take her business to the next level.

“I joined JMEC because I wanted to learn how to write a business plan for the company I want to launch. Now I feel that I have a good grasp of all the aspects required to produce a plan so that I can move my business forward,” she adds.

Fidler’s four teammates have not only become new friends for life, but also her new business advisors.

“When you go through a competition like this together, the sense of accomplishment as a team is enormous. I have already warned my teammates that they will have to go over the business plan that I will create for my company and everyone seems eager to help me,” Fidler said.

Kansai City native Nic Swindler and his team won third-place and a two-night stay at any location of Small Luxury Hotels of the World. Swindler moved from the U.S. to Japan in 2008 because he wanted to pursue an international career and use his Japanese. He works at the recruitment firm The Ingenium Group.

Asked about what he took away from JMEC, Swindler says new perspectives on how foreign companies in Japan operate and an understanding of the existing market potentials in Japan despite the economic turndown.

“Participating in JMEC was probably my best decision of 2010. I am sure that I will reap the rewards from the lessons learned and the friends made in years to come,” said Swindler.

“The speakers who joined us on several occasions really sparked some entrepreneurial interests which I never knew existed. I now see that business leaders’ success—and by extension that of companies—is due largely to focus and effort. A good business plan can give you focus, but without a concerted effort to execute the plan it is just a bunch of paper.”

British Chamber of Commerce in Japan President Philip T. Gibb, a JMEC judge, said, “The standard of the business plans and quality of the information and research this year was extremely high. The closeness of the final scores is testament to the effort put in by all participants.”

In his speech at the Awards Ceremony, judge Wootten revealed that the competition was very close, with a difference of just 1/3 of a percent between 1st and 2nd places, and 2nd and 3rd places. And the difference between 3rd and 4th places, in other words winning a prize or not, was just 1.27 percent.

For the third year in a row, the ACCJ, a JMEC sponsor, kindly donated prizes, such as memberships and event vouchers, to each member of the top three teams. At a reception, ACCJ President Mike Alfant introduced the winners to the benefits of an ACCJ membership and urged them to make good use of their prize.

“There was certainly excitement in the room. Not only had they won the JMEC competition, but they now have the opportunity to further their business networking by being part of such a valuable organization,” said Laura Loy, JMEC 17 Program Director.

“I want to take President Mike Alfant’s words to heart and really participate in as many events as possible to meet people and to get the most out of the membership. I enjoy active participation and hope to take part in some committee work,” said Fidler.

The ACCJ is one of 16 foreign chambers of commerce in Japan that support the JMEC program and, thereby, take advantage of the benefits that JMEC offers, including marketing and promotional opportunities to the wide JMEC network and the Tokyo business community at large.

This year’s JMEC participants were forced to postpone writing their business plans when the earthquake and tsunami struck northeast Japan on March 11. In an unprecedented move, the JMEC Executive Committee which consists of one representative from each supporting chamber decided to extend the deadline for handing in the final plans by two weeks.

“We are very proud of everyone who successfully completed the program this year. The events of 3/11 were a unique challenge for the teams, but after a little time off to attend to personal matters, they got themselves back on track,” said Loy.

Typically, proceeds from the raffle held at the annual JMEC Awards Ceremony are used for running the JMEC operation. However, this year it was decided to donate all raffle proceeds to Sendai-based Tohoku New Business Conference (TNB) to help earthquake-effected SMEs in Fukushima, Miyagi and Iwate prefectures.

Due to the generous donations by JMEC corporate sponsors and the kind individuals who bought raffle tickets at the event, JMEC was able to raise 575,000 yen. TNB is part of a national network of non-profit business organizations which, since 1988, has helped companies with business strategies, advice, surveys, information and events.

“JMEC is very pleased to donate the proceeds of its raffle to this very good cause that embodies the spirit of JMEC, which is to help mostly small to mid-sized companies thrive in Japan,” said Loy.

The ACCJ appeal is a natural extension of the ACCJ’s long history of charitable activities and community support, both as an organization and through its individual members. The ACCJ’s Community Service Fund has been making disbursements to the needy since 1995. The ACCJ acts as a leader in corporate social responsibility, both by encouraging its members to be responsible participants in their communities and by engaging in philanthropic activities that benefit those in need.

Tasked with distributing the funds raised by the 2011 Tohoku Earthquake Disaster Appeal, the ACCJ’s Community Service Advisory Council (CSAC) has been operating based on 6 key principles:

• Donations should be direct; not go through third parties such as the Red Cross.

• Donations should go directly to those most affected and in need of support.

•Donations should be made to recipients selected from a large variety of worthy causes.

• Donations should be made to recipients that are all-volunteer programs; i.e., programs with no overheads so that all funds go directly to the designated purpose.

• Donations should support specific projects that the ACCJ can be identified with and that could not be carried out without the support from the ACCJ.

• Donations will not be made to cover operating budgets of organizations or in a way that would cause the ACCJ donation to lose its identity.
Following these principles naturally led CSAC to work with NPOs/NGOs and local governments to identify the most impactful uses for the funds raised. One of the lessons learned from the 1995 Hanshin Earthquake was that many government-related organizations are constrained by laws and regulations, often making them slow to respond and resulting in certain needs going unmet. In response to this, many NPOs/NGOs have come into existence. These organizations are often quite small, with low administrative overheads. They are often better equipped to provide rapid response as well as flexible localized relief and recovery programs.

While the fund-raising continues toward the 100 million yen goal, the ACCJ has begun to distribute the funds already raised. Says CSAC member and long-time ACCJ leader, Tom Jordan, “It has been surprisingly difficult to give this money away in a manner that meets our stated principles.”

Nonetheless, the first 27.3 million yen has now been distributed, with further distributions expected soon as CSAC continues to review proposals and select suitable recipients.

The recipients of these first distributions are groups and causes that are consistent with the ACCJ’s long range philanthropic goals of supporting the sound health, education and welfare of children and generally promoting good health in threatened communities. Additionally, funds have gone to support one of the ACCJ’s stated goals for 2011: to recognize the important role of entrepreneurship in driving growth for the Japanese economy by supporting and promoting the success of entrepreneurs.

h2>Supporting Children’s Welfare & Education

Soma City Scholarship for Orphans and Victims of the Disaster
Before March 11, Soma city in Fukushima Prefecture, located some 40 kilometers north of the stricken nuclear power plant, was a port community with an economy based on the fisheries industry and fruit production. This city of 37,000 lost 459 of its citizens in the disaster. The tsunami that hit Soma was more than 7 meters high, reaching as far as 4 kilometers inland in places and destroying 4,682 homes. Now its citizens are struggling to clean up, rebuild and heal.

Especially affected are the 44 children who lost one or both parents (the UNICEF definition for orphan). The city of Soma has established a scholarship fund to provide these orphans with money for their academic and living expenses until the age of 18. The program also provides support to the orphans by a team of clinical psychotherapists and health nurses. The ACCJ funds provided to date will ensure scholarships of 30,000 yen per month for 3 of the orphans.

Children’s Musical Instruments for Schools in Fukushima City
While Fukushima City was not inundated by the tsunami’s water, there was substantial damage from the earthquake itself. Working with Masahiro Sato of the Fukushima City Council, the ACCJ has established a program to facilitate the recovery of music programs in two local schools.
The Noda Primary School Marching Band has been nationally recognized for over a decade. Many of its members lost their instruments in the disaster. The ACCJ’s support will allow them to get new instruments. Additionally, a grand piano will be replaced at the Hokushin Junior High School in Fukushima City.

Through restoring these school music programs, the ACCJ funds will contribute to the ability of children traumatized by the disaster to return to normalcy. Says Tom Jordan, “We believe that this is a wonderful project since music and musical activities will help the children recover from their recent traumatic experience.”

YMCA
The ACCJ, through its Community Service Fund, has long been a supporter of the Tokyo-based activities of YMCA Japan, many of which relate to children’s welfare. After the March 11 disaster, YMCA volunteers have engaged in a wide range of support activities in the disaster zone, including assistance with clean up efforts as well as programs for the disaster victims in evacuation centers.
The ACCJ funds will be used in a special YMCA project providing grief counseling and therapeutic assistance to children evacuees. Among the types of therapeutic activities organized by the YMCA are day camping outside the disaster zone, swimming outings in Sendai and magic shows in evacuation centers. The YMCA will add other activities as the program develops and in accordance with the needs of the affected children.

Kids Earth Fund
The Kids Earth Fund, an NPO established in 1988 to promote children’s welfare through art therapy and psychological counseling, is working with children in the devastated areas to overcome trauma and related anxieties. Volunteers travel to evacuation centers, hospitals and schools to help, instruct and interact with children, using art therapy to bring hope and a ray of sunshine into their lives. The ACCJ’s funds will help to acquire additional art-related supplies and provide other logistical support to the art therapy program in the disaster zone.

Promoting sound medical care

Nippon Foundation
After the earthquake/tsunami, many expecting and nursing mothers in the Tohoku area found themselves living in temporary evacuation shelters or even in their cars. Often these living conditions are unhealthy, especially for pregnant women, resulting in increased risk of miscarriage and delivery complications. The ACCJ’s donation through the Nippon Foundation will allow 50 pregnant evacuees to deliver their babies in hospitals and remain there for 5 days of post-natal care. Providing this safe and clean environment for post-natal care for mothers and their newborns will help these new lives get the best possible start in spite of adverse conditions.

The ACCJ is pleased to have this opportunity to work through the Nippon Foundation, which emphasizes education, social welfare and public health as a means to promote development both in Japan and around the world.

Otsuchi Town Medical Facilities Support
The Sanriku coast of Iwate Prefecture bore the worst of the tsunami’s furor. Several communities along that coast have been so badly destroyed that it is currently unknown whether they will even be able to rebuild. Of the 21 hospitals administered by the Iwate Medical Bureau, three that are situated in coastal areas have been heavily damaged and are not currently operational. One of them is the Otsuchi Hospital.

In the immediate aftermath of the disaster, Otsuchi Town in Iwate Prefecture was identified by the media as one of the worst hit communities. Struck by the tsunami just half an hour after the earthquake, the town lost 10 percent of its population, as well as most of its buildings. Working through a project launched by the Iryo Governance Gakkai (Medical Governance Academic Society), ACCJ funds are being used to restore Otsuchi Hospital and hire doctors to replace those who perished in the disaster. By ensuring the availability of medical care for the people of Otsuchi Town, the ACCJ is helping to facilitate the town’s recovery.

Supporting Entrepreneurs

ETIC’s Support for Disaster Recovery Leaders Project
On June 20, the ACCJ Board of Governors met with members of the Junior Chamber of Commerce in Iwanuma, near Sendai, and heard first-hand some of the difficulties being faced by young businessmen and women trying to stay in business while recovering from the disaster and in many cases coping with deep personal tragedy. Even just listening to their stories seemed to help them, but it is clear there is more that could be done.

In ordinary times, Entrepreneurial Training for Innovative Communities (ETIC) provides training and support for young social and business entrepreneurs. In response to the Tohoku disaster, ETIC launched two initiatives under their Support for Disaster Recovery Leaders Project.

One initiative is to send skilled entrepreneurs into the disaster zone to assist in the management and operation of evacuation shelters, improving the efficiency and efficacy of the shelters in providing evacuees with a dignified and healthy environment.

The second initiative is to help entrepreneurs and small/medium sized entities (SMEs) destroyed or severely affected by the disaster to get back on their feet by providing financial grants and by dispatching teams of experienced volunteer managers into the devastated areas to provide training, human resources support, mentoring and coaching. The ACCJ’s donation is supporting this initiative, which is particularly important as a means to encourage younger people to remain in the disaster zone and build productive lives there, rather than abandoning the region completely.

Future Disbursements from the Funds Raised

The CSAC and ACCJ staff have spent long hours identifying needs in the disaster zone as well as finding ways to meet those needs. They continue to review proposals from local governments as well as NPOs/NGOs to find the best possible uses for the remaining proceeds of the 2011 Tohoku Earthquake Disaster Appeal. They welcome ideas and suggestions from ACCJ members, which can be directed to Masafumi Miyata in the ACCJ office (mmiyata@accj.or.jp).

If you haven’t yet contributed to the 2011 Tohoku Earthquake Disaster Appeal, or would like to make an additional contribution, you now have the option of making a contribution in Japan, which is not tax deductible, or making a contribution through the United States which will be tax deductible in the United States.

Make a pledge to be paid through your ACCJ Member Account or by credit card by contacting helpjapan@accj.or.jp.

To donate via check, please make your check out to Friends of the American School in Japan, Inc., noting (ACCJ/ASIJ Japan Recovery Fund) on the check and sending it to:

Friends of the American School in Japan, Inc.
c/o International School Services
15 Roszel Road, Princeton, NJ 08540
Attn: Ms. Deirdre Simon, Director of Accounting
Phone: (609) 452-0990 Ext. 330

To donate via bank transfer (be sure to note  “ACCJ/ASIJ Japan Recovery Fund”) on your bank transfer and include your name):

Bank: TD Bank N.A.
Address: 3470 Quakerbridge Road, Mercerville, NJ 08619
Phone: (609) 689-6300
Routing Number: 031201360
Account Number: 7856737254
Account Name: Friends of the American School in Japan, Inc.

ACCJ Member Companies have undertaken a number of individual company initiatives to help out with the earthquake recovery. Engaging in meaningful volunteer work in Tohoku, or even nearby in hard-hit Chiba, has served as an ideal opportunity for a number of companies to establish or expand their CSR (Corporate Social Responsibility) programs while boosting employee morale and teambuilding in the process.

In the big picture, American companies have used this event as an opportunity to deepen U.S.-Japanese relations by lending a helping hand. This is a new frontier of CSR in Japan that may very well serve to stimulate volunteerism on a broader scale. The collective sentiment has been centered on the notion that local business leaders will mobilize larger domestic and international support and spread volunteerism to rebuild and go forward.

The devastation in Tohoku is beyond imagination. Driving along the coast in Ishinomaki and Onagawa, it immediately becomes clear that everything is in total ruins as far as the eye can see. Estimates by the Japanese Prime Minister’s Cabinet as of June 25, 2011 put the damage at $500 billion, making this the most costly disaster on record. In the city of Ishinomaki alone (population 126,000), 20,000 homes were totally destroyed and another 10,000 were damaged. In the aftermath of the disaster, 300,000 people were displaced from their homes all over the eastern coast of Japan. Thousands of people are still in evacuation centers. The scale of this disaster is so huge that it’s going to take the combined efforts of the government, volunteers and the private sector to begin the recovery process.

So what have ACCJ member companies been doing, and what needs to be done? Below are a few of the activities ACCJ member companies are undertaking, listed alphabetically by company. It is not possible at this point to provide a comprehensive list of all ACCJ companies and their activities, since we do not know what everyone is doing in exhaustive detail, but the following is an attempt to scratch the surface of what’s happening.

AMERICAN AIRLINES

American Airlines Japan is supporting an innovative group called “Tohoku Relief Homestay” which sends over 300 students from Tohoku to the U.S., Australia and New Zealand. American Airlines is offering special travel arrangements for those who are going to Dallas and Los Angeles. Members of American Airlines have also volunteered in Ishinomaki, and the company is planning an employee volunteer trip to Ishinomaki.

Together with Japan Airlines, American Airlines hosted a charity bazaar in late May and donated all proceeds to Chuo Kyodo Bokin Kai (Central Community Chest of Japan). There will also be a charity concert with volunteer performers from both airlines in mid July. One employee noted, “Our Bazaar was held more than two months after 3/11. We weren’t sure how much participation we could expect as many people had already made their donations and/or done their portion of contributions. But the reaction was good and we learned that people still cared and wanted to contribute.”

BECTON DICKINSON

Nippon Becton Dickinson, “BD,” a medical device and diagnostics company with a plant and distribution center located in Fukushima City, has set up a Soup Kitchen to provide hot meal service (takidashi) for the nearly 600 evacuees from the 20 km exclusion zone who continue to live with little hope of ever returning home. In addition, BD provides two to five paid days a year for volunteer activities. While BD has long provided medical diagnostic services and medical device product donations as part of their disaster relief efforts, providing food services was something completely new for BD volunteers.

However, what volunteers lacked in takidashi experience, they made up for in enthusiasm, with the numbers of volunteers growing every week. One BD associate summed up his experience well when he said, “I really felt the pain of the evacuees and when they told me that our food tasted so good, I also felt proud of myself and honestly believed that my cooking was not as bad as I thought.”

BLOOMBERG L.P.

Bloomberg L.P. arranged three trips to send 45 volunteers to work in the tsunami affected coastal district of Iwate Prefecture. They spent nine days cleaning up the mud and debris scattered across the city of Rikuzentakada. Minoru Toyoda, a Bloomberg LP volunteer commented, “We worked tirelessly over the weekend, leaving late Friday night on crammed buses, returning early Monday morning, to improve the conditions in those areas affected by the earthquake and tsunami. Volunteering with the Tohoku Disaster Relief was an incredible experience I won’t forget. More than four thousand people have been confirmed dead and two thousand still missing in Rikuzentakada alone and there remains a lot of rubble and mud in these areas. There is still a need for much more help and everyone should consider volunteering.”

Bloomberg launched a dedicated disaster relief matching program globally and matched employee donations yen for yen on top of their corporate donations to charities, in addition to raising funds for donations for the volunteer organization their volunteers joined in Iwate, through the “Bloomberg Dollars for Your Hours” program. In Tokyo, Bloomberg arranged a donation drive in the office and volunteers helped the charity Second Harvest, who packed donated items to be delivered to the affected areas each day.  Finally, Bloomberg sponsored the Japan Contemporary Dance Network to send 40 artist groups to give over 270 dance workshops to the victims in Tohoku, to give elderly and physically challenged evacuees the chance to move their bodies and to relax and interact with others, while giving children an opportunity to transform their energy into something positive and exciting.

BOEING

On the day of the earthquake, members of Boeing’s Tokyo office provided food and drink to some of the hundreds of people who were stranded near Tokyo station and taking refuge from the cold in the lobby of their building. In the days immediately following, The Boeing Company donated  $1 million toward relief and recovery, and Boeing employees around the world contributed an additional $1 million. Since then, Boeing employees have sent packages of school supplies and toy airplanes to evacuee shelters in the Tohoku area, visited the largest evacuee center in Kazo City, Saitama Prefecture to make and fly airplanes with children staying there and traveled to Iwanuma (Miyagi Prefecture) to help with the clean-up and recovery effort. Francois Pierin of Boeing 787 Field Operations in Nagoya noted, “Preparing for the trip to Iwanuma was a real challenge. Our number one focus was how to ensure that our presence was a help to—not put a burden on—the people of the region. In the end, we decided to bring all of our food for five days, our own sleeping accommodations (in the form of a rented camper van), and our own tools.”

Bloomberg employees on-the-ground in Rikuzentakada

Jared Sisk of Boeing 787 Field Operations in Nagoya added, “Through our trip to Iwanuma, we were really humbled by the strong sense of interdependence and community among the people of the Tohoku region as well as the visiting volunteers. The destruction was overwhelming, but our experience with such a dignified and determined group of people made us feel privileged to live and work in this country.”

FEDEX EXPRESS

FedEx Corporation committed $1 million in cash and in-kind transportation to support earthquake and tsunami relief efforts in Japan. FedEx also lent transportation and logistics expertise to support several agencies such as The American Red Cross, The Salvation Army and JEN (an NGO in Japan focused on reconstruction and other post-disaster assistance) in providing emergency and humanitarian relief to the earthquake and tsunami victims. In Japan, FedEx delivered approximately 30,000 relief supplies including toilet paper, blankets, snacks, bottled waters, instant ramen and flashlights to employees in affected areas and people in an evacuation shelter in Iwate prefecture immediately after the earthquake. Masamichi Ujiie, regional vice president, North Pacific, FedEx Express noted, “We hope that reconstruction of the affected areas is completed soon, and FedEx continues to lend support to the recovery and reconstruction efforts.”

FedEx Japan also arranged two trips in which 75 volunteers worked in the tsunami-affected coastal district of Ishinomaki City in cooperation with long-term partner, JEN. The volunteers cleaned up mud and debris from houses and buildings. Masaya Akitsu, Manager, Operations said, “In light of the scale of the devastation, we could only help in a small way. I believe if people from across Japan and the world lend a helping hand, these small deeds will add up to something big. Nothing you can read will prepare you for the experience. It is important to convey to others what you have seen and felt, and the suffering that is taking place. I hope these small deeds add up for the people in Tohoku trying to get back on their feet.”  FedEx Japan, with their sponsored Olympic athlete, Mr. Koji Murofushi in Miyagi prefecture, also delivered FedEx gifts to people in an Ishinomaki City evacuation shelter and taught them a physical exercise to help prevent deep-vein thrombosis. Receiving a visit from an Olympic medalist raised the morale of Ishinomaki evacuees considerably.

MICROSOFT

Microsoft Japan, right from the day after the disaster, worked with its partner companies and NPO organizations to provide PCs to disaster areas for the purposes of communication and information collaboration. Most in Tokyo will recall that cell phone communications were overloaded and the need for sharing information over the Internet became ever more vital. In order to support this ICT industry-wide effort and also work with the NPO organizations involved, Microsoft Japan volunteers have been and continue to go to the Tohoku area to support the training of the utilization of PCs and the collaboration benefits it provides. Microsoft also donated $2 million to relief efforts in Tohoku.

MORGAN STANLEY

Immediately after the disaster, Morgan Stanley pledged $1 million and launched a charity appeal among its employees, both in Japan and worldwide, additionally matching the employee pledges for a total of $234 million. These funds were contributed mainly to the Japanese Red Cross Society. Morgan Stanley employees also organized a food drive at Yebisu Garden Place, collecting 1.5 tons of non-perishable food items for use by Second Harvest Japan. Another organization supported by Morgan Stanley is ARTS for HOPE, which provides art therapy to victims of the disaster. Morgan Stanley employees donated sewing materials and assembled 20 craft kits for use in shelters in the disaster zone, as well as 100 sets of crayons, paints and sketchbooks for children in a small shelter in Shichigahama and elementary schools in Soma and Minami-soma.

Walmart’s Ayumi Ando leading a volunteer team at Peace Boat

Additionally, Morgan Stanley, which has a long and robust history of volunteerism and community support in Japan, is providing its employees with up to five paid days off before March 31, 2012 to volunteer in Tohoku. A number of Morgan Stanley employees have already volunteered. Thirty employees recently traveled to Ishinomaki on a Peace Boat-coordinated visit to spend a day and a half cleaning up mud-covered debris in houses and restoring drainage facilities. Another 26 employees, family and friends (including volunteers from another ACCJ member, Freshfields) chartered their own bus to Ishinomaki in June and were dispatched by the Ishinomaki Volunteer Center to help clean out a small private hospital that had been inundated by the tsunami. Even as early as March, one employee personally traveled to Ishinomaki to facilitate the construction of three public baths, and another worked with friends to deliver food and other aid to the citizens of Minami-soma.

OAK LAWN MARKETING

Oak Lawn Marketing established the OLM Genki Japan Fund, initially seeding it with about $1.85 million from the company and from it its senior executive shareholders, to support the relief efforts of NPOs working in Tohoku. Additionally, they received over $400,000 from their Product Partners from outside Japan. Oak Lawn Marketing has also joined forces with Hope International Development Agency, Japan, an NPO they have been sponsoring since 2002 and to whom they have entrusted the management of the Genki Fund. In the initial stages of the disaster, they teamed up with The Japan Helicopters Association and Global Medic to provide immediate relief in the devastated areas. To date, this coalition has delivered over 500 tons of aid directly to areas in need. Within two weeks of the disaster, OLM CEO Harry Hill along with Lowell Sheppard the Executive Director of HOPE-JP flew over the affected areas and found that the most urgent need was for logistical support to get items such as water, blankets, mattresses, diapers, baby formula, sanitary products, and medicines to people in shelters in more remote areas. Often there are goods stored in storage depots near the affected areas, but the last mile of getting these goods to the people who need them is often the most difficult, so initially the focus was on supplementing help to these areas until the government was able to take over.

The Genki Japan Fund purchased two 2-ton trucks to transport items and have established their own warehouse depot in the area. They gathered volunteers, drivers and helicopter pilots to transport items to established bases in the affected area and then arranged for local transport to get the goods directly to shelters in remote areas.  Now the focus of the fund is rebirth of the affected areas. Five development officers have been placed on the ground to evaluate mini projects with budgets between 1-10 million yen that will help families or communities rebuild their businesses and return to self-reliance. Harry Hill, Oak Lawn Marketing’s CEO commented, “OLM’s vision of ‘Enriching Lifestyles Worldwide’ is one we can achieve for Tohoku. Our company is built around the concept of the ‘Before and After.’ We identify a problem and we help our customer solve that problem. We hope that in a micro way we can achieve dramatic change in the Tohoku region.”

WALMART

Walmart has donated over $5 million including cash, food, water, daily necessities, general merchandise, and clothing to Tohoku since March 11, partnering with governments and NPOs on the ground so that the money and goods can go quickly to earthquake victims. Walmart has also been actively outfitting temporary housing (kasetsu jutaku) that is being built in Onagawa, by providing household goods such as dishes, bedding, etc. to help earthquake victims who have literally lost everything.

Having volunteered in Ishinomaki, Walmart Japan Vice President Ken Iida notes, “Lots of work still remains that requires manual labor such as gutter clean-up, finding out the needs of local residents, supporting those in temporary housing, etc. Thus, we need to keep sending more resources to Tohoku from all over the world. In order to do this, we need to lower the psychological and financial hurdle to participate in volunteering. The value of human presence in the face of disaster cannot be emphasized enough.”

PUTTING THE TOHOKU DISASTER INTO PERSPECTIVE FOR AMERICANS

To provide perspective for American readers, the closest comparison to the Tohoku Disaster may be Hurricane Katrina, which was of a smaller scale. During Hurricane Katrina, 1,836 people died, and total property damage was estimated at $81 billion. By comparison, during the Tohoku Earthquake/Tsunami, 15,457 people died, and total property damage was estimated at $500 billion. Yet, 75 percent more money in donations has poured in to help in Katrina than to help in the much larger Tohoku disaster.

In response to Hurricane Katrina, American NPOs received $4.25 billion in donations from the public and an additional $1 billion from corporations (according to a CNN report dated September 13, 2005), with the Red Cross receiving over half of the donations. During and after hurricanes Katrina, Wilma and Rita, the American Red Cross opened 1,470 different shelters and served 68 million snacks and meals to victims of the disasters and to rescue workers. Similarly, The Salvation Army provided more than 5.7 million hot meals served in and around New Orleans, 8.3 million sandwiches, snacks and drinks. As part of the overall effort, Salvation Army officers, employees and volunteers contributed more than 900,000 hours of service.

In Tohoku, NPOs received $3 billion in donations from companies and the public, in response to the estimated $500 billion in damages. The Asahi Shimbun reported that some earthquake survivors died in the shelters or in the process of evacuation, and that many shelters struggled to feed evacuees, and some were not sufficiently equipped to handle medical emergencies. In the Ishinomaki area hardest hit by the tsunami, there are around 10 ongoing, established NPOs on the ground (with year round operations and a full-time headquarters) doing relief-stage work, and 200 ad-hoc groups (formed after 3/11 to address the tsunami), with the largest of the established NPOs currently on the ground being Peace Boat. The 10 on-going, established NGOs in Ishinomaki stand in stark contrast to the thousands of established, ongoing NPOs on the ground operating in the aftermath of Hurricane Katrina. This may be an area where companies can step in and support volunteerism in Japan through CSR activities like paid volunteer days.

WORKING WITH NPOS & GOVERNMENT ORGANIZATIONS TO MEET HUMAN NEEDS

The U.N. Office for Coordination of Humanitarian Affairs (OCHA) sets out three phases of disaster response: relief, rehabilitation and rebuilding. The organization explains the phase as such: “Relief is about ensuring immediate survival, rehabilitation is about getting the affected communities back on their feet, reconstruction is about rebuilding infrastructure, and sustainable development includes helping communities to prepare for future emergencies.” We are still in the relief stage, but we’ll soon be moving into the rehabilitation phase.

It is much more effective to work through an NPO or government organization than to go alone and unannounced to volunteer in Tohoku, as these organizations provide vital coordination. The NPOs in the Ishinomaki area meet daily with the Ishinomaki Junior Chamber of Commerce at Senshu University and coordinate the next day’s activities.

Examples of CSR activities that can really make a difference right now include: paid volunteer days, employee matching donations to buy cars for evacuee community car-sharing, microfinancing, job creation, and retraining, among others. Currently, the biggest immediate needs of disaster victims are food and daily living supplies for evacuees contemplating moving into temporary housing. Many evacuees staying in evacuation centers are hesitant to move to the temporary housing being built by the government, because they will lose access to food. Providing cars for car-sharing programs would be one step toward gaining access to food and other services such as health care.

Also, many have lost their jobs as well as their homes, and are not in a position to pay their own electricity or water bills once they move into temporary housing. Microfinancing, small-scale business opportunities, and/or jobs would be most welcome and helpful in getting people back on their feet in a way that promotes independence rather than dependence. Longer term rebuilding will require relocation or investment in hospitals and schools, and education.

With government debt at 225 percent of GDP, the Japanese government faces huge financial constraints to address this disaster on its own, and public private partnerships can play a very important role in this recovery. Many people hit by the disaster in Tohoku are without homes, jobs, money, or food. Illness has set in with the onset of black mold and the rainy season. People are losing hope, and the suicide rate is soaring. People need help now.

Elisa Bortolato, a Bloomberg L.P. volunteer sums it up, “Using my free time to help those affected while working towards a goal as a team to make them feel supported and not forgotten, made the weekend I volunteered the most meaningful in a long time. Witnessing so much destruction and cleaning up the belongings of those who had lost their homes and loved ones from the rail tracks and river bank was a very emotional experience, but it was all worthwhile and I would certainly volunteer again. This was also a great bonding experience and an opportunity to work alongside colleagues we wouldn’t usually come across in our positions.”

JEN—Japan Emergency Network (another well-established NPO that organizes volunteer work in Tohoku, using English-speaking leaders): Volunteering: Miyako Hamasaka,  Tel: 81-(0)3-5225-9357,  Email:  hamasaka@jen-npo.org

Second Harvest Japan (leader in providing food to those in need in Japan):  Volunteering:  Charles McJilton, charles@2hj.org

HOPE International Development Agency (providing small and medium family grants to help get businesses back on their feet): Contact:  Isa Ichikawa, Tel: 81-(0)52-204-0530,  Email:  isa@hope.or.jp

Peace Boat (largest NPO on the ground in Tohoku, organized meaningful volunteer work with English-speaking leaders in Ishinomaki in conjunction with the local government and neighborhood associations):  Volunteering:  Rachel Armstrong, Tel: 81-(0)90-9962-4891,  Email:  rachel@peaceboat.gr.jp

Habitat for Humanity (building homes for disaster victims):  Volunteering: info@habitatjp.org

Local Volunteer Centers in Tohoku (Japanese):

http://msv3151.c-bosai.jp/index.php?top

ACCJ Japan Recovery Fund: Sam Kidder, Tel: 81-(0)3-3433-5381, Email:  skidder@accj.or.jp, Website: http://www.accj.or.jp/doclib/forms/Disaster_Relief_Fund_Letter.pdf

ACCJ CSR Committee: Ako Serizawa, aserizawa@dow.com

ACCJ Volunteer Affinity Group: Tish Robinson, tishintokyo@gmail.com, Hitoshi Maruyama, hmaruyama@accj.or.jp

Over the next few months, Japan faces the challenge of dealing with potential electricity shortages caused by events stemming from the Great Eastern Japan Earthquake and tsunami. Few have forgotten the images of ominous smoke plumes rising from damaged reactors, or the hordes of stranded commuters trudging their way home. Those looking for proof of Japan’s electric dependence needed to look no further than Tokyo’s darkened skyline. In Tohoku, damaged factories struggled to maintain output causing the global supply chain to stumble.

It was in those first few weeks that the concept of setsuden (electricity saving) took root. Artists banded together over Twitter to create artworks encouraging citizens to avoid wasting electricity. The screens in Shibuya crossing fell dark. Escalators shut down. Even Japan’s ubiquitous vending machines were suddenly dimmed.

Thanks in part to these efforts, by April 8 TEPCO stepped back from the near daily warnings of rolling blackouts. Temperatures were rising, lessening the need for electricity-guzzling heaters. The aftershocks had grown fewer and farther apart. To the naked eye, life in Japan was perhaps a bit dimmer, but normal.

Yet, the message had already been sent. Summer was on the horizon and with it, the threat of electricity shortages that could further hamper Japan’s fragile economic recovery. Slowly but surely setsuden replaced jishuku (self restraint) in the media as the buzzword of choice. But Japan is no stranger to energy conservation initiatives, none of which have thus far managed to deter Japan from its nuclear fixation. As Japan prepares for another sweltering summer, the question remains whether energy conservation is the solution, or just another band-aid to Japan’s electric dilemma.

SETSUDEN VS. ENERGY CONSERVATION

Cameras flashed. Men and women, clad in stylish polo shirts and chinos, strutted down the catwalk to showcase Uniqlo’s latest business casual looks. The well-heeled audience murmured critique after each passing model. For all intents and purposes, it had the appearance of a regular fashion show. The only difference was that afterwards, it was not designers, but representatives from the Ministry of Environment (MOE) who took to the stage to kick off the first day of Japan’s “Super Cool Biz” campaign, fronted by a smartly produced fashion show designed to illustrate that business casual had indeed arrived in Japan.

Initially introduced under the Koizumi Administration in 2005, “Cool Biz” is an annual government campaign aimed at reducing electricity consumption by limiting the need for air conditioning. Government offices are kept at a steamy 28 degrees Celsius (82 degrees Fahrenheit), and workers are encouraged to wear short-sleeved business shirts while forgoing stuffy jackets and ties. In light of this year’s heightened electricity concerns, the MOE took it one step further and relaxed the dress code to include Hawaiian “Aloha” shirts, polo shirts, jeans, sneakers and even T-shirts.

The image of stoic Japanese salarymen trading in their dark suits and ties for bright Hawaiian shirts and sandals is indeed, an eye opening one, particularly within the conservative confines of Japan. However, it’s precisely that image that makes “Super Cool Biz” one of the more memorable examples of what exactly setsuden is, and how it differs from previous attempts at energy conservation.

Put simply, “Super Cool Biz” is an enhanced version of its less “Super” predecessor. The fundamentals and goals are essentially the same: reduce summertime energy consumption. Where they differ is in terms of scale and purpose. In addition to relaxed dress codes and steamier offices, Super Cool Biz aims to curb office electricity use by 10 to 15 percent.

“Setsuden is used to mean an effort or activity to save electricity for the purpose of suppressing a peak demand,” explained a spokesperson from the Federation of Electric Power Companies (FEPC) Tokyo office. “Meanwhile, the term sho-ene (energy conservation) often means an effort or activity to use electricity efficiently for the purpose of lowering energy consumption in general.”

As of July 1, the government enacted a mandatory 15 percent power cut for companies whose contracts exceed 500 kilowatts located in all areas covered by TEPCO and Tohoku Electric Power Company. Until September, between the hours of 9 a.m. and 8 p.m., businesses found to be in intentional violation of the government’s 15 percent cut will be fined 1 million yen.

Currently, nuclear energy accounts for roughly 30 percent of Japan’s electricity generating capacity. However, as of this writing, only 19 of Japan’s 54 nuclear reactors remain operational, with the remaining 35 currently either shut down or undergoing safety inspections.

According to a report from the Institute of Energy Economics Japan, TEPCO is projected to have a maximum electric supply capacity of 53.8 gigawatts to meet an estimated 60-gigawatt demand—a shortfall of 10.3 percent. To prevent blackouts, TEPCO must either conjure up a new source of electricity to meet demand, or energy consumption needs to be reduced to meet capacity.

Over the past few months, Japanese news media were flooded with pictures of dressed-down government officials and headlines detailing the various conservation plans of some of Japan’s big name corporations. In addition to cutting electricity consumption, companies such as Sony, Sharp and KDDI have shifted employee work schedules to the weekend and extended summer holidays to reduce energy demands during peak hours. Others have also adopted daylight savings time, with workers coming and leaving an hour earlier than usual.

“Everybody’s getting into it,” says Justin Manger, a Senior Coordinator at Sojitz, an international Japanese trading company. “At our headquarters in Akasaka, the air conditioners are set lower and every other row of lights in the office is turned off, as well as in the lobby areas. We also take part in ‘Light Down,’ which is a nationwide movement where after 8p.m., workers are encouraged to go home and turn off their computers.”

“If telecommuting were to develop as a result of the energy crisis it could have revolutionary effects,” says Robert Dujarric, director of Temple University Japan’s Institute of Contemporary Asian Studies. “Less congested trains and roads at rush hour and more time for parents to take care of the kids (as they wouldn’t lose, as is sometimes the case, 2 or 3 or more hours/day commuting) would make it easier to live far away from city centers.”

SETSUDEN AND BIZ

No one can deny that companies and individuals alike are doing their part to reduce electricity consumption this year. However, the overwhelming desire to contribute to Japan’s recovery has diverted attention away from the critical question: How much will setsuden efforts actually benefit Japan’s recovery?

At a cursory glance, the answer seems obvious. With electricity capacity diminished and a steep reconstruction bill to pay, the Japanese economy can ill afford another crisis. To keep business operating and the economy afloat, the lights must stay on—and cutting electricity usage is the most effective way to ensure that. Or is it?

“Japan is already the most energy-efficient of the world’s advanced industrialized countries,” says Brian Woodall, a professor at Georgia Tech University and Japanese energy policy expert. “To the extent that initiatives such as ‘Cool Biz’ contributes to this, it is a useful tool for energy conservation. But it will be difficult to find additional ways to cut energy consumption, although the mandated cuts this summer may produce some innovative thinking.”

Furthermore, the success of setsuden is entirely reliant on the belief that Japanese will refrain from electricity demands in the heat of summer. As temperatures soared in the last week of June, TEPCO reported that in the Tokyo metropolitan area alone electricity usage reached a high of 92 percent of capacity—a rate that falls significantly short of the government’s target goal of a 15 percent power cut, as well as TEPCO’s estimated 10 percent minimum. While it may be true that the government-mandated 15 percent cut didn’t come into effect until July 1, various other government initiatives and company setsuden measures—including Super Cool Biz—had been in effect for over a month.

“As offices get very hot, it’s clear that productivity goes down. Humans are not optimized for peak efficiency in a 29C office,” says Dujarric.
“Initially, this summer it did not seem that people were making sufficient conservation efforts. But now it looks as if they are complying with government requests. Hopefully, they can continue to do so all summer,” says Jeffrey Kingston, Director of Asian Studies at Temple University’s Japan Campus and editor of a new e-book “Tsunami: Japan’s Post-Fukushima Future.”

But outside the realm of speculation, there is no doubt that setsuden will have a major impact on the Japanese economy. Whether that impact is for the better or worse, is too early to tell.

“All businesses will be affected,” notes Dujarric. “For example if manufacturers decide—as many have—to operate on weekends and close on weekdays, all sorts of businesses, from restaurants to railroads, will be affected.”

Economically, Japan has yet to fully recover from the global supply chain disruptions caused by the earthquake and tsunami. For major manufacturing and production companies, the government’s mandatory 15 percent power cut poses a number of logistical challenges. To make up for lost production and unfulfilled orders, these companies must work overtime. However, altered work schedules and limited electricity supplies mean companies are only likely to incur extra costs and slow output for their troubles.

Such conditions could be the last straw for a number of Japanese companies with antsy overseas clients, and ultimately accelerate the hollowing out of industry in Japan. According to a recent trade ministry poll, 70 percent of Japanese domestic manufacturers expected one or more partner companies to push forward plans to shift production overseas.

Conversely, setsuden may also provide some golden opportunities for retailers who can anticipate setsuden-related consumer demands. Capitalizing on the Super Cool Biz initiative, Fast Retailing’s Uniqlo has seen sales increase 3.9 from last year. Similarly, energy efficient products have also seen a rise in popularity as more Japanese look for alternative ways to keep cool outside the office. In Tokyo’s electronic stores, eco-smart appliances and energy-efficient LED light bulbs have become hot commodities.
“People here are environmentally conscious and aware, and businesses who position themselves to take advantage of the situation will find huge business waiting to happen out there,” adds Kingston. “Japanese will vote with their pocketbooks if given the chance.”

NEVER WASTE A GOOD CRISIS

The fact of the matter is that even if blackouts are averted and the Japanese economy survives this summer unscathed, Japan’s energy dilemma is far from solved. There is no telling when, or even if, the 35 offline nuclear reactors might be restarted. Some, like the Fukushima Dai-ichi and Dai-ni power plants, are damaged beyond repair and will be decommissioned. Others undergoing safety inspection could be restarted if they pass the proper safety guidelines. Of the 19 plants currently operational, a number of them will undergo safety inspections in the near future, as Japanese law requires inspections at least once every 13 months.

“It’s going to be very difficult to restart the nuclear plants that have shut down,” says Kingston. “There is going to be a problem retrofitting some of these plants for safety, to build more secure tsunami walls—throughout Japan there’s been inadequate risk assessment.”
Of course, geothermal options such as oil, coal and liquid natural gas (LNG) can and are being used to fill the gap. However, a large surge in Japanese demand in LNG markets will only exacerbate already fluctuating market prices. Without nuclear reactors, by next year energy costs may skyrocket up to an extra 2.4 trillion yen in 2012.

“Ending nuclear power would be economically very costly and geopolitically very dangerous,” agrees Dujarric. “Oil and gas are mostly located in countries which are generally—with the exception of Norway and few others for gas—unstable, lack the rule of law, and have political objectives that are hostile to Japan.”

Given this, it’s not unthinkable that this summer’s setsuden measures could extend well into fiscal 2012 should nuclear reactors fail to resume operations. But as the old adage goes, “Never waste a good crisis.” As public concerns over nuclear safety rise, Japan has a unique opportunity to hit the reset button on its basic energy policy. In particular, champions of renewable energy have grown both in number and influence.

Softbank CEO Masayoshi Son, one of renewable energy’s most vocal supporters, unveiled his plans to build ten solar power plants throughout Japan. Big, ambitious plans are no surprise from Son—but the fact that this plan is currently backed by most of Western Japan’s prefectural governors is a fact that cannot be overlooked. Likewise, in recent weeks Prime Minister Naoto Kan has repeatedly emphasized Japan’s need to properly invest in developing renewable energy sources.

“Perhaps the 3/11 disasters will provide the impetus for a green awakening in Japanese politics,” notes Woodall. “But this will take considerable political will and a willingness to suffer economically in the short term on the possibly risky promise of long-term gain.”
“Politically, three things need to happen for renewable energy to have a chance in Japan,” explains Kingston. “First, Japan needs better feed in tariff legislation. Second, NISA [Nuclear Inspection Safety Agency] needs to be split from METI. Lastly, Japan needs to upgrade to smart-grid technology.”
Feed in tariffs are measures designed to accelerate investment in renewable energy technology by paying renewable energy producers—including households, small companies and other organizations—for the green electricity they produce. FITs played a critical role in promoting renewable energy in Germany, where they account for 20 percent of electricity generated. Currently, Japan only offers FITs for solar power generation, measures that some believe are in need of revision.
Prime Minister Kan has also advocated separating NISA from METI, a situation that has been blamed for Japan’s lax nuclear safety regulation prior to the Great East Japan Earthquake. Additionally, Kan has also addressed the need for greater separation between electricity generation and distribution operations.
“Ten utility companies have a virtual monopoly on both functions in that they both supply and distribute Japan’s electricity. The only way to promote renewable energy is to split these functions,” emphasizes Kingston.

Another obstacle to widespread domestic renewable energy adoption is the mismatch between electricity generation frequencies in eastern and western Japan. Eastern and western Japan operate on different electric frequencies, making it difficult to channel large amounts of surplus electricity to TEPCO or Tohoku Electric Power Co.’s service areas.

Needless to say, backtracking on Japan’s nuclear investment in favor of renewable energy is an enormous and controversial task. Since the oil shock of the 1970s, Japan had heavily invested in nuclear power. And before the earthquake, the country had plans to increase nuclear power to 50 percent of Japan’s total electricity generating capacity by 2030. Moreover, switching to alternative energy will not happen overnight. Legislation must be passed. Facilities have to be developed and built. Older nuclear plants would have to be either upgraded or decommissioned and eventually phased out. Odds are that, in Japan, the shift to renewable energy will take anywhere from 10 to 30 years. So while public sentiment towards nuclear energy has been somewhat shaken in recent months, forgoing it completely is unrealistic in the short-term.

Frustrating as that may be, there are also a number of opportunities companies and the Japanese government can take to stimulate growth. Last year, the government’s eco-point campaign energized the Japanese electronics sector as shoppers rushed out to trade in their old appliances to buy more energy-efficient TVs, washing machines and hybrid cars in exchange for “eco points.” Recent events indicate that enacting similar initiatives to encourage energy conservation could help to speed up Japan’s economic recovery.

INTO THE FUTURE

It may be too early to accurately assess the full impact setsuden will have on the Japanese economy. It is clear, however, that while the Hawaiian shirts may disappear come September, Japan’s energy dilemma certainly won’t. Moreover, many of the infrastructure benefits from initiatives to switch over to alternative energy sources appear to be years away from fruition. Nevertheless, Japan’s business community seems well disposed toward moving into a new style doing business.

In years to come, Japan’s oft-mentioned “Gross National Cool” may no longer refer to its colorful anime characters and futuristic robots, but rather to a pioneering culture shift, mapping the way for the planet’s post-industrial societies to transition into truly sustainable energy practices.
Surrounded by smartly dressed models, and the applause of his peers, former Environment Minister Ryu Matsumoto ended Super Cool Biz’s inaugural fashion show with a particularly bold statement of intent, “This is not just a temporary measure to survive the summer, but this is going to be a big event to change the way of life in Japan, and people’s lifestyles.”

In the landscape of normally buttoned-up Japanese business, Hiroshi Mikitani is a man possessed of strong opinions and well-defined goals. Recently (August 8), he joined fellow executives at an ACCJ event in Tokyo to discuss responses to the March 11 disaster and the future of Japan, as one of the earliest Japanese supporters of the ACCJ initiatives connected with the disaster.

Being a Kobe native, he was particularly affected by the 1995 Great Hanshin Earthquake, which devastated his native city. On the day of the Hanshin earthquake he was planning to go to New York in his capacity as an investment banker working with the Industrial Bank of Japan (IBJ, now part of the Mizuho group), together with Masayoshi Son, the President and CEO of Softbank, to buy a company there. However, as he watched the news reports of the disaster, he realized that many of his friends and relations had passed away. The next day, he flew to Kobe, and was shocked by the scenes. “For me, that was the moment I changed the way I viewed my life,” he says. “Up to that point, I was thinking about becoming a senior manager at IBJ, but I started to realize that life is short, and that anything can happen.”

This provided the impetus for him to leave IBJ, and start his own company. “I felt we needed a new industry and new venture companies in Japan,” he says, adding that since the past successes of manufacturing giants such as Sony, Panasonic and the like, there has not been the same number of fast-growing Japanese startups. “As an investment banker at IBJ, I saw we needed something new…but not many people were rising to the challenge.”

At the time, Mikitani saw himself as somewhat of a trailblazer, hoping that he, as an ex-investment banker from one of Japan’s most prestigious financial institutions, could found a successful company to be seen by others, who would then follow his example. It took six months from his decision to leave IBJ until his actual departure. “I actually didn’t have any business plan at that point,” he says, “I just wanted to show the public that you can do it.”

Thus, the founding of Rakuten is due, at least in part, to the occurrence of the Great Hanshin Earthquake. According to Mikitani, this is even reinforced within the notion of supporting the entrepreneurial mindset, “The original intention [when founding Rakuten] was to help SMEs sell their products all over Japan.”

Fittingly, years later it does appear that Rakuten has managed to inspire Japan’s entrepreneurial community, a trend that offers some satisfaction to Mikitani’s original plan when he left the IBJ to strike out on his own. “We are seeing many ex-Rakuten employees leaving and starting up their own companies, which I like… well, I don’t ‘like,’ but I like,” he says. One of the most notable of those ex-employees is Yoshikazu Tanaka of GREE, now one of Japan’s largest and most high-profile Internet companies. And while his support of domestic startups remains focused, Mikitani adds, “If we succeed in making this Japanese company into a global one, many entrepreneurs may change their mindset and their perspectives will become more global.”

Rocking the boat

Rakuten recently made waves when Mikitani announced that the company would quit the Keidanren, the Japan Business Federation. In Mikitani’s view, the Keidanren has been protecting the electricity utilities by refusing to consider the split between generation and transmission—a move favored by Mikitani. He adds that, “This decision was based on the assumption that they are representatives of special interests—specific segments. I feel that this is not very fair, and I think that more and more we are going to see entrepreneurs who will push a social movement.” Keidanren chairman Hiromasa Yonemura has refuted this view of the organization, claiming that the Keidanren is a policy group working for the good of the entire Japanese economy and the nation’s development.

“There are various interests in Japanese industries,” says Mikitani of the reconstruction and recovery of the disaster-hit region, “and we need to make sure that the framework is fair and is going in the right direction. We need a more global perspective and a more global framework for that.”

Of course, this is not the first time Rakuten has rocked the boat of Japanese business society. Six years ago, the lines between traditional media and Internet-based commerce looked as though they would become blurred when Rakuten acquired a significant (over 19 percent) stake in Tokyo Broadcasting System (TBS) and announced plans to merge with it. TBS, somewhat taken aback, revised their corporate structure, and prohibited one shareholder from owning more than 33 percent of the voting rights. Rakuten thereupon requested that TBS buy back the shares held by Rakuten and, following a court battle over the price of the shares, TBS bought back the shares at a substantially lower price than Rakuten had originally paid.

Since its founding in 1997, Rakuten has muscled in on a number of areas traditionally associated with older more traditional companies. For example, in the area of online travel Rakuten occupies the number one domestic slot; for online brokerage businesses it boasts the number two position; and for online banks, it also holds the top rank.

Nor is the company a slouch when it comes to going head-to-head with international competition within Japan, losing pole position to Amazon for online books and media, but edging out the Seattle-based giant for e-commerce overall. Even in a new field where Japan probably leads the world, electronic money, Edy, issued by Rakuten group company bitWallet, leads the pack (over the JR Suica and private transport operators’ Pasmo) when it comes to the number of cards issued.

With 10,000 employees worldwide, Rakuten can no longer be regarded as a lightweight upstart. It has carved out a place for itself, not only in the business world, but in the everyday lives of many Japanese people who use their services. This growth has led to Rakuten being ranked at number 12 in the 2010 Nikkei BP Brand Japan list (a remarkable leap from 167th place in 2004).

Can Rakuten work outside Japan?

One question raised with any Japanese domestic hit is whether the domestic experience and success can be exported outside Japan in the same way. Too often in the past, the “Galapagos effect” has produced a product or service, wildly popular inside Japan, but which has no market outside its native country. “We are wasting our talents and resources by not trying to understand the global standards. We need to open our eyes. I’m a great believer in Japanese strengths, but I think we are currently wasting our time and our efforts,” says Mikitani.

Often quoted in the press, Mikitani has made no secret of his belief that there is an opportunity and intention for Rakuten’s operations to expand to the rest of the world. One way in which he is promoting the international nature of the group is to make English the official internal language within the company. All internal meetings will be conducted in English from next year. More than being just a “internationalization” gimmick, this is intended to bring ideas and concepts from overseas back into the home organization as well as to promulgate Rakuten’s own corporate culture to the overseas branches.

“The goal is to convert Rakuten from a Japanese company to a global company,” says Mikitani, “while retaining the good parts of Japanese culture and mindset.” He adds, “We are not a Japan-centric company, we are trying to adopt the best global standards in our group as much as possible.” According to Mikitani, the company’s French operation provides solid business models to follow, while the American arm offers robust technology models. “We’re not just trying to expand, but we are trying to learn from each other,” he says, using the Toyota-inspired word for horizontal knowledge sharing yokoten to describe the process.

As a practical measure to facilitate this information sharing, Rakuten has traditionally held weekly in-house group meetings at 8 a.m. on Monday mornings. This allows Asian group members to participate, but with Rakuten’s recent expansion into Europe and North America, this is obviously not very convenient for the group workers in those continents. Mikitani’s proposed solution is to move such meetings to Tuesdays for the convenience of the overseas subsidiaries, the number of which continues to grow. At the end of December 2010, Rakuten was doing business in five different countries, with operations in another 21 planned for the future. Further, Mikitani hopes to grow the share of overseas transaction volume from 7 percent to 70 percent in the near future. Even within the Japanese operations, the move towards internationalization is apparent in the composition of the workforce. About 25 percent of last year’s Rakuten Japan workforce were non-Japanese. At present, the staff is largely Asian, reflecting Rakuten’s aspirations for a multi-cultured internal business environment.

Moving outside

Rakuten’s overseas shopping mall operations started in 2008 with the launch of a Taiwanese shopping site, and since then expansion has continued on an upward path, with fiscal year 2009 seeing the establishment of a partnership with Thailand’s premier e-commerce site, TARAD.com.

With the acquisition of France-based electronic mall PriceMinister S.A.S. in June of last year for about $250 million, Rakuten began its gradual move into the European market. Prior to this, Rakuten had made a relatively bold move into the North American market by purchasing Buy.com for approximately the same price.

But for consumer sales, the Holy Grail has to be the rapidly expanding Chinese market. In January of this year, Rakuten finally made a move into China, laying out a $50 million joint investment with Baidu, the Chinese search engine leader. The deal has Rakuten retaining 51 percent of an online mall to be developed with this money. This online mall will be labeled as a B2B2C site, meaning that it will serve both shoppers and businesses.

Rakuten’s Indonesian business started in March of this year as a beta, and went live for all consumers in June (the events of March 11 impacted the original launch date). Rakuten Belanja Online is a venture with Indonesia’s media giant Global Mediacom (this is 51/49 split, similar to the Baidu deal). The partnership is designed to harness Global Mediacom’s impressive local reach, and is attracting various Indonesian brand names in a bid to boost the site’s credibility with local consumers.

The secret sauce

So what is it exactly that Rakuten can bring to these various international concerns, apart from cash infusions via acquisitions? According to Rakuten, there are several key advantages to working within the “Rakuten Eco-System” (as it is referred to internally), whereby a range of services, mostly linked under one brand, provide the customer with a one-stop online shopping experience.

Rakuten’s chief strength lies in its proven technological expertise in the area of e-commerce, which it plans to leverage to enhance the existing core competencies of its myriad new acquisitions.

For example, Rakuten points to Baidu’s ability to attract masses of China’s finicky customers, which when combined with the Rakuten e-commerce platform and experience in managing such an operation, acts as a synergetic case study of successful cross border partnerships. One particular area in which Mikitani believes Rakuten can add value to overseas ventures is in the area of customer loyalty programs. The Rakuten Super Points Strategy is seen as a key feature of the Rakuten customer experience, and the company plans to introduce this to the Baidu venture, having already implemented it in the Buy.com partnership.

While e-commerce business accounted for over 40 percent of the company’s net sales in 2010, the banking, credit card and e-money sides of the operation also helped to generate income, accounting for nearly 30 percent of net sales.

It remains to be seen how many of these financial service initiatives—which help to make the Rakuten experience so seamless in the domestic market—can be successfully introduced overseas. The regulation of the financial sector in different countries remains a key factor. “Some [markets] are easier, some are very difficult, but as far as we can, we would like to do it [introduce the Rakuten services] in other countries.” He is a little coy about future markets, but emphasizes flexibility in the approach toward overseas card operations, working either in alliance with a local credit card issuer or, where possible, issuing Rakuten’s own cards.

On the “back office” side of things, Rakuten is one of the more advanced Japanese companies regarding the implementation of technology. For example, Rakuten uses Microsoft cloud technology for its mail system. “Most Japanese companies are afraid of storing their internal data on a public cloud, but I think that’s a big mistake, and we need to change this notion,” says Mikitani, pointing to Japanese regulations that prevent Rakuten Bank from using cloud services for its mail.

According to Mikitani, the events of March 11 have shown that the use of cloud computing is safer, more flexible, and cheaper than a company running its own server. “This is a great opportunity for Japan to use Tohoku to prove that outsourcing and cloud computing can create faster and more agile infrastructures.” The Rakuten Institute of Technology, the R&D arm of Rakuten, is the company’s attempt to proactively develop solutions within the rapidly changing field of Internet business. The section looks ahead to not only what is possible using current technology, but attempts to predict, and in some cases develop, future technologies in order to provide Rakuten with the strategic advantages it needs to flourish.

Rakuten’s response to March 11

Rakuten’s response to the March 11 quake and associated disasters has likewise been somewhat unconventional (as a sidenote, March 11 is actually Mikitani’s birthday; he and some Rakuten executives were celebrating the occasion when the quake hit). Mikitani admits that when donating to charities, “We are not exactly sure where the money is going. Between the staff and myself we donated 1.3 billion yen and we gathered about another 300 million yen from our bank and point services, and so on. The Red Cross is doing a great job, but we’re not sure how it is helping the process. So we decided to donate the money directly to the prefectures: 50 percent to Miyagi, 30 percent to Iwate, and 20 percent to Fukushima.”

In addition to this direct financial assistance, Rakuten has also surveyed disaster victims, including children, inquiring about their needs. In the case of shoes, for example, Rakuten asked various mall merchants to provide these items at cost price, rather than retail mark-up. The results were positive–the process was repeated over twenty times, with the goods offered for sale sold out within 20 minutes each time. But Rakuten’s wishes for change go beyond the way in which relief is distributed.

The future within Japan

As far as post-March 11 Japan is concerned, Mikitani claims that the events have already started to change the way that Japanese people think about their lives. “The rate of marriage is already going up. People don’t want to die alone, so they want to get married. People don’t want to have regrets. So Japanese people will become more and more aggressive and challenging.” But, he adds, “I think that Japanese people and Japanese entrepreneurs are a little bit afraid of standing up and talking about things.”

When talking about the effects of the disaster, especially as it has hit ordinary people, he says, “We need to convert this disaster into an opportunity for change.” He places special emphasis on the now well-documented fact that Tohoku people are very patient. “Even when we [the Rakuten Golden Eagles, the professional baseball team] are losing a game, they still cheer us up. Even when we are five or six points down, they never leave the stadium. This doesn’t just apply to baseball games—it’s a general thing. They are very patient people.” However, he says, “The really tough time is yet to come. The recovery process in Kobe took more than ten years. This current disaster is much more serious, and we need continued support from the global society. All the support from the ACCJ is very much appreciated.”

Despite the many expressions of support, Mikitani still feels that change in Japan is necessary. “We need to change the social sentiment of Japan. Not just for entrepreneurs, but to also make people feel free to stand up and speak up.”

When asked whether he supports the notion proposed by some Japanese entrepreneurs that Japanese would-be startup business leaders should leave Japan to pursue their dreams, he uses another baseball analogy, that of Ichiro Suzuki. “First you set up a good record in the Japanese baseball league, and then you move to the major leagues.

Tish Robinson, along with David Slater, initiated this ACCJ-Peace Boat Earthquake Volunteer Project. Tish is a professor at Hitotsubashi University ICS and the head of the ACCJ Volunteer Affinity Group. If you would like to join the ACCJ Volunteer Affinity Group to work on this or other relief projects like this, Email: tishintokyo@gmail.com.

Maryanne Murray Buechner worked as a journalist in New York before moving to Japan in 2007. Email: buechner@gmail.com, website: http://mtokyoblog.blogspot.com


Have you or your company wanted to help victims of the March 11 earthquake and tsunami, but didn’t know where to start? Peace Boat Japan, a leader in NGO disaster relief, arranged safe and meaningful volunteer recovery work for ACCJ members over a long weekend in June. This hands-on volunteer project showed what CSR can look like by providing work that made a visible difference in an Ishinomaki neighborhood in Miyagi prefecture, one of the hardest hit areas. The three-day trip, a full-service package in English arranged by ACCJ in coordination with Top Tour Travel, also turned out to be a meaningful team building opportunity, while generating other concrete and creative ideas for how corporations can get more deeply involved in the long term recovery effort.

Forty-two participants—ACCJ members, spouses, co-workers and friends—spent two days in Ishinomaki cleaning residents’ homes and grounds of debris, clearing a park for children to play in, shoveling mud out of gutters and performing similar tasks necessary to help the local community get back on its feet. Because of the personal items and narrow spaces involved, these jobs can’t be done by machine; they require sensitivity and a human touch.

Project Vision
Peace Boats founder Tatsuya Yoshioka’s vision for the project was to build awareness and spark long-term Corporate Social Responsibility (CSR) in response to the Tohoku disaster, inside and outside Japan. The hope was that thought leaders could mobilize broader domestic and international support and spread CSR practices to rebuild the region. Examples of CSR activities designed to make a significant difference include: paid volunteer days, employee matching donations to buy cars for evacuee community car sharing, micro-financing, job creation, and retraining, among others.

Peace Boat, working in conjunction with the local government and neighborhood associations, assigned the work to each team and provided on-site direction from one of its own experienced volunteers. Peace Boat also conducted comprehensive situation and safety briefings for team leaders and offered volunteer insurance for participants. Top Tour Travel Agency of the Tokyu Group oversaw travel arrangements, including Shinkansen tickets to Sendai, hotel accommodations, chartered bus to and from Ishinomaki, and all meals.

The ACCJ organized bilingual team leaders and provided safety gear including hard hats, heavy-duty work gloves, N95 dust masks, protective goggles, and steel boot inserts (to prevent punctures from nails and other sharp objects on the work site). This project grew out of an information meeting to discuss earthquake responses that was organized by Professor David Slater of Sophia University.

Participants came through the experience full of ideas on how to contribute further to the Tohoku relief effort while also promoting CSR within their own companies. “The ideas come when you see what has happened with your own eyes,” said Tatiana Tarasova, chief marketing officer for TUV Rheinland. She said her goal was to get 20 employees from her company, including her CEO, to volunteer with Peace Boat as a group, following the ACCJ model. She also wanted to explore ways to provide used cars to those who lost theirs in the tsunami. “The only way to understand how to do it is to bring people here, and include the decision makers. These ideas don’t come to you if you are in Tokyo. You have to feel it with your skin.” Before March 11, there were 128,000 houses in Ishinomaki, 44,000 were completely destroyed by the earthquake/tsunami, with 34,000 of them partly damaged.

Many of the corporate volunteers said they also saw real value in their employees doing Peace Boat volunteer work as a leadership training and team building exercise, which would benefit individuals as well as the company as a whole, while giving back to the community. “Instead of a regular company day playing football… we could do this,” said Glynn M. Brasington, CEO of Pitney Bowes Japan and leader of Team 4.

ACCJ/Peace Boat team leaders were in charge of surveying the worksite, delegating tasks and making sure volunteers took regular water breaks, among other responsibilities. “Instead of paying money to a training company, I can send my young leaders on the sales team and my engineers in field service out to lead one of these volunteer groups, which puts them in a position where they have to make decisions,” said Brasington. “Considering the amount of coordination needed to do volunteer work and the different roles people have to play to get a good amount of work finished, I’d say this is a good practical leadership training course for people. You learn a helluva lot up here.”

Pitney Bowes’ matching program raised almost $50,000 in three weeks for relief organizations working in Tohoku. “It’s on everybody’s mind,” said Brasington. “It comes up at every dinner, every meeting I have with customers and sales people. What can we do? How? This is something that is organized, and that triggers ideas.”

From a personal perspective, Brasington, who worked as a Scout leader and gravedigger during his university days, said the work was perfect for him. “We were out in the air and close to the earth. We could see the devastation but we could also see that things were coming back together in a very detailed way.” Brasington’s team cleared wood and other debris, including busted bicycles, toys, and assorted personal effects from a public park and leveled the soil, removing chunks of contaminated mud. His group also cleaned up the outside of a house, including the garden and driveway. The toughest bit, he said, was removing the glass shards and rotted remains of some smashed up fish tanks.

By the end of the weekend, many participants felt that volunteering for Peace Boat could be a more satisfying alternative to the usual company off-site meeting. “We typically get together once a year at a conference center to discuss strategy and business initiatives, but it’s really about reinforcing personal relationships among co-workers,” said Steve Kapner, co-founder and Japan country manager for Aquent, a marketing and design staffing firm with 45 employees in four cities in Japan. “We can certainly do that volunteering with Peace Boat.” And, according to his evaluation, there may be other ways to help the relief effort that tie into his company’s areas of expertise that go beyond one-off relief projects. “If you’re digging sludge, when you leave, you’re done,” he said. “You can’t keep digging from Tokyo. But if we come here to do job training, for example, or set up a computer bank at a community center, we can keep that going. The recovery will take years, so the question for me is, what does Ishinomaki need done from a business perspective, and what do I want my people to get out of it? What can my company do to be helpful over the long term?”

On the third day of the project, the ACCJ group toured Peace Boat’s base operations at Senshu University campus, including a warehouse storing food, water, children’s shoes and other donated goods. “I’d like to see some companies lend their expertise in logistics and inventory management, have someone come up here for a couple of days to take a walk through and tell them what they’re doing right and what they’re doing wrong, to help maximize efficiency,” said Charles Lent, an HR and Communication Consultant.

Daniel Bodin, a recruiter for Robert Walters, said he felt a responsibility to take his experience back to Tokyo and share it with others. “We are the ambassadors,” he said. “If I don’t tell anyone about what we did here, or try to generate any activity from it, the effort would’ve been wasted.”

Unfortunately Peace Boat has seen a dramatic decrease in the number of volunteers turning up for work in Ishinomaki. “During Golden Week, I was on team 41,” said Ayumi Ando, a Peace Boat volunteer and communications coordinator who helped guide the ACCJ/Peace Boat volunteer group. “This week, I am on team 11 out of 16.” While the NGO expects more students to come and lend a hand during the summer holiday, the concern is that as time goes on, memories fade and media attention shifts, the numbers will keep dwindling. And they need all the help they can get. International companies interested in enhancing their CSR program are encouraged to seriously consider lending their employees for this purpose. “We’d like to have at least 300 volunteers per week coming up,” said Yoshioka. Having the ACCJ group up for just two days of work, he added, “I didn’t expect there to be such a big impact, that it would make such a difference, but it is such an encouragement.”

With the success of this first Peace Boat volunteer program, the ACCJ now has a pre-tested model for other ACCJ member companies looking to map out their own volunteer opportunities. If you would like to replicate this effort, the ACCJ can provide all the tools you need: a step-by-step list for organizing the trip, including travel logistics, safety rules and procedures, a project management manual; contact info for related vendors and organizations, packing lists and information on where to buy large-size rain boots and other essentials. Several ACCJ member companies gave employees one paid volunteer day to cover the Friday, and paid for the employees’ travel, food and accommodation costs. Participants needed only bring waterproof jackets, pants and boots, and a willingness to get their hands dirty!

Additional thoughts from team participants:

I was very touched by Shuki Ito-san of the Ishinomaki Disaster Recovery Assistance Council and his sharing about their challenging reality, as well as his strong commitment to rebuild the town and promote the creation of jobs for the townspeople.  I hope we will keep the momentum from this weekend going by getting other people involved in the recovery work ahead.  The work we did over the last two days seems like just a drop in the bucket, but it is a very meaningful drop of water, I believe.
–Keiko Suzuki, ACCJ HR Committee, Team 1 Leader

Logistically, everything came off perfectly. The Shinkansen, the bus, the hotel—it was structured and efficient, and that’s what we want. I could probably get 20 or more people from UBS to do this.
–Corey Gustin of Equity Trading at UBS Securities Japan, Team 1

In one weekend, our volunteer teams helped clear three parks, two backyards and a few hundred feet of residential gutters clogged with contaminated silt and mud. These are work sites and progress rates I hadn’t contemplated before, but I know these humble efforts have a place somewhere in the overall critical restoration work to be done. So this small journey of ours to the Tohoku region has been all of heartbreaking, daunting, frustrating and inspiring. The restoration and reconstruction effort will be immense. Such extraordinary projects demand extraordinary planning and coordination.
–Adrian Archer, Associate Director, Hill International, an independent project and construction management firm, Team 2

The ACCJ/Peace Boat ‘Get Your Hands Dirty’ volunteer trip was a super experience on so many levels. It allowed me to meet and work with wonderful individuals from the international and Japanese community whom I would likely never have met. We exchanged ideas, impressions and built our ties to a network of action-oriented people who care about the long-term success of Japan.
—Charles Lent, HR & Communications Consultant and Team 3 Leader

During our time working as a team with a common goal, to make a difference to those who have experienced a tragedy, we experienced the power of diversity. America’s strength comes from the cultural diversity of its roots, the great melting pot. The members of our team were Russian, Mexican, French, British, American-Mexican and American-Japanese. We were three women and three men. Brought together through the ACCJ, we had a powerful mix of ideas and skills to bring to the tasks at hand. The days together gave us time for reflection and time to benchmark our future plans from very different perspectives.
–Glynn M. Brasington, CEO, Pitney Bowes Japan, Team 4 Leader

People want to feel connected. If you donate money, you want to see where that money is going. It would be great if some of that money could be spent hiring local people to do some of the recovery work, to create jobs and generate income.
–Daniel Bodin, recruiter for Robert Walters, Team 6

I think that everyone got a great deal out of digging mud, and seeing just how much manual labor is required to dig Tohoku out of their situation. The next step is to take this experience and use it to stimulate CSR projects. Businesses build cities, and business will have to rebuild Tohoku. So our next step is to help develop and focus the CSR of companies to invest in Tohoku in whatever way they can.
–David Slater, professor, Sophia University, and co-coordinator of this earthquake relief project.



KEY CONTACTS
Peace Boat: Organized meaningful volunteer work with English-speaking leaders in Ishinomaki in conjunction with the local government and neighborhood associations and provided safety briefing. Contact: Rachel Armstrong, email: rachel@peaceboat.gr.jp

JEN—Japan Emergency Network: Another well-established NPO that organizes volunteer work in Tohoku, using English-speaking leaders. Contact: Miyako Hamasaka, email: hamasaka@jen-npo.org

Top Tour Travel: Organized Shinkansen, chartered bus, hotel accommodations, and bentos for this ACCJ-Peace Boat Relief Trip. Contact: Toshi Fujii, email: toshihide_fujii@toptour.co.jp

ACCJ Volunteer Affinity Group: Provided logistical coordination and templates for safety briefing manual, packing lists, trip announcements, team leader responsibilities, emails to group members, steps for organizing, lists of stores in Tokyo that carry large-sized rain boots, etc. Contacts: Tish Robinson, Hitoshi Maruyama, email: hmaruyama@accj.or.jp

]]> http://accjjournal.com/getting-your-hands-dirty/feed/ 0 http://accjjournal.com/the-employment-ice-age/ http://accjjournal.com/the-employment-ice-age/#comments Wed, 20 Jul 2011 05:44:48 +0000 ACCJ Journal http://accjjournal.com/?p=4802 Momoko Nagaiwa strolls into the Starbucks at Roppongi Hills around 8:30 pm on a Friday night, tired and carrying a heavy backpack filled with papers and a laptop. “It’s for my internship,” she explains, before profusely apologizing for running late. Between juggling a part-time job as a clerk at Uniqlo, job-hunting, and an internship with an international trading company, she only has an hour before she has to dash back home to finish more work while simultaneously getting ready for her part-time job and college graduation ceremony that weekend.

Starting Monday, Nagaiwa will enter “real adult life” unemployed and armed only with her diploma and résumé as paper shields in the uphill battle that is the Japanese job market. According to figures released by the Education and Labor Ministries on April 1, an estimated 33,000 college graduates had failed to secure jobs after graduation. Compared to statistics from 2010, the employment rate for new graduates slipped 0.7 percent to a mere 91.1 percent—a third consecutive year of decline which marks the lowest employment rate since the government began collecting data in 1996.

Numbers can also be deceiving. The 91.1 percent does not include new graduates in the areas of Iwate, Miyagi and Fukushima, nor does it give any indication of the cultural differences between Japanese and Western job-hunting practices.

When asked to describe her job-hunting experience this past year, Nagaiwa simply gives a wry, knowing smile that indicates a mix of frustration, bitterness and a glimmer of hopeful determination. Almost every recent graduate interviewed for this article reacted in the same way. That might be understandable considering Japan’s recent economic doldrums, the recent shift by Japanese companies towards more globalization, and a September 2010 survey by the Sanno Institute of Management, which indicated that two-thirds of Japanese white-collar workers felt no desire to work abroad. Except for the fact that at 23-years-old Nagaiwa is fluent in English (despite never having lived in an English-speaking country), studied abroad for a year in Rome and has completed no less than 3 internships. One would think that students like Nagaiwa, at least on paper, would have their pick of whatever company they wanted to join. So why is she, and others like her, finding it so hard to find a job in Japan?

Illustrations by Phil Couzens

A Year (Or more) of Pursuit
In Japan, by the time a new graduate walks across the stage to receive his or her diploma, it’s already too late. Japanese companies generally start recruiting new hires one year before they are set to graduate, meaning the typical Spring 2011 graduate began their hunt as early as January 2010. However, after the Lehman Shock in 2008, China’s ascendency, and the events of March 11, uncertainty in Japan remains high. These days, students are starting the job-hunt as early as their sophomore year of college, in addition to taking classes to help them polish their interview etiquette and craft bulletproof résumés.

The standard job-hunting process is incredibly intensive. New grads start off by attending a series of pre-entry informational seminars or setsumeikai, as well as on-campus and off-campus job fairs. On the Internet, students register at numerous Monster.com-esque sites such as Rikunabi to scour over thousands of job postings, and find information regarding company seminar schedules. In the spring, summer and fall, armies of impeccably dressed Japanese college students swarm the big job fairs held at Tokyo Big Site in Odaiba, hoping to catch the eye of an attractive company.

After the application process is done, companies can take months to screen résumés and administer written exams before scheduling interviews with the remaining candidates. Depending on the company, an applicant can expect to attend as many as five or six interviews before finding out if they’re hired.

Whereas companies in the West tend to look at previous experience, Japanese companies are more interested in a candidate’s communicative skills and attitude. “When they [Japanese companies] tend to choose people, they prefer more harmonious people than aggressive people,” says Yoshitaka Okada, Dean of Sophia University’s Faculty of Liberal Arts. “Ideally, they want to hire someone who can realize both achievements and harmony within the group, not someone aggressively pursuing self or personal interests.”

Of those interviewed who engaged in the traditional Japanese job-hunting system, most regard it with a sense of severe anxiety. And for good reason. Those who fail to secure a job the “first time around” face an even tougher job-market, as well as reduced opportunities to advance their careers. So much so, that it’s not uncommon to see students purposely postpone graduating for an extra year, rather than graduate without a job.

“They [Japanese companies] are willing to invest heavily in undeveloped talent. The flip side of this is that they prefer new hires to be fresh and uncorrupted by the influence of other companies,” explains Erica Adams, a career development officer at Temple University’s Japan Campus. “As a result of this preference for new graduates, many-to-most key roles will only be available for those employees who began their career at the company.”

A Lottery of Fish, Sheep and Robots
But is this truly the most effective way to nurture, find and engage emerging talent in Japan? The prevailing sense is that the traditional Japanese method of securing a job makes it increasingly difficult for an ambitious young graduate to find a place where they feel they can make an active contribution. Whether true or not, it often gives internationally-minded participants the impression that the skills they’ve worked so hard to cultivate will be left by the wayside once working life begins. For some, finding meaningful working experiences could be the equivalent of winning the lottery.

“You go to these job forums, with those ridiculously large companies that everyone is drawn to…and it feels like advertising. It’s like candy,” says Shou Kondo (a pseudonym), when recounting his foray into the big career forum circuit during a year’s pursuit of a job that would satisfy both his ambitions and interest. “Everybody’s drawn to it, but there’s such a slim chance you’re going to get it. It goes back to the question of ‘What do I really want to do?’ You go to those job forums and you really don’t figure that out.”

Kondo, a bilingual Japanese graduate who studied for a number of years in the U.S. before returning to Japan for university, is for all intents and purposes exactly the type of candidate companies claim to be missing among today’s “inward looking” Japanese youth. When asked to elaborate why traditional Japanese job-hunting measures left him wanting, he seemed a bit unsure how to put his exact reasoning into words.
“I felt like I was a fish in a school of fish,” says Kondo, after a few minutes of introspection. “And I was the wrong kind of fish. I felt like a sea bass in a school of goldfish.”

“It really feels like you’re sheep being herded into these companies,” says Christian, an American student, who is currently job-hunting while enrolled at a Japanese University in Tokyo. He related that it was hard to feel excited or engaged at career forums due to a perceived lack of interest. “A lot of the company presenters were just reading off a PowerPoint about their company. None of them had any true experience within the company in areas I was interested in.”

Hammer, Meet Nail?
There is a Japanese proverb that perfectly explains the frustrations facing many ambitious Japanese and foreign graduates. Deru kugi wa utareru. The nail that sticks out gets hammered down. Take controversial Livedoor founder and Japan’s most infamous entrepreneur Takafumi Horie. From his casual dress to his aggressive business tactics to his noticeably expensive tastes, Horie is not your typical Japanese CEO. His recent downfall and subsequent prison sentence is widely touted by business conservatives as a cautionary example of what happens when one puts individual career goals before that of the company.
Whatever his individual failings may be, it cannot be denied that Horie promoted a unique brand of “go-getter” attitude that is a rarity in Japan. Before his jail sentence, Horie offered a sobering piece of advice: “Even if you cling to this country, it has no future. It’s better for young people if they just let go.”

On the surface, it’s a fairly straight-forward sentiment, but a deeper look suggests otherwise. It’s true that since the Bubble burst in the early ‘90s, Japan has endured two decades of muted growth and stagnation. “Generally, the trend is that Japan’s economy is not growing. It was sort of stable, but with the recent crises now, the economy is showing a negative growth rate which may improve to some extent, but not as much as we hope,” says Okada. “So companies are not necessarily looking to expand. With the electricity crisis, some companies are actually thinking of moving down south, and some of them are actually thinking of moving out of Japan.”

Okada goes onto explain that while this state of affairs may dim the hopes of many job-seeking Japanese youth, for those with the right mindset, it could be the beginning of a golden opportunity. In contrast with the rising unemployment rates for new graduates, he explains that Sophia University graduates have yet to be negatively impacted—in fact, Sophia’s employment rates have has not declined since 2009. On a similar note, 95 percent of English-speaking Japanese students from Temple University’s Japan Campus graduating class of 2009 managed to find full-time employment. With companies like Rakuten, Uniqlo, Panasonic and Nomura Securities calling for globalization, common sense would indicate that bilingual candidates would have a leg-up on their competition. And that would be the case if it weren’t for Japan’s fixation with tradition.

“The seniors had a sort of ‘responsible disdain’ for their juniors,” says Jonathon Clemons, a fully bilingual American graduate, when describing some of his previous frustrations at a Japanese firm. “You can’t always ask questions or learn from them very well because they’ll just tell you to ‘watch’ how they do things. I was always on the bottom rung, and it was very hard to advance or get a foothold anywhere.” Clemons has since moved on to a foreign firm in Tokyo, which he feels places more value in his opinions and affords him more global opportunities. “I can go up and talk to the head of the company about anything—such as mistakes or errors I’ve found—in order to get the job done and I won’t be held accountable for it. That’s really refreshing.”
This kind of frustration is not uncommon. Rigid, frustrating, disengaged—these are all words international graduates have used to describe their image of life working under a “traditional” Japanese company structure. As such, many with global aspirations write-off, perhaps prematurely, Japanese corporations in favor of a more international company because they believe they might be more likely to utilize their skills.

“I went to an international career forum in Tokyo, and there were all these companies—Japanese and foreign—and all the students were international as well. So I went and talked to companies, but I was told, ‘Yes we want international students, but we don’t have any plans to go abroad. We just want international students because we believe they have stronger mentalities,’” Nagaiwa laments. “I don’t want do stuff like serving tea to clients. I didn’t go to school for that. If I have to do it, of course I have to do it, but I don’t want to just sit there and learn like a robot.”

But bilingualism, trilingualism or even quadrilingualism no longer carries the same cache it once did. Bilingualism is usually considered a ‘plus,’ especially for foreigners with business-level Japanese, but it does not translate into an automatic job. While bilingual graduates may want to utilize their language skills in their careers, companies rarely hire on the basis of language skill alone. For Japanese companies in particular, a new hire represents a long-term investment.
“Although we often hear that life-time employment is a relic of the past, and that job turnover is high among young Japanese, etc., the hiring process at major corporations has not caught up to this reality,” says Adams. “This means that companies in Japan focus on finding students who they feel have long-term potential.”

“A lot of the time there’s a worry that if you hire someone that’s fully bilingual—either Japanese or foreign—that person will get bored in the role if it doesn’t have an international enough feel,” agrees Charles Breen, an HR recruitment specialist at Specialized Group K.K. in Tokyo. “All employers naturally want to ensure that if they invest in training and development, that their people stick around. If their business fundamentally does not offer the environment a bilingual employee desires, then many of these employers would rather avoid the hiring risk all together.”

Breen goes on to emphasize, “However, far more encouraging news is that a growing number of globally focused Japanese firms have recognized the value of a skilled and fully bilingual/bicultural workforce and are driving their hiring from this perspective.”

Fight or Flight?
As the number of new graduates willing to sacrifice lifetime employment for greater career opportunities rises, so does another question: Should they fight to stay in Japan, or place their bets elsewhere? With Singapore, Hong Kong and Seoul emerging as thriving centers of growth, Japan could face a serious ‘brain drain’ if it does not learn to utilize the budding international talent residing within its borders.
“Japan might not be the best market right now for fresh graduates. China, Hong Kong or Singapore are places where young people, particularly foreigners, can get a start,” says Greg Leviton, an HR consultant at The Ingenium Group. But even for those who have found a job, the idea of staying in Japan for the long haul can seem like a gilded cage.

“I don’t intend to stay in this country forever,” says Kondo, who eventually found employment at a foreign firm in Tokyo. “I set a number, 3 to 5 years, and that number has not changed. I want to build on my skills so that I can go to other places.”
“A key point I tell students is be prepared to go anywhere in the world because trying to stick to Japan may not really prove wise in the future,” says Okada. “Due to the declining economy and the hollowing out of industries, if a student really tries to remain in Japan they may be unable to find a job that they would like to do. Location is secondary; students should try to find out what they really want to do and if necessary, they may have to go somewhere else.”

However, this is not comforting advice for foreign graduates who have invested four years of time and money into building a life and career in Japan. For non-Japanese graduates, one particular thorn is securing a job that will also sponsor a working visa. In some cases, although a foreigner may be perfectly qualified for a position, they will be ineligible for hire since they have not acquired a valid working visa, creating a catch-22 situation. While this is less common in positions offered by larger companies, it can prove to be frustrating for those more interested in small to mid-sized companies.

“Japanese are risk-adverse. When it comes to foreigners, a main concern is ‘Who’s going to vouch for you?’ If a foreigner gives the company any room for doubt, they will lose faith,” says Brent Conkle, President of Business Across Cultures, a HR consulting firm in Tokyo.
In 2009, Temple University Japan reported that just over half of its foreign graduates managed to find full-time employment in Japan. Of course, not every foreign graduate has a desire to work in Japan once they have completed their studies. Of those that do, however, some opt to teach English (which may or may not align with their career goals) in order to extend their stay in hopes of finding other work Japan. While many will go on to find full-time work in their preferred industry, it is also an unfortunate fact that others become discouraged and ultimately return to their native country.

In that regard, Japan’s immigration laws can be difficult to navigate. While there are options available, they are not always well advertised, and accurate information can be hard to find. “In Japan, it is possible to obtain a visa for up to 180 days after graduation for the purposes of job-hunting,” says Yoshio Shimoda, a Managing Partner at ILS Shimoda Office and specialist in Japanese immigration law. “However, I think it is too short especially in this difficult financial time.” Getting this ‘job-hunting’ visa however, is no easy feat.

Laura Semmler, a quadrilingual graduate of a Japanese university, recalled that, “It was a major headache. Not only did I have to provide proof I had graduated from a Japanese university, I had to provide a list of companies I had pre-arranged interviews with, recommendation letters from two upper-level school officials, a recommendation from the school that I was a good candidate to stay in Japan, proof that I had enough funds to support myself, as well as proof that I had been properly registered at a ward office.”

Shimoda goes on to mention that although Japan has plans to introduce a new ‘point system’ designed to make obtaining working visas easier for foreign talent by the end of this year, he emphasized that it is not yet clear how or if it will benefit students.

The Information Gap
Before she packs up to leave, Nagaiwa takes a moment to reflect. “I’m here. I know there are companies here—they don’t have to be the big well-known ones—where I could contribute and really learn a lot. I just can’t seem to find them.”

“We tend to think we can get enough information about companies because of the Internet. However, it is almost always limited to large-sized companies, and students have little information about small-mid sized companies,” says Kentaro Sawa, head of Temple University’s Career Development Office. “[Because of] this information gap and students’ tendency to pursue stability, most students rush to large sized companies. On the other hand, many small-mid sized companies struggle to hire new graduates.”

Not a single one of the graduates interviewed expressed aversion to working at a smaller, lesser known company so long as it provided them with an opportunity to learn new skills. In fact, among foreign graduates it almost seemed to be their preferred option.
“Small and mid-sized companies hoping to expand their operations need this type of young, flexible worker. The problem is that nobody knows where they are. No one is looking in that direction,” says Conkle.

Another, albeit much riskier, option is entrepreneurship. When asked about his post-graduation plans, Parker J. Allen makes it clear that he has every intention of starting his own social media consulting company here in Tokyo.

Allen admits the odds are against him. He’s been told that he has to raise 7 million yen in capital, not to mention the conundrum of having to find office space and sponsor his own visa. “As far as a really cool city for young, creative people to get together and get ideas and make business, Tokyo’s great,” says Allen. “But the problem is that there’s just not enough people with great ideas going out and doing them.”
“There are a few exciting ‘movers and shakers’ in our field here in Tokyo,” adds Marco Lüthy. Less than a month after graduating, Lüthy and a partner set up their own Internet media and marketing firm, Robotag Media K.K.

“I was not intending to start a company this year, although it’s always been something that’s been on my mind,” says Lüthy, who spent two years freelancing while completing his studies. “However, as my employment situation changed, partly due to the events of March 11, an opportunity arose for my business partner and I to setup a corporation without needing to take on any investment. We found ourselves in a situation which enabled us to be our own bosses and take on work which inspires us.”

Forging a New System
However slowly, things are changing. Some leading Japanese companies like Rakuten and Uniqlo are at the front of the globalization trend, and the number of foreign hires in major Japanese companies has been rising steadily every year. Furthermore, more companies are investing in overseas recruiting.

“Japan is still a strong country, and Japanese people work well as a collective. Once they [Japanese] move, they will all move,” says Conkle.
“The consequences and implications of the Tohoku quake is one of the most significant moments politically in Japan in the post-war era,” says Kyle Cleveland, a sociologist at Temple University Japan’s Institute of Contemporary Asian Studies. “Things that previously seemed untenable are going to become more relevant. Internationalism is going to benefit people. In the post-quake, post-tsunami Japan, the surge of volunteerism will invigorate NGOs, and opportunities for non-traditional work modes will increase.”
While it’s anyone’s guess if or when Japan will benefit from this shift, in the meantime there are multiple options companies and new graduates can use to their advantage. In addition to proactive skill building during university, experts agree that the essential key to finding a satisfying job is researching your chosen industry.

“The easiest way, if a student has an interest in a certain industry, is to jump online and find a journal, find a blog or find somebody in that industry that they can speak to. Go to networking events. A lot of the smaller companies are at those events because you can build connections that way,” advises Breen.

“Informational interviews are key,” recommends Conkle. “Many Japanese SMEs are open to hiring new graduates, but don’t know how to use recruiting companies or find them. An informational interview can help a candidate get their foot in the door.”
“If universities and companies agree that it is in their shared and best interest to develop outstanding human resources, it is only beneficial for students, companies and universities to start connecting with each other early,” suggests Sawa. “Universities can develop programs where their students can make direct contact with real businessmen, engineers, entrepreneurs, and other professionals inside and/or outside of their coursework. Companies can develop long-term internship programs with universities.”

While the current Japanese system is not perfect, it is far from hopeless. International, driven, young talent is here, and eager to work. But they won’t play the waiting game forever.

]]> http://accjjournal.com/the-employment-ice-age/feed/ 0 http://accjjournal.com/global-health/ http://accjjournal.com/global-health/#comments Wed, 20 Jul 2011 05:30:38 +0000 ACCJ Journal http://accjjournal.com/?p=4783 Although the last few decades have forever burnished the United States’ reputation as a technology pioneer, the sometimes overlooked reality is that the country has been, and continues to be at the vanguard of a myriad of medical breakthroughs impacting the entire planet. Leading that charge is international pharmaceutical company Eli Lilly. Founded in 1876 by Colonel Eli Lilly, the company, headquartered in Indianapolis, Indiana, now conducts clinical research in over 50 countries and markets its products in 143 countries.

As the first company to mass-produce penicillin, today the company is at the forefront of providing medications that address ailments such as diabetes, osteoporosis, thrombotic cardiovascular events, cancer, psychiatric disorders, and male erectile dysfunction. Heading up the company’s efforts in the newly active Asia market is Alfonso “Chito” Zulueta, as President & General Manager of Eli Lilly Japan, based in Kobe.

An Eli Lilly employee since 1988, Zulueta recently managed to slow down his busy schedule to give the ACCJ Journal deeper insight into the how the company has prospered in the Asia region in recent years, as well as offer perspective on what the future of post-Tohoku earthquake Japan may look like in the coming years.

photography by rob walbers

Journal: Is there anything that Eli Lilly Japan does differently here in Japan compared to its Western operations? Also, what is the company’s Asia public profile because, particularly in the West, Eli Lilly has very distinct public profile.

Chito Zulueta: We have made our medicines available in Japan for over 100 years. We had a partnership with Shionogi, which is a company based in Kansai. That’s why when we started our own independent operations here, we ended up operating out of Kobe. We started having our own business here in 1975, the business has grown nicely—we’re going to be close to 2,500 employees. Revenue is targeted this year to reach $2 billion here in Japan and our goal is to double that by the end of the decade.

Over the last few years, our growth has been very strong; we have been the fastest growing pharmaceutical company the last two years. But we’re just ranked number 20, whereas globally we’re ranked number 10 within the pharmaceutical industry, so that just gives you a sense of the opportunities to continue to grow the business here as we bring more innovative medicines to Japan. So, in a way, that is a bit of a difference as to where we are in Japan versus the U.S. Because of the drug lag, there has been a bit of a lag between getting pharmaceutical products into Japan versus the U.S. for a variety of reasons. Now that lag has been reduced over time, but as a consequence we are having products launched in Japan where they have been launched in the U.S. many years back.

Journal: What’s the reason behind that lag?

Zulueta: The reasoning is that Japan, in the past, required independent research and development be done in Japan. Whereas now, at least in the recent past, the Japanese government has embraced the need to reduce that lag and therefore has allowed Japanese patients and Japan in general to be part of global development plans as well as allowed Japan to be part of what we now call a Pan-Asian type of clinical development. As a consequence, we’re beginning to see a reduction in the lag from what was seven years to about two years. The intent is to close that gap fully. In fact, there are some examples where we are getting approval simultaneous to that of the U.S. So that is a major change, which is not only good obviously for the business, but more importantly it is the right thing to do for the patients.

We applaud the government’s efforts here in Japan, they realized that the gap was not acceptable. So they have worked with industry, with us, to really identify the specific steps of the process in each of the clinical development stages, and identified areas to reduce that [time lag]. At the same time, they now allow simultaneous development of Japan with global. So instead of a standalone Japan development, you can just have a piece of that global development be composed of Japanese patients and they would accept that data as part of that product’s approval.

Journal: Among the foreign set here, there’s this thinking that the efficacy of certain drugs, aspirin, etc., is stronger in the West, particularly in the U.S., than it is in Japan. Is this a myth? It sounds like what you’re saying may buttress this thinking, that there are a different set of parameters for the medications delivered here in Asia. Is that perception off the mark?

Zulueta: No that’s a very good question. In fact there is a difference: the ethnic difference, the weight difference, has seen that in Asia for a number of medications, you’ll probably need less dosage than you would in the West. Now that’s taken into account when doing those clinical trials. All of that takes into account the need to potentially have different milligram forms for a particular product treating a particular disease. So you may get approval in the U.S. of a higher dose versus in Asia, but at least it is in one simultaneous clinical development.

Let’s take an example, a simple one may not be appropriate but…Let’s say aspirin for instance, aspirin for a headache. Then they would have one set of patients that would have 25 milligrams of aspirin. Then another group of patients, which would have 50 milligrams. Then they would show that in comparison to no medication at all or in comparison to an existing therapy for that particular disease, for headaches. But they would include Japanese patients within those tests within the clinical development.

Journal: One thing that immediately jumps to mind, particularly in the age of the Internet and the global citizen, is that a lot of people are trying to be global citizens. You have a lot of people who live their lives 1/3 of the year in Singapore, 1/3 of the year in London, 1/3 of the year in California. During the course of the year, they have to go through various treatments. Do you foresee at some point in the future that there will be some sort of global standard or way of approaching medication; instead of it being region based, having some sort of global approach?

Zulueta: Development is becoming more global. The time frame, and the protocol is more global. Now exactly the kind of dosing may be different depending on the ethnicity or the weight of a particular patient. But the actual development of a product is more global now than it ever has been. And that’s very encouraging. In fact, a subset of that globalization of this development is what we call Pan-Asian, where we actually have studies across the key Asian markets: Taiwan, Korea, Japan, Singapore and at times, India and China. We have a number of those studies, and those studies are becoming more acceptable to many of the Asian markets.

Journal: In Asia, can you give us a general sense of where Eli Lilly stands percentage-wise in terms of your market presence and influence?

Zulueta: The influence part makes it a little more difficult for me to assess. I would say clearly Japan is, I think as in most other industries, the big player here in Asia. In fact, in our industry, it is the second biggest market behind the U.S., so it is a very significant part of our total business and of the industry. Behind that would be China, although China as you know, and as we all know, is growing double digits, it’s growing rapidly. But it is still a far third from Japan from a market perspective.

Journal: In the Asian sphere, which country is emerging, is on the fastest growth track? Would it be South Korea, Taiwan, Singapore, Indonesia? Where’s the new action coming from in terms of your business?

Zulueta: At Eli Lilly & Co., Japan has been the fastest growing part of its business for the last 2 years driven by excellent uptakes of our new launched products and market share gains across the portfolio. We see Japan as a tremendous opportunity for growth for Lilly and we intend to continue to invest. China, of course, remains a source of strong growth, and so is Korea which is now a truly emerging market for us. Then you also have the big diabetes markets with very good opportunities for us: Indonesia, India, Philippines and even Pakistan. These countries are in the top 10 of the biggest diabetes countries of the world.

Journal: Going back to Japan, and the origins of Eli Lilly Japan, you mentioned a company called Shionogi. If you could just give us a sense of what that company was about? Why was that the most attractive partner in Japan for Lilly?

Zulueta: It was strategic collaboration that we established. We started supplying our products to Japan over 100 years ago through this company. Shionogi, a highly respected company, based out of Kansai, is still an independent pharmaceutical company and was the biggest pharmaceutical company when we partnered with them here in Japan. And then over time that collaboration evolved to include research and development collaboration until the point in 1975 when we decided to set up our own operations independent of them.

And that’s how it started. We continue to have some important partnership collaborations with Shionogi today.

Journal: A hot topic of debate for a lot of companies in Japan right now is the question of “Tokyo versus a different region of Japan” as a base of corporate operations. Could you talk to us about why you think Kansai is a viable headquarters in Japan, as opposed to Tokyo?

Zulueta: You know last year I was actually in Tokyo through the invitation of JETRO and Hyogo Prefecture to talk about what our experience has been here in Kobe and, as I’ve shared, there is a bit of a history of why we’re here. Let me tell you, I’ve been here three years and we’ve evaluated every year whether or not we should move our operations to Tokyo. And we’ve always come to the same conclusion: that it would not be cost-effective for us to move. Obviously, because we already have an operation here and that would mean a significant disruption for many of our employees. But setting that aside, we think it’s cost-effective being here. The cost of doing business, we think, is lower whether it be office, whether it be housing—so we think overall it is cost-effective.

Given the importance of Tokyo as the seat of government and a lot of what we do is working with the Ministry of Health, Labor and Welfare, we’re often in Tokyo. We also have some of commercial staff based in Tokyo.  So we have a small office in Tokyo, and I’m there often. I do not find that as a problem.  I think the infrastructure is great. Obviously Japan in general, whether it be the shinkansen, or Itami Airport or international flights through KIX (Kansai International Airport), or the airport now in Kobe—could be improved, could be better in terms of number of flights to key cities—but overall we find that to be positive. The other thing is that I think we punch above our weight, so to speak.

Given that we’re one of the bigger companies here in the Kobe-Hyogo prefecture area, we’re able to have a bigger presence in the community. That means a lot to our employees, plus we’re able to tap some of the very talented people who want to live and work in Kansai and I think that’s worked to our advantage. We also have very good relationships with both prefecture and local governments here.

And then the other thing is it’s a wonderful region to live in. We’ve actually come to the conclusion this is a great place to have our business.

Plus, within Kobe there’s a growing medical health care hub being established that we’re very much a part of.

In Port Island, which is very close to where our offices are, the Kobe government has really invested in attracting companies to set up operations specifically around the medical and healthcare industry, primarily around research and development. They’ve built a consortium of companies, and I’ve seen a number of them already set up clinical development, research development and even informatics types of businesses here.

Journal: We talked about a kind of global approach; current and future standardizations, research, R&D here in Asia, what are some of the new innovations, new methodologies, new approaches that may have happened specifically because you were here in Asia versus say the U.S.? Something that was very region specific that played to your advantage of being in Asia?

Zulueta: One area, specifically in Asia, that has been identified as a best practice is our use of information technology, electronic technology, and mobility tools in driving both our development and commercialization efforts. That includes the use of the Internet and the use of information technology to communicate to our customers.

We have really significantly invested in the use of information technology. As an example, our entire sales organization, and almost our entire workforce, they’re all on Blackberries and we use this as a platform whether it be to promote our products to our customers, or to communicate. And we’re going to expand the use of iPads across the organization. I think the West, at least in our business, is probably a few steps behind us in that. We’re using Japan as an innovation hub in the form of information technology.

Journal: What about innovation as far as the drugs themselves? Many in the West see Japan and Asia as this mystical, exotic place of odd cures and interesting herbal remedies. Has that played a part at all, or is this just more cultural mythology at work?

Zulueta: Well, there are what we call traditional Chinese Medicines, or what people call proprietary Chinese medicines (pCm), and a number of companies in the industry continue to look at such opportunities. Lilly was one that looked into one or two potential ones, but not to a large extent. However, keep in mind that within the bio-pharmaceutical space of our industry, Japan has been a major contributor of very important products. Whether they be cardiovascular products, cancer products, diabetes products—many products have actually been discovered and developed here in Japan and are important global medicines.

Japan will continue to be a source of research and development and a source of innovative medicine. Companies like Lilly continue to look at opportunities here in Japan to collaborate and license and co-develop some of these medicines. The other piece is that there are certain diseases that may be specific to Asians. To give you an example, gastric cancer, which is a predominately Asian disease. It’s not a phenomenon in the West, so we are beginning to develop and look for medicines that are specific to Asia, in Japan and in China. So there are diseases specific to Asia, but also Asia becomes a source of future innovative medicines which then may be licensed and co-developed for use in the West.

Journal: Globally, can you just go over some of your best known products?

Zulueta: Our biggest product is called olanzapine. It is for the treatment of schizophrenia and bi-polar disease. That is our biggest product not only here in Japan, but globally. Lilly is known as a very significant player in the field of neuroscience and mental health. So olanzapine is an extension of that. The other big one for us would be duloxetine for depression. We also have in Japan the only non-stimulant, non-controlled ADHD (attention deficit hyperactivity disorder) product called atomoxetine. All three products are doing extremely well here, very well received by the market as they are truly innovative medicines. You’re probably more familiar with fuluoxetine for depression but this product is not available in Japan at this point. We’re also a very big cancer player with a product called pemetrexed, for the treatment of non-small cell lung cancer, as well as mesothelioma, which is a cancer based on asbestos. And of course diabetes. Lilly was the first company to make and commercialize insulin globally for patients with diabetes. We have a number of diabetes-related products including insulin and exenatide (GLP-1). In addition, tadarafil for the treatment of erectile dysfunction (ED) is growing rapidly as the preferred ED drug. We’re also very big in the field of osteoporosis or bone diseases, so you can imagine in Asia this is a huge opportunity because of the aging population and Asian women tend to have more osteoporosis related diseases. We recently launched a product called teriparatide that builds bone and prevents future fractures for patients with severe osteoporosis.

Journal: Is that because of the lack of calcium in the diet here?

Zulueta: That’s one reason. The other thing they told me, and I heard this from one of our experts, is that they have less weight and less weight apparently puts more burden on the bones, interestingly enough.

Journal: I understand you’ve been with Lilly since the ‘80s. Can you just give us a brief look at your background with the company and how you’ve seen the company grow throughout the decades up until now?

Zulueta: I’ve been with Lilly 23 years now, started off in Asia having worked in Manila and Singapore early in my career and then worked in the U.S. several times in various capacities. Prior to this role here, I was based in Hong Kong for several years managing all of Asia except Japan because Japan is a standalone region and to us significantly bigger than all of the rest of Asia combined, and now I’ve been in Japan for three years. It is clear that in the future, as in many industries, Asia will be at the forefront of much of the growth. And that growth is real. In China, much of Southeast Asia, Korea, India…it’s truly an exciting time to be in Asia. It is the future for economic growth and the same is true for our industry. But let’s not forget Japan…it remains a highly attractive large market, with excellent people and opportunities for growth for those who see the ‘glass half-full.’ If you look at the size of the populations, you see the growing per capita incomes, you see the aging population for instance in Japan and as you know as the population ages, the demand of healthcare and therefore the demand for innovative medicine increases. So I think for companies like Lilly that are focused on innovation and innovative medicines, the future is extremely bright here in Asia. So I have to tell you I am thrilled to be here and I think a lot of folks are thrilled to be part of our business here in broader Asia.
Now things have changed. When I think about when I joined in Asia 23 years ago, I think there was a lot more focus on pushing our products, or trying to sell our products. And I have seen a change to a focus on “What is the right thing to do for the patients?” It is a dramatic change.

And I don’t think it’s only Lilly, but for the industry. We realized, at the end of the day, we need to be focused on what is the right thing to do for the patient. And in some cases, our products are not the right products for a particular patient. So we have to have a deeper understanding on which patients benefit the most from our products and in what way, and what services and support we provide them, their families, as well as healthcare professionals. I think we’ve become more integrated in our focus on what is best for the patient.

The other thing I would add that has changed is the need for more partnerships. We call it integrated pharmaceutical networks. Being an independent pharmaceutical company—one of the very few left, by the way—we do know that we cannot do it all ourselves in-house. So across the value chain, from discovery research to the clinical development to the manufacturing to commercialization, a key element of our strategy is to look for strategic partnerships, which I have to say, when I joined the company and even ten years after I joined, that was not a specific focus of ours, and that is a major change.

Journal: In the wake of the Great East Japan Earthquake, does Lilly have any particular activities or involvements in the recovery or outreach efforts? And, outside of recent events, are there any CSR activities that the company is involved in that we might want to know about?

Zulueta: I think within two days, we announced that we were going to make a financial contribution as a company of 100 million yen. On top of that we had close to another 30 to 40 million yen in employee contributions financially. Of course we haven’t quantified the amount of medicines we’ve made available and, as you know, most of our medicines are life saving, so we made that available very quickly. So we’ve been very pleased with the reaction of our people and of course we’re not done yet. We’ve just started. We will continue to look for ways to continue to support the Japanese government and the country. I think the country and its people have been an inspiration to many in terms of how they’ve reacted and we’re just pleased to be a part of that.

On top of that we have many Corporate Social Responsibility activities. Most of which are related to health care. We support a number of advocacy groups. For instance we support PANCAN, a pancreatic cancer group that looks for the next generation of treatment. We provide them support on an ongoing basis. We also provide awards to health care professionals as well as patients for reintegrating patients with mental health issues back to society. People are helping support that and we’ve provided a system of awards and recognition to encourage them.

We also support people who have been taking insulin for 50 years. Just recently we set up what we call the “cancer of the arts” program which supports patients and their families who have been very supportive of efforts to show what it is like to manage cancer and we call that Lilly Oncology on Canvas. It encourages cancer patients, their families as well as health care physicians to paint, write essays describing what it is like to manage cancer and in so doing inspiring other cancer patients that they can fight this battle and win it. There are many others we support and of course in Kansai we’re very active with ACCJ activities. We’re a major sponsor of the Walk-A-Thon here, which is every year, we have it in different parts of Kansai. Proceeds of that go toward various women’s groups because we’re very supportive of the diversity effort, particularly around female diversity here in Japan.

Journal: What are we missing about the Asia story? What should we be paying attention to, examining or keeping an eye out for that maybe you’ve been able to see more clearly from your vantage point moving forward?

Zulueta: That’s an interesting question. Some companies were later than others in their assessment of the opportunities here in Asia, but the opportunity is real so everyone’s accepted that. The question now is a question of how much commitment they have to Asia. Meaning: how much investment and resources. And then second, the talent that you put behind your operations

To me, the first part of it is resourcing. I think some companies are still not all-in. This is the place to be. I mean, the demographics would suggest that. So, at least for Lilly, really it’s been in the last five years where we’ve really gone all-in, and I think there’s still continued opportunity. But you have to be resilient enough to know that there will be ups and downs—in the long haul you’ve got to invest to win. I think some companies may be missing that.

Also, the talent you put behind the operations here. That takes a longer period of time but I have my own biases in terms of Asia in particular. I think sometimes multinationals go local too quickly in terms of staffing key senior positions. I think you’ve got to get the right people in the right jobs here: people who want to win, who have a sense of where the business is, and who can execute, and then take time to seriously develop your local talent including overseas assignments and give them meaningful leadership roles that prepare them to be effective global executives back here in Asia and move forward. At the same time, I have seen some of the expats that come may over-compensate for the cultural differences. We obviously need to be cognizant and appreciate the cultures but  I think there are more similarities than there are differences in running a business.

Journal: Finally, what areas, in terms of products, or market focus, does Lilly plan to venture into in the next two decades?

Zulueta: I think we will continue to focus on areas such as neuroscience. Of course the next field in neuroscience that will be a major focus for us will be the treatment of Alzheimer’s. We have a major product for that. We’re also very focused on a new area called autoimmune diseases like rheumatoid arthritis, psoriasis, and lupus. We’re currently not in that field, but we have a very exciting innovative portfolio of products that’s moving forward. And then we have our staple therapeutic areas such as cancer and diabetes and bone diseases.

So we expect to grow much faster than the market. As I said earlier, we think we are still underrepresented here and that there are tremendous opportunities for us to improve our ranking and grow our business significantly in Japan.

]]> http://accjjournal.com/global-health/feed/ 0 http://accjjournal.com/transforming-japan-inc/ http://accjjournal.com/transforming-japan-inc/#comments Tue, 14 Jun 2011 15:14:57 +0000 ACCJ Journal http://accjjournal.com/?p=4559
The Tohoku earthquake took a major toll on life and property in Japan. Estimates say the quake and resulting tsunamis claimed more than 20,000 lives (including the missing) and damaged or destroyed over 125,000 buildings. Two leading authorities gathered to discuss the economic aftermath of the disaster on April 27 at the Tokyo American Club. In an ACCJ-sponsored event titled “Japan’s New Economic Reality–Assessing the Disaster’s Impact and Recovery Prospects,” Hiromichi Shirakawa and Jesper Koll addressed the situation that Japan will face as it mounts its recovery effort.

H iromichi Shirakawa, Credit Suisse’s Chief Economist for Japan

Hiromichi Shirakawa, Credit Suisse’s chief economist for Japan, led off the discussion. Shirakawa cited the best-case scenario for Japan’s recovery and the disaster’s potential effect on GDP growth for 2011 and 2012. He also looked at risk factors that could hinder growth.

Analysts have adjusted projections for real GDP growth of 0 percent in 2011 and 3.5 percent in 2012. Nominal GDP forecasts have likewise been revised at -1.1 percent in 2011 and 3 percent in 2012. Shirakawa expressed concern that the revised GDP could affect the government’s plans to fund recovery stimulus through tax hikes, and the limited ability of increased income and VAT taxes to generate revenue.

Risks to the economy’s growth trajectory include prolonged supply chain disruptions, delays with power supply normalization, a continued slump in consumer confidence and a potential 3 percent increase of the VAT in 2012.

Although Japan’s bond market could turn jittery, it was not a likely scenario. Cash on hand had hit record peaks in the corporate sector just before the quake. This factor combined with significant sources of externally generated income and the nation’s over-saving situation further decreases that likelihood.

Jesper Koll, managing director and head of research at JP Morgan Securities Japan spoke of the disaster’s devastating human toll, but said, “From an economist’s perspective, this does actually create a very, very big opportunity here,” alluding to the “creative destruction” that disasters of this magnitude inevitably bring.

In the aftermath of this disaster lies the opportunity to revitalize several troubled aspects of Japan’s economy. The situation will accelerate efforts by private companies to create more efficient supply chains and by the government to reverse the downward spiral of deflation. It also raises the prospect of rebuilding the Tohoku region into a pioneering leader of new industry.

“We actually think the private sector of Japan…will seize the opportunity,” Koll said, pointing to the ability of the corporate sector to tap large cash flow surpluses for rebuilding better production facilities and logistics hubs. Koll said he expects these private companies to become very creative, proactive and efficient as they capitalize on the current situation.

Koll ventured that JP Morgan is optimistic that the industrial sector will resolve all remaining supply chain disruptions by August or September of this year. “There are some uncertainties within the electric power supply, but even there, our experts think… [there] are not going to be significant issues going forward,” Koll added. Analysts predict that peak electrical demand is about 62 gigawatts while they expect Tohoku Electrical Power to have 55 to 58 gigawatts capacity by the summer.

Koll was emphatic that the current situation is not another “Lehman Shock,” referring to the 2008 bankruptcy filing by Lehman Brothers and the subsequent effects on world markets as global production and demand declined for seven consecutive quarters. “In global economic terms [the Lehman Shock] was a once in a hundred years event… quite the opposite from where we are now,” Koll said.

All of the world’s major economies are revising economic growth upwards. Koll noted that, “The world is fine. In fact, the world is doing too good, because inflation is becoming a real issue.” According to Koll, inflation has begun to move beyond the commodities and food sectors and into other spaces, leading to wage inflation and demand-pull inflation. This differs greatly from the Lehman Brothers situation.

Another frequent comparison to the current situation is the 1995 Kobe quake that killed nearly 6,500 people and caused about 10 trillion yen in damage. Aside from the obvious differences in magnitude, the present situation is also very different from the Kobe quake from an economic point-of-view.

The Kobe earthquake struck at a time when Japan was in the midst of a banking crisis. It also hit the same year that marked the start of deflation in Japan due to import liberalization, regional competition and labor market revolution, among other factors. The current situation lacks the credit crunch and deflationary pressures present at the time of the Kobe quake.

This disaster has affected underlying deep trends that Japan was already experiencing, including de-industrialization. Many Japanese companies had been eyeing overseas markets due to thin domestic profit margins and a lack of growth in the domestic market. Various Japanese concerns have been able to earn three times greater profit margins in overseas markets compared to their take of domestic market. Koll cited Honda as an example, saying that the company has not made a profit on any car sold in the Japanese market for the last 13 years.

]]> http://accjjournal.com/transforming-japan-inc/feed/ 0 http://accjjournal.com/fact-from-fiction/ http://accjjournal.com/fact-from-fiction/#comments Tue, 14 Jun 2011 15:12:59 +0000 ACCJ Journal http://accjjournal.com/?p=4565

Photography by Irwin Wong

Kevin Carroll, Representative Director of EA International, an environmental risk management, engineering and scientific consulting company, spoke with the ACCJ Journal about the March 11 disaster, focusing on the nuclear crisis at Fukushima, and its possible impact on those of us working and living in the Tokyo area. And while the company specializes in general environmental health, toxicology (including radiation), materials, and the human responses (crisis management) to related problems, he emphasizes that he is not a nuclear physicist or engineer.

First Reactions

When asked for his first thoughts on what he saw of Fukushima on television, he replies, “I was concerned. Primarily community because there was basically no information coming out of the Tokyo government or any ministries, or TEPCO [Tokyo Electric Power Company] in particular.” For the first two days, the chaos resulting from the quake and tsunami overwhelmed the media, and he does not blame TEPCO for the lack of information, but he adds that, “By day three the picture started to emerge that Fukushima didn’t appear to be under control, and TEPCO didn’t appear to have any answers.”

From the broadcast media, it was hard to determine what was going on, but Carroll concluded from what he saw that there were issues with the reactors and the spent fuel pools. “I know enough about nuclear power engineering to tell you that the fuel sources, regardless of whether they’re in an active reactor or dormant, have to stay cool,” he says, “and as soon as we knew that power was out and TEPCO wasn’t able to bring in any trucks, my alarms started going off.” Not, he adds, that this lack of response to the failure of the backup systems was necessarily TEPCO’s fault—the infrastructure in and around the power plant was shattered (though the reactors themselves appeared to have survived the initial disaster), preventing power being supplied to the site, or even vehicles such as generator trucks from arriving.

Two additional factors contributed to Carroll’s initial concern: that offers of help from many outside experts were initially rebuffed by the Japanese government, who claimed that TEPCO could handle the crisis; and that when information did start to emerge, it was delivered in highly obscure and technical terms which could not be easily understood by the general public.

The End Result?

According to Carroll, the end result—as opposed to the general and immediate after effects—of the Fukushima crisis will be the same as that of Chernobyl, a pile of melted nuclear fuel. “No one knows what to do with it,” says Carroll. “I’m not faulting anyone. This is a nuclear power industry problem—what do you do with spent fuel?” Many seem to feel that the answer, as with Chernobyl, is to entomb the material in a concrete sarcophagus. But as Carroll points out, Chernobyl is some distance from the nearest body of water, while Fukushima is only a few hundred meters from the Pacific Ocean. “The long-term ramifications bother me,” he says.

But in the short-term, he adds, “I know enough about nuclear safety to know that the radiation itself coming out of the units where the fuel rods were exposed is an issue, but it’s an issue that’s primarily local. It’s a Fukushima problem, as opposed to a Japan problem or a Tohoku problem.”

So what has everyone worried? Carroll explains that when the hydrogen explosions at Fukushima occurred, combustible debris fell into the craters that were created, and burned. “The temperature of the fuel rods is in the hundreds of degrees and anything that falls in there is going to burn,” he explains. Smoke, composed of particulates, billowed from the structures, and those radioactive particulates were picked up by the wind and spread onto the surrounding areas, including crops, and soil. “Any surface which is out there, such as leafy vegetables, is going to be contaminated. In theory, you can wash off the radiation, but frankly, no one in their right mind is going to touch it, he says. He goes on to explain that this contamination works its way up the food chain, and now the cattle who have eaten grass in that area have been contaminated. The idea is to keep the contamination localized, and not let it move through the food chain to the human populace.

The fishing industry, which has likewise attracted a great deal of attention in the wake of the event, is also a matter of some concern to Carroll. “Sea water is not tap water,” he points out. “It contains sand, micro-organisms and particulates floating in the water, which become contaminated. Fish eat those.” And although he cites the government statement that prohibits fishing within 20 kilometers of the plant, he also warns, “Well, fish don’t stay still. They swim.” Radiation in fish works its way up the food chain in the same way as mercury–the animals at the top of the food chain accumulate most in their bodies.

However, Carroll emphasizes that, “Based on the data that’s been released to date, there doesn’t appear to be any immediate threat of airborne or water-borne exposure in Tokyo. On the question of contaminated materials, whether they be vegetables, or livestock, or fish, the government is doing everything they can to control that, and we hope that it is successful.” But, it’s better to err on the side of caution, he adds.

Even with this caution being exercised, and noting that the risk of radiation-induced illness may not be great, he admits that there are clear repercussions to our daily lives. “No matter how many people tell you that that head of Ibaraki lettuce is safe, if you have a choice between that Ibaraki lettuce and a head of Brazilian lettuce without a hint of contamination, even if it’s twice the price, which one are you going to buy and feed to your kids? It’s not the risk, it’s the perception of risk,” he says. “And that’s already having real consequences. We’ve received numerous calls from clients who manufacture products in Japan, some of them nowhere near the affected prefectures, but as a condition of export, their customers are insisting that we test these products for radioactivity before shipping. It’s not a big deal. You can do it, but it’s an additional cost in the manufacturing chain.” He describes the entire situation as a “horrible reputational risk [for Japan]… and some of it is not even warranted.”

So Wasn’t He Worried?

Carroll admits that he was somewhat concerned at the time when the plants weren’t being cooled, during which the fires appeared to be uncontrollable. And for medical reasons, he took his daughter to Osaka for a few days (she requires medication that must be refrigerated, and there was no guarantee that power would be consistent). Despite the recent stabilization of matters, he remains somewhat concerned: “There still continues to be a risk of fire. If [TEPCO] loses cooling capacity through another quake or tsunami or other disaster, and the fuel rods are exposed, they will auto-ignite and it will spread. How far? No one knows. So far, Tokyo’s been lucky, with the prevailing winds blowing south to north.”

However, even this scenario is not as dire as it first appears. The advice given by the British Scientific Advisory Group for Emergencies (SAGE) as relayed by the co-chair and British Chief Scientific Adviser, Sir John Beddington, is that in the highly remote event of a worst possible scenario (all four reactors and fuel pools simultaneously catching fire, with a strong wind continuing to blow towards Tokyo for at least two days), staying indoors and avoiding exposure to contaminants would circumvent the worst radiation-related risks. Carroll concurs, adding that, “If you can do it, that would probably make the most sense.”

The risk of radiation-induced cancer exists, as he admits, but this is essentially a statistical matter, which has many variables related to individual physiology. Carroll says that even after such a catastrophic event such as the one described above, “My conclusions at the moment are that you [would not be] likely to die of radiation exposure. You [would] likely have a host of other problems immediately after that event, including food and water and infrastructure breakdown.”

During such an event, water might be contaminated and considered unsafe to drink. And while activated charcoal filters may absorb some radiation, Carroll emphasizes that, “Anything will absorb something of anything. This [activated charcoal] is not the solution.” Food already in the stores might be safe, but food in transit would be suspect. It might even be unsafe to leave shelter for extended periods. And there are other problems that might also arise. In such situations, “The dominoes start to fall in rapid succession,” he points out.

Photography by James Ferrara

As spring inevitably gives way to a hot and humid Kanto summer, Japanese and foreign businesses alike are contemplating how to conduct business-as-usual without the assurance of plentiful, unrestricted electricity. Enter Paul Scalise, an energy economist and TEPCO expert. A former Senior Associate at Cambridge Energy Research Associates (CERA) and current non-resident fellow at Temple University’s Institute of Contemporary Asian Studies, Scalise has spent his career analyzing every aspect of Japanese energy markets and has a forthcoming book investigating the restructuring of the Japanese electric power industry since the 19th century. He took the time to speak to the ACCJ Journal about the current challenges facing the Japanese energy market, and what businesses can expect in the coming months.

Journal: How has the energy situation evolved in the past month and a half since March 11, and what’s different now compared to when all of this began?

Paul Scalise: Well, for starters, TEPCO has released new press releases suggesting that the projected supply-demand gap will narrow for the peak summer months of July and August. Originally the gap was a projected 8,500 megawatts. That has now fallen to 5,000 megawatts. The nuclear power issue is unresolved. Thirteen of seventeen nuclear reactors remain offline, that’s about 12,396 megawatts to be exact. Obviously the six Fukushima Dai-ichi reactors are now useless, because of extreme damage. The remaining seven offline nuclear reactors will not likely to be back online before the summer, because the understandable caution exhibited by the local governments, the regulator and of course TEPCO, to protect the public from potential radiation leaks. Consequently, the objective now is to restore thermal power generation in time for the summer. The extent of the company’s thermal power plants and how quickly TEPCO can correct the supply-demand imbalance is unfortunately unclear.

The press releases have conflicting information in them from TEPCO and elsewhere. TEPCO suggests that 2,600 megawatts of thermal power at two power plants remain offline, whereas other company statements and interviews suggest that the problems at Hirono power station—which is a thermal power station,
conventional power—for example, are far more extensive than the official TEPCO press releases suggest, be that as it may.

Journal: Although there are some reports that the supply-demand gap will be less than originally anticipated, it also seems that some kind of planned blackouts or “energy caps” during the summer will be inevitable. What kind of impact will this have on Japan’s ability to rebuild within the next few months?

Scalise: Obviously, the electric power gap is going to create problems first and foremost for industry. A political decision has been made that in the event of rolling blackouts, industry will bear the greatest burden—not the residential or commercial customer. Therefore, the likelihood that Tokyo’s urban areas will be affected are minimal at best. Not very probable. The countryside will be greatly affected if rolling blackouts take place and as you know, the greatest amount of industrial activity and factories are located within suburbs and the countryside. Therefore, if we assume that peak demand in July and August brings about blackouts, those industries with the greatest energy intensive needs will be affected first. Now, what industries are those?

To begin with, we’re looking at mining, storage facility services, railroads and railways, paper and pulp industry, the steel industry, chemicals, breweries, computer chips like semi-conductors, and autos and auto parts. Those are the major energy intensive sectors that will be affected should rolling blackouts take place. Companies that have been offline, as a result of the earthquake and not as a result of necessarily the electricity crisis have been companies like Asahi Beer, Nissan, Toyota, and Tokyo Steel. Now these companies have stated quite clearly that if a blackout should take place it will affect their production capacity quite significantly. For example, in the case of lost production, back in March the automaker’s combined production was said to be lowered by 400,000 autos. That’s equivalent to about five percent of the year’s production. By April 7, Toyota had lost about 300,000 units of production, while Nissan and Honda said their plants would be able to run at only half of the pre-crisis levels.

Now, petroleum refineries and petrochemicals would be affected as well in terms of the final goods that they make. The loss of electricity should impact the chemical industry and the petrochemical industry even more. Unfortunately, very few of these industries have what is known as jikahatsuden, or self-generation, the building their own electric power plants to deal with the high electricity prices that were unfortunately the result of the oil shocks of the 1970s. Why they chose not to break away is a testament to the brand that TEPCO has over them—the brand being stability. The blackouts and brownouts in Japan, especially in the TEPCO service region, have been historically few and modest. Will that change now as a result of the looming electricity crisis, and if that changes what will that do the contestable liberalized competitive market for electric power in which new entrants since March 2000 have unable to capture a significant share? Will customers finally choose to switch over and risk breaking away from TEPCO despite the fact that new entrants sell at significantly lower marginal cost than TEPCO does? That is an open question. No one really knows yet.

Journal: There is some talk about companies looking to maintain productivity and minimize the impact that these restrictions might have. For example, you have companies like Sony who have stated they will voluntarily switch over to Daylight Savings. So while Tokyo and urban areas may not be as affected, it seems that it won’t be business as usual come summertime. In the medium to long term, will this have a major effect on the Japanese economy?

Scalise: It is certainly a counter scenario to the conventional wisdom. The conventional wisdom argued that the immediate impact of the earthquake would be minimal to Japan’s GDP growth because it happened in the prefectures of Miyagi, Fukushima and Iwate which roughly contribute only five percent to Japan’s GDP. However, given the fact that Tokyo Electric Power Corporation and Tohoku Electric Power Corporation distribute electricity across 45,963 square miles of northeastern Japan, servicing 33 million residential and 3 million industrial customers in 15 prefectures, if the lights go out and companies are forced to alter their economic behavior, that actually impacts 45 percent of Japan’s national GDP. That’s a much larger story, isn’t it?

Now the question is: What will happen to this 45 percent of Japan’s GDP if companies start adopting the so-called Daylight Savings Time this year, which the Japanese are considering implementing this summer as a means of saving energy? There is a theory, which was adopted by the U.S. in the 1970s, that states if you go on daylight savings time, you’re effectively lowering energy consumption by approximately one percent each day, to the tune of about 300,000 barrels of oil each year. Now that was originally based on a study from the U.S. Department of Transportation in 1975. Unfortunately, what has happened since then is that technology has changed. Now, much more electrification has taken place and the technology in the household as well as in industry has changed dramatically since the 1970s oil shocks. I’ll give you a few examples, both in the U.S. and in Japan to demonstrate how the technology has changed.

Given that Japan is one of the U.S.’ closest allies, many American and Japanese business people based in the nation’s business hub of New York City, home to the economic barometer that is Wall Street, are now attempting to divine the real long term impact of the earthquake on the U.S.-Japan economic partnership from across the Pacific.

ECONOMIC AFTERSHOCK
On the southern tip of Manhattan, the Japanese and American flags hang side-by-side at the New York Stock Exchange on Wall Street. On March 14, just three days after the historic quake, Ambassador Shigeyuki Hiroki, Consul General of New York along with representatives from the Japanese Chamber of Commerce and Industry in New York (JCCI NY) and the Japan Society, rang the closing bell at the NASDAQ MarketSite in Times Square. As a symbol of the U.S.’ economic wealth and prosperity, Wall Street’s show of solidarity for Japanese businesses illustrates the close economic ties linking the U.S. to the world’s third largest economy.

According to figures from the U.S. Census Bureau’s Foreign Trade Division, trade between the U.S. and Japan totaled over $180 billion in 2010. New York (as well as Los Angeles, and Washington D.C.) is also home to a number of U.S. branches of major Japanese banks, trading companies and corporations. On a more local level, Japanese expats, along with Japanese-Americans have created vibrant small business communities across the U.S., including Japantown in San Francisco.

Regardless of size, the tragic events of March 11 have had a profound effect on Japan-related businesses, companies and organizations worldwide. In the short to medium term, the spotlight will understandably remain fixed on the ongoing crises and reconstruction. Going forward, however, the questions facing the Japan-U.S. partnership will not be limited to just how far the “business aftershocks” reach, or how long they will last. It will be a question of how to adapt.

CRUNCHING THE NUMBERS
Preliminary figures from the Japanese government estimated that the total losses caused by the earthquake could range from 15 trillion to 25 trillion yen ($168 billion to $309 billion), making it the costliest natural disaster in modern history. In comparison, Hurricane Katrina in 2004 cost insurance companies an estimated $125 billion, while the Great Hanshin Earthquake in 1995 cost the Japanese government $100 billion. Combined with potential power shortages that may last well into the summer, there’s no question that Japan faces a number of obstacles in its long road toward recovery.

“The 25 trillion yen figure provided by the Japanese government figures does not include losses in economic activity from planned power outages, the crisis at a stricken nuclear power plant in Fukushima or radiation contamination of agricultural products and water in the neighboring prefectures,” said Takashi Imamura, Vice President and General Manager of Marubeni America Corporation’s Washington Office. “I assume comprehensive damage from the four disasters may reach 30-35 trillion yen.”

Currently, Japan accounts for roughly 9 percent of the total global economic output—a number both telling and surprisingly counterintuitive in terms of how these numbers will add up on an international scale. It would seem only logical that a disaster of such scale in a major economy would lead to massive, if not crippling economic repercussions worldwide—especially for the U.S. However, the general consensus among experts is in fact, quite the opposite.

“The big story is that the overall impact will be surprisingly small,” said Edward Lincoln, Director of the Center for Japan-U.S. Economic and Business Studies at New York University. “The magnitude is actually not that large. The areas most heavily affected—Iwate, Miyagi, and Fukushima prefectures—account for only four percent of Japan’s total GDP.”

Michael Auslin, Director of Japan Studies at the American Enterprise Institute, agreed, stating that, “The long term effect on U.S.-Japanese economic relations is fairly limited. The short to medium term issue is the loss of productive capacity.”

GLOBALIZATION AND THE EARTHQUAKE
To be sure, the most visible impact of the earthquake on an international scale were the various disruptions in the global supply chain. Automobile companies such as Toyota, Nissan Motors and Honda were forced to halt production and shipment of vital components, which in turn caused shortages overseas. In the U.S., these shortages caused both General Motors Co. and Ford Motor Co. to suspend or divert a percentage of their operations. A survey by an auto parts manufacturing group reveals that 74 percent of U.S. automakers import components from Japan, while 69 percent reported troubles in receiving parts from Japan.

Automobile companies were not the only ones affected by global supply chain issues. Since Sony’s Walkman became a household name in the 1980s, Japan has built a global reputation for all things electronic, and produces hundreds of vital components found in a wide variety of high-tech products ranging from smartphones to LCDs. According to industry estimates, Japan produces 60 percent of the world’s supply of silicon wafers, an essential component used in building computer chips. Immediately following the earthquake, rumors abounded that Apple might have to delay the launch of its newly announced second-generation iPad. While as of this writing, Apple has yet to confirm or deny any delays, the mere implication speaks volumes.

Outside Japan, however, the problem is likely to be only a temporary setback. For instance, most auto companies in North America, Europe and South America have significant, independent regional operations, and can conduct most of their production at home.

“If anything, the shortages in the global supply chain reminded the world of the strength of the Japanese economy,” said Michael Green, Senior Advisor and Japan Chair of the Center for Strategic and International Studies. “The world depends on Japan quite a lot. Companies such as Toyota and Panasonic are global, agile and resilient. In six months’ time, they’ll be fine.”

Similarly, the impact on recent efforts by Japanese companies to globalize is likely to be minimal. Prior to the earthquake, many Japanese companies took advantage of a rising yen to extend their global reach. From April to September of 2010, Japanese firms from a wide variety of sectors spent a record 1.53 trillion yen in foreign acquisitions—a 54 percent increase from 2009. Moreover, companies such as Rakuten and Uniqlo made headlines by making English the official company language in an effort to increase their global competitiveness.  

“There won’t be much impact on Japanese corporations trying to globalize as long as the aftermath of the quake doesn’t affect their ability to produce goods and services sourced in Japan,” said Robert Dujarric, director of Temple University’s Institute of Contemporary Asian Studies (ICAS).

“Companies such as Uniqlo get their supply from China,” adds Lincoln. “If anything, recent events may encourage them to be more aggressive overseas.”

The direct effect on Japanese companies who have already established offices in the U.S. is also likely to be minimal. “Trading companies are largely independent. Operations in the U.S. have not suffered,” said Imamura. Instead, he suggests that some companies may shift focus towards building U.S. interest in exporting to Japan or China.

However, power shortages caused by the nuclear situation in Fukushima have, for the time being, shrouded U.S. companies interested in the Japanese market under a veil of uncertainty. “The energy dilemma is the real elephant in the room,” said Paul Scalise, a TEPCO expert from Temple University’s ICAS. “The real question no one wants to talk about is: What happens when the lights go out?” Blackouts in Japan average a mere four minutes per year, compared to an average of 69 minutes in the U.S. According to Scalise, should such disruptions in power continue, it could lead to an alternative energy renaissance—provided it gains enough political momentum to offset its relatively expensive infrastructure costs and technological constraints.

Recent murmurs from the DPJ have also hinted that the proposed corporate tax cut could be suspended to help pay for reconstruction costs. At 40 percent, Japan’s corporate tax is one of the highest in the world, especially when compared to the 25 percent and 24.2 percent corporate income tax rates in China and South Korea. “Asia as a whole remains an attractive market,” explains Auslin.

“Backtracking on the corporate tax cut could affect foreign companies interested in entering into joint ventures or setting up subsidiaries in Japan.” Additionally, should uncertainty persist, it is not unlikely that some companies may turn to South Korea, China or Taiwan as an alternative business supplier.

“You might have a situation where U.S. companies contemplate new investments,” adds Lincoln. “For instance, if a company has $100 million to spend in Asia, I can imagine a conversation at corporate headquarters where investors look at Japan in terms of the earthquake, tsunami and nuclear situation and perhaps invest elsewhere.” However, Lincoln goes on to emphasize that companies whose success is contingent on the Japanese market, or who have a vested interest in Japan are unlikely to be swayed by recent events. 

LOCAL KNOW-HOW
Just as the “business aftershocks” from the Tohoku Earthquake rippled out into the world economy, so too will the actions and outpouring of goodwill from overseas ripple back towards Japan. On March 18, the G-7 countries intervened to stem the sharp and sudden appreciation of the yen, which soared to post-World War II highs of 76.25 yen to the dollar. The intervention—the first coordinated effort by the G-7 in ten years—had an immediate effect, as the yen quickly weakened to pre-quake levels of roughly 80 yen to the dollar.

However, aside from intervening in currency markets and participating in humanitarian efforts, experts agree that there is little that foreign governments can actually do to prevent Japan’s weakened economy from slipping further. But where governments may be limited to helping at a more macro-level, local businesses in the U.S. paint a very different picture of how the U.S. can help Japan.

Spurred by a sense of helplessness, many Japanese and American business leaders in the U.S. have taken it upon themselves to do what they can to expedite Japan’s recovery and reconstruction. Within a week of the disaster, exchange students, volunteers and Japanese expats armed with donation boxes flooded Union Square, Grand Central Station, and the Empire State Building to raise money for the Red Cross and other NPOs. The business community was not far behind.

Soon after the earthquake, the JCCI NY collaborated with the Nippon Club to create a united relief effort from the Japanese business community in New York. “Right from the day the disaster struck, the Chamber has been contacted regularly by our member companies inquiring about how they can help with fundraising for relief efforts,” said Tsutomu Karino, Executive Director and Secretary of the JCCI NY. “Our member companies have not only donated their own money but have also involved their employees with matching contribution campaigns.”

“We have nothing to lose,” said Chikako Ichihara, CEO and President of Azix Inc., which sponsored the weeklong Dine Out for Japan event in collaboration with NBC Universal and the New York Restaurant Association. The event organized over 70 restaurants both big and small to pledge 5 percent of their sales from March 23 to March 30 in donations for the Red Cross. “New Yorkers love eating food from different restaurants and cultures, so by doing this, we could help in a more natural way.” Restaurants were encouraged to contribute in ways that would fit their business and appeal to a wide variety of customers; some simply contributed 5 percent of total sales, while others opted to craft special menus specifically catered towards earthquake relief.

“People in New York are constantly dining out and enjoying our restaurants,” added New York Restaurant Association Executive Vice President Andrew Rigie. “Therefore, people could support the relief efforts by dining out as usual or, to show extra support, they could add an extra restaurant meal to their normal dining routine.”

One trend among both charitable organizations and business-related relief efforts was the implementation of the Internet and social networking sites, particularly Facebook. “Using Facebook was like getting free advertising. We could target food bloggers and food writers to get the word out,” adds Ichihara.

Across the country in San Francisco, designer Brooks Hassig used social media to organize a network of over 50 stores in ten countries, who for one day, would pledge a percentage of their sales towards the Japanese Red Cross. “Businesses see the opportunity to both support themselves, other socially conscious businesses, and most importantly do some serious good for the people of Japan,” said Hassig. He added that, “Our model allows businesses to join an ad hoc network, a pop-up team if you will, that support each other by showing support of a common goal, while also empowering themselves to energize their customers.”

RESILIENCY AND FRIENDSHIP
In the news media, the word most often used to describe Japan in the aftermath of the earthquake was “resilience.” For many, the matter of Japan’s recovery is not a matter of “if,” but a question of “when.” Predictions from economists, the World Bank, and the IMF have already projected that the Japanese economy could begin to rebound by the second half of 2011. When compared to the Hanshin earthquake, it has become clear that the Japanese government has taken the lessons from Kobe to heart. Where the government once shunned foreign aid, it has now embraced it with open arms.

However, as TEPCO races to contain the nuclear crisis at Fukushima, and the Kan Cabinet begins to formulate a reconstruction plan, it remains to be seen whether or not this cautious optimism will come to fruition. Yet regardless of what may lie ahead for Japan, actions taken by the U.S. government and its business community prove that ties between the two countries remain uniquely close.

“On a different level, seeing this outpouring of support from organizations here in the U.S. will certainly help to further strengthen the bond between our two countries,” said Karino. “The Japanese people will remember for years to come how Americans reached out to them during this time of need.”

This phenomenon is seen not only here in Japan but across the globe, not only in response to disasters but also in response to on-going needs such as the fight against poverty in the developing world. Volunteer activities that involve travelling away from home have come to be known as voluntourism. Voluntourism has a number of manifestations ranging from fund-raising activities to spending time in a developing country helping to build houses or teaching English and several options in between. As with other forms of volunteering, it results in wide-ranging benefits and opportunities.

Fundraising Activities
Endurance physical events are particularly popular and successful fund-raisers. One such fundraising voluntourism activity that is available in eleven countries–Australia, New Zealand, Hong Kong, the UK, Netherlands, Canada, Belgium, Ireland and Japan–is the Oxfam Trailwalker. An endurance event in which four-member teams hike 100 kilometers through bush terrain in 48 hours, Oxfam Trailwalker raises funds for natural disaster relief and projects to end poverty. Each team commits to raise a certain amount of money, usually by holding separate fund-raising events.

Of the funds raised by the Oxfam Trailwalker in Japan this year, which will be held May 13 to 15, 10 percent will go to earthquake relief. Kristin Soni, a freelance translator who completed the 2010 Japan Oxfam Trailwalker observes, “Even though it’s a real physical challenge that requires training and preparation, a hike like Oxfam Trailwalker is more accessible to non-athletes, providing a once-in-a-lifetime opportunity to raise money to help people in the world’s poorest regions.”

This author recently completed a 6-day trek in Ethiopia’s World Heritage-listed Simien Mountains that was organized by Dubai-based Gulf for Good to raise funds for RAEY, a school in Addis Ababa founded in 2005 to educate street children who have lost one or both parents to HIV/AIDS. The money raised by the 20 trekkers will build a new school building at RAEY, increasing the number of children who can be educated. At the end of the trip, the trekkers spent a day with the children at the RAEY school, fitting them with new shoes donated by a Dubai merchant and feeding them lunch.
As a participant, in addition to raising funds for a good cause, my time on the ground in Ethiopia has given me a heightened awareness of the need for basic education and hygiene among forgotten children in Addis Ababa, the lifestyles and poverty of rural Ethiopia, where electricity and running water are unknown, and the environmental challenges of the mountain region, which faces deforestation and water supplies damaged by phosphate run-off.

Although UNICEF, the United Nations Children’s Fund, is affiliated with the UN, it receives no UN funding, relying instead on private donations. It is increasingly relying on voluntourism as a fundraising source. For example, UNICEF UK’s voluntourism activities in 2011 include multi-day treks in the Namib Desert and Jordan as well as an off-road motorbiking adventure in Africa emulating a trip by UNICEF UK Ambassador Charley Boorman and actor Ewan McGregor. UNICEF projects supported by the funds raised include child immunizations, HIV/AIDS prevention programs and special programs for the education of girls.

Fundraising voluntourism ordinarily requires the participants to pay a participation fee that covers the costs of their participation and also to engage in a fundraising to a set level. The fundraising activities of the participants serve a dual purpose, to raise funds and to raise the awareness of others regarding the supported cause.

Activities that Lend a Hand
Other voluntourists prefer that their efforts provide direct assistance to those in need and are prepared to travel to make their contribution.

Habitats for Humanity is well known for helping to build or repair homes for those in need around the world. It is possible to volunteer as an individual or as a group to travel overseas and spend a week or more helping to build a house. St. Mary’s International School sends a group of students to the Philippines every year for this purpose. Says Ann Ebrecht of Temple University Japan, “Although my son didn’t think he wanted to go, in the end he found the experience very rewarding. He worked side by side with the people who would ultimately live in the house, learning some basic skills as well as a bit about the lives of the local people.”

Numerous organizations also offer opportunities to visit developing countries for periods of one week to several months to teach. Volunteer participants usually pay a fee to participate, although some programs allow participation without charge or even provide room and board to volunteers. So many voluntourism projects are available that it is impossible to focus on just one for purposes of this article. Those interested are encouraged to do thorough research in selecting a project, particularly considering the location, the nature of the project and its fit to the goals of the voluntourist, as well as the motivations of the project sponsor/facilitator.

Closer to home, JEN (originally founded in 1994 as Japan Emergency NGOs) organized groups of volunteers to assist in recovery after the 2004 Niigata earthquake. The volunteers initially repaired an old schoolhouse in Iketani-mura, where they bivouacked while then working on recovery projects such as helping to rehabilitate fields so that farmers could work them again. Realizing that many people had left the area following the earthquake and that many of those who remained were older, JEN then launched its “village revitalization program,” designed to go beyond recovery to assist in preserving the rural lifestyle.

Volunteers, often the same people who had been involved in the original recovery efforts, traveled to Niigata, often just for a weekend, to assist with planting, harvesting, snow removal and other aspects of the life cycle of the village. Ichiro Suto, a volunteer from Morgan Stanley says, “I had to be taught how to plant and how to harvest, which was interesting. I also enjoyed interacting with the older people in the villages. They told great stories.” This highly successful project resulted in close personal relationships that have made it self-sustaining, with the result that JEN phased out their Niigata program earlier this year.

Novice volunteers, who might be nervous about traveling too far or putting in long periods of effort, might consider “Voluntourism 101”—a day trip to volunteer. Particularly popular for Tokyo residents are eco-friendly clean up projects. Soleil Provence, a French language and cooking school in Fujisawa, hosts beach clean-ups twice a year. Morgan Stanley employees also have an annual beach clean-up in Kamakura. One employee, Akihiko Imae, reports, “I participated with my wife and three kids and all of us really enjoyed cleaning up the beach.  It was a great opportunity for my kids to learn about the volunteering. Even my youngest now shows more awareness of the environment and the impact of garbage.”  The employees of another ACCJ member, General Electric, took to the hills, conducting a similar clean up on the flanks of Mt. Takao.

There are many types of voluntourism opportunities and the motivations of voluntourists are as varied as those opportunities. Observes Charles McJilton, CEO of Second Harvest, “One’s motivation to volunteer changes over time based on the volunteer experience. Volunteering is not only an opportunity to enrich the lives of others, but also a growth opportunity for the volunteer.” In the end, if you want to help, just look around a little and you’ll soon find a way to do so.

photography by lorenzo barassi

Mike Alfant, the President of the ACCJ, spoke with the ACCJ Journal about the effect of the recent disasters on the ACCJ, and the response of the Chamber and its members. Looking to the future, he also discussed possible scenarios for Japan’s near and long-term future, and for American companies and enterprises doing business in Japan.

Journal: How has the disaster affected the day-to-day running of the ACCJ?
Mike Alfant: The ACCJ has been doing business as usual since the day of the quake and tsunami on March 11. We haven’t closed the office, and we haven’t really changed the way we operate. We’ve reemphasized some aspects of what the Chamber does—we’ve prioritized information in favor of any other activity that we engage in, and we’ve tried to be as communicative as possible with the members.

Journal: Ambassador John Roos has been using Twitter and Facebook a lot. Has the ACCJ also used these tools?
Alfant: Yes, and if you go to the ACCJ home page (www.accj.or.jp), there are links for both the Facebook and Twitter feeds of the ACCJ. I personally follow the Ambassador’s Twitter as well. As of this morning [March 30], I think he’s now the fourth most re-tweeted person on the Net, so he’s fast approaching number one status–I believe number one was Lady Gaga.

My personal perception is that Ambassador Roos has done a fantastic job. He’s been very forthright and diligent in communicating with the Chamber and with the community at large. I’ve had multiple meetings with him; he’s made himself accessible and available to us when needed and has been extremely open with us in sharing information and explaining why certain decisions are being made and how they’re being undertaken. I have nothing but respect and admiration for the Ambassador in this situation.

Journal: Can you say something about the charity efforts and the disaster relief efforts
of the Chamber?
Alfant: There are two aspects to this. One is that the Chamber has created a Tsunami Disaster Relief Fund. As of this morning, we’ve raised about 42 million yen [a little over $500,000] so members have been very generous these are direct cash donations to the fund. The intent is to get these funds distributed as early as next week to people in the affected area, and we’ve had folks from the Chamber go up there already trying to scope out the recipients. Obviously, everyone who’s been exposed to this catastrophe is a deserving recipient, but what we are endeavoring to do is focus on helping people restart their businesses, especially small business people who’ve had their businesses affected by this.

We’ll certainly focus on families and getting them back on their feet to the extent possible. We’d like to make our donations as meaningful as possible, so we’d sooner have fewer recipients with a more meaningful impact on each one, if possible. Of course, there are multiple agencies up there already–the outpouring of appreciation from around the world has been fantastic–so the ACCJ is just one of many.

In addition, ACCJ member companies have their own programs. A lot of those include matching grants from the firm–matching the donations that the employees themselves make–and their own CSR programs. As far as I can tell, the aggregate amounts there will be in the tens of millions of dollars based on what I’m hearing from the member firms right now.

Journal: America seems to be perceived as Japan’s best friend right now…
Alfant: Rightfully so. I think the U.S. Government has really been fantastic in this situation. I know personally that President Obama, on the day after this situation, issued a directive saying any and all assistance to be rendered–no holds barred. That is a very strong directive to be given by the President to the U.S., and that’s been taken seriously by every level of the U.S. government. You can see it in the U.S. military’s stance in terms of their direct hands-on relief efforts. We have over 100 people in-country right now from the Nuclear Regulatory Commission and other U.S. agencies with relevant expertise, including U.S. Navy personnel with experience of reactors of this type who are on-site and rendering assistance.

We’ve deployed national strategic reconnaissance assets to help monitor the situation in lieu of some of the sensors that have been knocked out. So I think the U.S. has really come through in this case. The U.S. government’s done a great job, and the U.S. business community’s done a great job by operating business as usual and maintaining a physical presence in Japan. A big part of leadership is just being there and showing people you’re serious and you intend to be there through any situation like this.

It’s important to say that the Ambassador has been here throughout the crisis. I personally have been here and never considered leaving. We did a survey of our members and right now the numbers show that 88 percent of the companies are operating either business as usual or in what they consider a slightly diminished capacity. So I think the response has been everything we could have hoped for.

Journal: What do you see as the adverse short-term effects on American businesses operating in Japan?
Alfant: Clearly the issue over the next six months will be electrical power. By some estimates we’ve had 10-11 percent of the country’s power knocked off line. It’s not easy to replace and it will take a while to replace. Firms will have to take some measures in terms of prioritizing business processes and business functions, and some firms that are very dependent on large factories or manufacturing facilities are going to be directly impacted by this. We have members of firms that have plants in Fukushima and Tohoku, so they’ll be and have been directly impacted. Short-term, the number one business issue will be power. That will persist through the summer, which in Tokyo, as we all know, can be extremely difficult, even with air-conditioning. So I expect we’ll have to gaman (work through it) a little bit this summer, but it will definitely be a business impact for our members.

I would say at this point it’s impossible to put a numerical value on this. I’ve seen estimates from smart economists saying they expect a quarterly drop in GDP of 3-4 percent and that would probably largely be mitigated in the following quarter by the kicking off of the rebuilding efforts. As a broad benchmark, the six prefectures that have been directly affected by this encompass about 4.6 percent of Japan’s GDP. Kobe, at the time of the Kobe quake was about 4.5 percent of GDP. So I’m looking at a somewhat analogous rebuilding effort once the Fukushima issue is taken care of. We came through the Kobe situation and recovered within several quarters, and I expect to see something similar here.

Journal: Most people would agree that this crisis has been better managed than Kobe?
Alfant: Crisis management is an art, not a science, and I think when you combine that with the unknowns governing a nuclear power station, I would say that the Japanese and U.S. authorities have done a very good job in managing this situation and keeping it localized to a large extent. I have no complaints there.

Journal: And in the longer term, say three years or so…?
Alfant: I always look for opportunities, and there is an opportunity here to change the way that business is done in Japan for the better. We’ve had a very static environment here for a number of years–a number of decades, in fact–and this is an opportunity to break out of some long-term bad habits. This will largely be a construction-driven business recovery–construction companies will be at the forefront; that’s been an issue for Japan for a number of decades, and here’s an opportunity for Japan’s political system and the Japanese government to take a principled stand and push things forward in a transparent clear fashion. It will also present some opportunities for agricultural reform–a large portion of Japan’s agricultural sector has been impacted by this. There’s an opportunity there.

From my personal perspective, this will be an opportunity for some foreign direct investment. That’s one of the areas that will not only help remediate the situation, but drive Japan’s growth for the next several decades. I also think there will be increased career opportunities for women as a result of this. We’re already in a position where there’s some labor scarcity and we will have to deploy all of our talented resources in-country to help us remediate the situation, and at least half of those should be professional women, and I think that’s a good thing.

Lastly, I feel that entrepreneurs should engage and contribute to the overall effort. Entrepreneurs can move more quickly than large companies and can find niche opportunities in assisting, maybe not even directly in the impacted areas; but as some of the larger firms divert resources to remediate the impacted area, they’ll expose opportunities in the rest of Japan.

Obviously, it’s a great humanitarian tragedy, and you never want to downplay that. You don’t want to have these crass commercial concerns overshadowing the humanitarian issue, but if we can put the humanitarian issues aside for a second and focus on the business issues, those are the things that I would see.

Journal: In a sense, it’s an acceleration of what people like Jesper Koll have been talking about?
Alfant: It’s an acceleration of what a lot of wise people in Japan have been pushing for decades, and sometimes catastrophes can be catalysts. I think we should not let this catastrophe slip by without utilizing it as a catalyst for positive change. We have to make something positive out of this.

Journal: Can we talk about a few specific issues? For example, TPP?
Alfant: The Chamber’s position on the Trans-Pacific Partnership is very clear–it’s on the website. It is a decision that Japan has to make for itself. From the Chamber’s perspective, we are supporters of TPP and we think that it’s a well-structured, well-organized platform for regional trade, and we think that Japan should very strongly consider participation in TPP, but it’s a decision that Japan has to make on its own. The Chamber will not opine as to the direction Japan should take here, other that they should strongly consider it and come to their own decision on it.

Journal: What about the banking and financial services sector?
Alfant: Typically banks are among the companies with the strongest business continuity plans in place–we saw that after 9-11 in New York, where the banking system got back on line rather quickly, as well as the NYSE. What I’m seeing right now is that the banking sector is up and running at full speed, and there’s no real impact as of now. Certainly TSE trading volumes are high, and futures are up, which is an interesting indicator of what people feel the future holds, so I’m very confident about the banking sector and the whole financial services sector. At some point the insurance companies will have to up their exposure, and I’m sure they’re in the process of doing that right now. This is why people buy insurance, after all, and there’ll be some exposure there, but I’m confident that the firms in question have understood the risks and have sufficient coverage.

From a financial services sector viewpoint, I personally don’t see a huge impact right now. It’s a very active sector with a lot of liquidity, a lot of deals getting done, and it’s business as usual there. And there’s no reason not to take advantage of that accurate perception in the financial markets.

Journal: It may be the turn of the shinkin (credit unions) to support small businesses, and securitize the debt, which would get a AAA rating?
Alfant: It would be a very enlightened thing for them to do. I think small businesses are going to be potentially adversely impacted by this, and as we know, small business is the driver for employment and economic growth in Japan and the U.S. and other developed countries, so I do think we need to pay some attention to how we help out the SMEs as they struggle through this.

Journal: How about foreign exchange, and the strength of the yen?
Alfant: Foreign exchange is the largest liquid trading market in the world. Many smart people have attempted to predict the direction of various currencies over the years–with a notable lack of success, and I don’t view myself as having any particular capability in that regard, but I do think Japan is a very stable “safe-haven” type economy and the Japanese currency is, generally speaking, a very strong currency, so it’s something Japanese society and the government can call on. It’s a rainy day, and sometimes you have to use your rainy day funds to get through the day.

Journal: What about future taxation here in Japan?
Alfant: My gut feeling is that the planned cut in the corporate tax rate is not feasible politically at this time. My expectation is that there will be a consumption tax increase. And my feeling is also that the Japanese people understand that there is a necessity. People I have spoken to understand that there is a need to raise additional funds right now to pay for the rebuilding effort, and to take care of the people in the affected area. Though I have no inside information, my feeling is therefore that the planned corporate tax decrease will not come off and a consumption tax increase will occur.

Speaking as a businessman, what I’d like to see is the corporate tax decrease delayed rather than canceled, so putting some certainty around that such as saying “We’re going to keep the corporate taxation rate as it is for the next two years, and then we will implement the corporate tax decrease that we had discussed” would go a long way towards inspiring some confidence in the corporate sector.

Journal: What’s your opinion of all these overseas bans on Japanese produce, etc.?
Alfant: Silly. Absolutely silly. I’m not a scientist, and I don’t pretend to be one. I think my sources of authoritative information are the U.S. and the Japanese governments to the extent that if these governmental organizations are saying “don’t eat the produce,” I won’t. If they’re saying it’s safe, I’ll consume it, and that goes for the water as well. As long as they’re telling me it’s safe to eat it, then I’ll eat it.

It is important to understand that there are authoritative sources of information available, and that from the ACCJ’s perspective, those sources are the U.S. government and the Japanese government and they’ve been very clear and very open in communicating and articulating the risks and getting information out to us in a timely fashion and I see no reason to second-guess anything they’ve said to date.

Journal: I’d like to backtrack a little and talk a bit more about change in the way things are done here…
Alfant: I think it’s an evolutionary change. There’s evolutionary change happening, even without the tsunami, but that’s a process, not an event, and that’s a process that will take many years to play itself out, but I think it’s inevitable.

Journal: Do you see pressure for change coming from the public?
Alfant: If you mean the Japanese public, the answer is no. But if you mean the business community, the answer is clearly yes–they want a greater pace of change, but it’s not likely to have a huge impact. The trend is in a positive direction, but it’s moving slowly.

One of the benefits of all this might be that we’re finally able to keep a Prime Minister in office for an extended period of time. Without commenting positively or negatively on any named politicians, because the ACCJ doesn’t take positions supporting anyone, I think generally that some continuity would be a good thing in high office right now.

Journal: How do you see recent events affecting American companies relying on Japanese-sourced components?
There’s a potential impact. These days, very few companies have single-source suppliers for any critical component. Most people understand that your value chain has to have multiple levels of contingency in it, so I anticipate some short-term disruption–short-term here meaning 60 to 90 days maximum before firms reorganize their value chains, either temporarily or permanently. But I don’t anticipate a huge hit in that regard.

Journal: What about other opportunities for American companies as a result of all this?
Alfant: There are certainly opportunities from an energy point of perspective. Again, I’m not an industry expert, but I’m given to understand that the amount of capacity that has gone off-line is enormous, and is not easily replaceable by alternative energy sources. I’m a big proponent of solar energy and alternate energy sources, but I don’t know if there are enough solar panels in the U.S. to make up the deficit that we’ve suffered here. Again, though, this is an opportunity, not only for American firms, but for Japanese and international firms to enter the market. I think they will–capital is attracted to opportunities, and Japan is to my mind a land of opportunity, and so I think there will be capital coming in.

We’re talking about 4-5 percent of GDP here, and it’s a very large number in aggregate, but my feeling is that it doesn’t fundamentally change the landscape here in Japan. So I think the type of firm that will have opportunities is the type of firm that has been investing in Japan and has long-term presence, and local market capability–these firms are very well-positioned.

You never want to downplay the humanitarian side of this. All you have to do is look at any of the images coming out of the north, and you realize that this overshadows any business considerations, but from a business organization perspective, and that’s what the ACCJ is, the way we do our part is by helping to grow the economy here. By doing that, we provide opportunity and growth for all firms, not just American firms or ACCJ member firms. “Full stakeholders in the economy” is the phrase we use.

Our growth strategy white paper is a very good document. I wrote the section on entrepreneurship and it’s something I feel very strongly about and the other sections are very good, dealing with FDI, immigration, taxation, education. I think it’s probably more relevant now, and it bears mention specifically with regard to some of the areas we touched on earlier: new market entrants, either FDI or entrepreneurs; women in the workplace; and generally firms taking a longer-term view of the economy here and making investments that will bear fruit over the long term.

Journal: Anything you’d like to add that we haven’t covered?
Alfant: The last column I wrote for the Journal was written four days after the quake and so we didn’t know quite what was likely to happen, but at the time I said I was very confident that the core values of the Chamber would see us through this situation, and I’m even more confident now that this is the case. It’s been a very enlightening and educational experience for me to be the President of the Chamber throughout this disaster. As they say, “May you live in interesting times,” and this is about the most interesting time any of us could have imagined.

The real message for me is one of: “Be positive, look to the future. We will get through this. This is not an existential crisis. This is a largely localized catastrophe where the humanitarian cost is immense in the local affected areas, and we will do our best to help those people. At the same time, we need to send a clear message that Japan is open for business; American firms in Japan are open for business; ACCJ members are open for business, and we will continue to be full stakeholders in this society here, as we have been for the past sixty-plus years.”

PHOTOGRAPHY BY LORENZO BARASSI

4) Big government versus reform agenda

Basically, I expect the fundamental trends to improve relatively quickly for corporate Japan. The end of deflation has probably been brought forward while the shift towards more profitable off-shore production is set to accelerate. Moreover, the risk of Japan becoming a net drain on global savings is very small indeed. Japan has the financial and productive resources to rebuild, and to rebuild a better, globally more integrated and capital efficient Japan Inc. At the same time, I am more cautious on policy and social trends and worry that the disaster will turbo-charge the trend toward big government, more cumbersome regulation and higher taxes, at least in the immediate future.

The End of Deflation
Let us first of all look at deflation. Here there is a lot of good news and, in my opinion, the end of deflation will now come earlier than I expected before the disaster. Why? Most important, there has been a very aggressive monetary policy response. The Bank of Japan (BoJ) has not only added unprecedented short-term liquidity, but more importantly they stepped-up purchases of private credit and risk assets. Clear-speak: The disaster actually triggered the long-overdue aggressive monetary ease needed to get Japan out of deflation.

Note here that the BoJ is not acting alone, but in all-out coordination with the Ministry of Finance (MoF). MoF got explicit agreement from G7 to prevent imported deflation from a stronger yen. Japan did intervene in currency markets and the yen has actually depreciated since the disaster as a result. If, as I suspect, the trend of yen appreciation has been reversed, it definitely supports the end-of-deflation thesis.

Make no mistake about the importance of what has happened since the disaster on the policy front: monetary policy has opened up at least three inflationary transmissions channels—credit, assets, and exchange rate. In coming months, base money supply growth is set to accelerate by as much as 15-20 percent, more than five-times the growth rate the authorities tolerated over the past decade. Possible bonus: In my personal opinion the BoJ is likely to agree to directly underwrite part of the reconstruction budget. A switch towards more open debt monetization would send a strong, and much needed, message that, yes, post-disaster Japan is not just business as usual, but a clear start of a new Japan.
 
2011 is not 1995
There are sharp and fundamental differences between the economic outlook now and the forces that shaped Japan after the 1995 Kobe disaster. Yes, 1995 did mark the start of Japan’s deflation. However, at that time several powerful deflationary forces converged on Japan that were much more important than the Kobe earthquake disaster.

1995 was the start of hard-core labor market restructuring. Lifetime employment contracts were broken for the first time in two generations. Non-wage benefits were cut dramatically–many companies began to sell-off their corporate dormitories and the end of corporate housing started a deep-rooted fundamental change in not just young-workers’ financial well-being, but society at large. Also, it was in 1995 that corporate Japan began to hire part-time rather than full-time workers.

Clear-speak: On top of a cyclical downshift in employment income, Japan’s workers were forced to accept a previously unimaginable structural downshift in lifetime income expectations. This was a highly deflationary cocktail. In contrast, the current disaster is more or less ‘business as usual, (i.e. some cyclical adjustment, yes, but no new employment reality and added downshift to lifetime income expectations). If at all, the cyclical downshift in employment and wages is likely to be superseded by a quick uptick—if, as I suspect, the public-works reconstruction programs start kicking in. Public works construction has been one of the sectors with a very high surge in unemployment. This will now be reversed very quickly, in my opinion. In Japan, the infrastructure rebuilding projects really are “shovel-ready.”

Global Price Level
One final point on deflation: Today, Japan’s general price level is more or less in line with global levels. The Big Mac or Starbucks coffee index, for example, is close to parity, and expert calculations of purchasing power parity come to similar conclusions. In contrast, the mid-1990s saw a Japan with a domestic price level at a 20-30 percent premium to the rest of the world (note dollar-yen levels almost same now and then). 

Now recall that in the mid to late 1990s Japan went through radical programs of import liberalization—literally a case of a previously closed economy with a higher-than-global price level beginning to open up. This allowed global price arbitrage in multiple sectors of the economy, fresh fruits to furniture to construction materials and steel. At the same time, this ‘deflationary’ dynamic was reinforced by the relentless rise of global competition. Asian producers in general, Koreans in particular, began to gain market share from their Japanese competitors in global markets.

As a key example, the structural decline of Japan’s consumer electronics industry started around the time of the Kobe earthquake, yet it clearly would be absurd to attribute any form of causality. The demise of Japan’s textile industry also started in the mid-1990s as well, and ditto for Japan’s steel industry, her concrete industry, and, to some extent, even her game software industry, to name just a few of the more obvious examples.

Of course, global competition remains fierce this time around. However, it all started de facto right around the time of the Kobe disaster. The net effect was pushing Japan into deflation. In contrast to the mid-1990s, global trends today are much more inflationary for Japan, in fact so much that most regions of the world economy–Asia, Europe, America–have already started, or are about to start, tightening their monetary policy because global demand is rising faster than global supply. Make no mistake, outside of Japan, the world has already become its most inflationary in over two decades.

Add to these global inflationary tailwinds the aggressive domestic pro-inflation policy push by the BoJ and MoF and you pretty quickly reach the conclusion that the disaster has actually brought forward the existing movement from deflation in Japan, in my view.
 
Japan Inc. Goes Global 
The second Japan mega-trend has been deindustrialization and hollowing out: over the past three years, outward direct investment has been accelerating sharply. Japan Inc.—across all sectors, industry to services to food producers—has ‘followed the money’ and invested more and more aggressively in global production and distribution. Why? Remember, domestic margins in most industries are wafer-thin, while margins on offshore factories, logistics hubs, call centers, or research and design facilities are very high. Several government surveys suggest overseas operations may have profit margins that are on average five times higher than domestic margins. Moreover, long-term growth prospects outside Japan are significantly higher than at home and, finally, the global supply of young, dynamic workers, salespeople, managers, engineers and creators is clearly much more conducive to a high-growth strategy than the natural dynamics offered by Japan’s home demographics.

So in this case, the disaster is likely to accelerate the existing trend, Japan Inc. is set to invest even more aggressively overseas. Investment for growth goes to global, while local investment increasingly focuses on bare replacement and, to some limited extent, on productivity enhancement, i.e. capital deepening, but not much more, in my opinion. The disaster has highlighted everywhere that proximity to customers and markets, as well as global diversification of production centers and supply centers must become a bigger priority.

Indeed, there is a risk that global producers who depend on Japan Inc.’s superb quality of components and products may now demand greater global production diversification from Japanese suppliers. Due to the disaster, Japan country risk has gone up in the eyes of boardroom directors everywhere around the globe. The shift from “Made in Japan” to “Made by Japan” is poised to get turbo-charged now.
 
What’s good for Japan Inc. is not good for Japan?
If this is right, the net result of this accelerated hollowing out should actually be positive for corporate Japan; trend profit margins should be rising from here. I do not expect corporate Japan will wait for politicians to make up their minds on reconstruction and long-winded discussions about new urban planning designs for the affected area. More likely, corporates will act fast, forced so by the reality of global competition. Note here that the directly affected area is the poor and forgotten part of Japan. In terms of production, employment and value added, the 1995 Kobe disaster affected almost five times more of the national economy than the 2011 disaster. What this does mean is that private sector pressure on politicians to “get it right” and use the disaster as a trigger for change was huge in 1995. Now, all companies are already much more serious about assessing the opportunity cost of not going overseas more aggressively.

Clearly, this sets the bar a notch higher for Japanese policy makers: to counter a likely acceleration in deindustrialization and hollowing out should demand significant changes in rules and regulatory policies, as well as, in the final analysis, a more open and urgent debate about importing labor.
 
From net creditor nation to net debtor?
The third deep trend we need to consider is Japan’s net creditor status. Could the cost of reconstruction be so high that Japan becomes a net drain on global savings? Worries about Japan beginning to run a current account deficit and thus replying on global savings to fund its budget deficit, rather than funding other countries savings shortfalls, have been around for many years.

Obviously, the need to fund an additional supplementary budget for disaster reconstruction is fueling these worries even more. However, the empirical facts suggest this risk is very low. The shift to offshore production for higher profits has been accelerating, and with it so has the income generated on overseas assets. Japan shows all the signs of successfully becoming a “rentier economy,” living off her highly profitable overseas assets.

Moreover, if, as I suspect, the BoJ does begin to monetize fiscal debt more aggressively, the domestic savings investment gap should comfortably remain positive. Here is a trend that is likely to continue—global finance will worry about it, but the productivity and income of global Japan Inc. keeps on churning out hefty surpluses for the time being.

So on the fundamental economic trend side, I would suggest this disaster is likely to accelerate the trend towards a more global, more productive and more profitable Japan Inc. The flip-side of this development is likely to be reflected in more conservative, more ‘big government’ oriented policies from politicians who see themselves fighting an increasingly difficult battle against the globalization of capital, risk taking and entrepreneurship.

Welcome back, big government
Now, let us try and think about the medium-term policy challenges facing Japan’s elite. Clearly the disaster requires a unified and coordinated policy response. As outline above, first signs are good—the monetary authorities are out aggressively and well coordinated. On the fiscal front, politicians across all parties have pledged to push through a quick and decisive rebuilding program. For now, the deeply entrenched trend of policy paralysis appears to have been broken. However, the content of the response inevitably pushes Japan back down the road of big government and more public sector intervention in private sector affairs.

Specifically, Prime Minister Naoto Kan had actually launched an impressive program seeking agricultural liberalization so that Japan could possibly become part of the Trans-Pacific Partnership (TPP) by autumn of this year. Now that the disaster struck heavy in many farming-only areas, it will take a truly heroic effort to proceed with this very difficult program.

Moreover, the push for higher taxes on consumers—something advocated by the ruling Democrats—is poised to become stronger. Several policy makers have already suggested that part of the reconstruction budget should be funded by abandoning the extra child-support programs implemented by the Democrats last year. Clearly, Japan needs both: more children, and a rapid rebuilding of the destroyed infrastructure. Both work to lift the potential growth rate. In my personal view, Japan has the necessary savings surplus and financial wherewithal to afford both. Taking from Mr. Watanabe to pay for Ms. Suzuki is neither necessary, nor prudent in the current situation. In contrast, an all-out pro-growth strategy would be welcome, including a long overdue fundamental review of Japan’s rules and regulatory framework, in my view.

Will policy be creative, or standard? For example, a simple response to projected power supply shortage in Tokyo could be to enforce daylight savings time. Possibly as much as 5 percent of Tokyo’s power demand could be saved with one simple rule change. Pro-forma, past opposition to this had come from farmers who argued their cows and pigs could not adjust to the change, though in reality the utilities companies naturally prefer to see 30 million people switch on lights earlier rather than later in the evening. Either way, extraordinary times call for creative solutions. Could Japan’s government surprise us?

Yes, Reform dynamism is possible
It would be wrong to be too pessimistic on this front. Within little more than a year after the Kobe earthquake, Japanese politicians led two fundamental policy revolutions—the financial big bang was launched together with a radical program of administrative reform. Both were supported by the main stakeholders; the financial industry, domestic and global, wanted a better system (free, fair, global was the slogan of the big bang). The biggest proponent of administrative reform was the most powerful administrator itself—the MoF. This is because the MoF was very much in favor of more streamlined government, cutting administrative and regulatory red tape, as well as excessive administrative personnel costs.

In the end, the number of central government bureaucracies and agencies was cut by almost 25 percent. Make no mistake, these were radical changes, and there is no question that the bureaucratic incompetence exposed by the Kobe disaster helped focus the minds of the reformers. Chances are that, eventually, something similar will happen this time around as well. Patience.

Changing agricultural policy faces obvious big opposition from agricultural cooperatives, agricultural financial institutions, farmers, etc. However, there are also powerful advocates. Corporate Japan is pushing forward, as they know Japan’s failure to enter the TPP would be a further step towards relegation to second rate nation on the global power stage. Moreover, corporate Japan envisions sizable profit opportunities from supplying high-grade top quality food produce to the increasingly wealthy Asia gourmets. By one expert calculation, Japan could actually run a trade surplus in agricultural products if the right combination of agricultural reform and rural land reform is implemented. Also, the MoF should be much in favor as agricultural subsidies and farm support incur significant costs for the national coffers.

And finally, the impact of radiation contamination on food supply and food security is poised to trigger a positive shift in the domestic debate on food security. Clearly the merits and benefits of more open global sourcing and better quality and lower price global fresh food and produce are being demonstrated like never before as a result of the crisis.

In many ways, the unfolding debate and direction of agricultural policy and TPP may prove the real litmus test for how the country’s leaders respond to the challenges forced upon them by this disaster. Helping and supporting more aggressively to counter the unprecedented human tragedy is the first priority. And rebuilding of hard infrastructures and public services should prove relatively easy. From there, the reform and rethink of soft infrastructure—rules, regulations, as well as economic incentives and public support—is when the real test will come. That’s the real challenge to the “Samurai Spirit” facing Japan’s policy elite after the triple disaster. Chances are good, that the challenges will be met full-on before long. In my personal view, the new Japan will prove to be more integrated globally, more flexible domestically, and led by more decisive policy leaders.

photography by rob walbers

The Value of Licensing
A license is essentially a grant of permission from one party to another to use the intellectual property or other assets of the licensor in exchange for the payment by the licensee of royalties, license fees, or even another license (known as “cross-licensing”). Title to, and ownership of, the relevant licensed intellectual property remains with the licensor and is not transferred to the licensee. Licensing occurs in many different industries (software, electronics, music, fashion, design, etc.) and involves various types of legal rights such as patent rights, copyright, trademark rights, and trade secret rights. Licensing can be a huge profit center, and one need only look to the Walt Disney Company, Warner Bros., IBM and other licensing giants to understand the types of revenues which can be generated.

On the other hand, those who ignore market realities and fail to license their technologies when called for can face adverse consequences. Despite its recent phenomenal success with the iPhone, iPad and a variety of other products, a classic case was the unwillingness of Apple to license its computer operating system in the 1980s (despite the strong encouragement to do so by none other than Bill Gates), which resulted in the subsequent operating system hegemony achieved by Microsoft.

What countless companies have realized over the years is that licensing one’s products and technologies can have many benefits, such as:

1. Efficient Distribution. Licensing can be a very effective way to sell and distribute one’s products or technology without having to spend a great deal of time and money on sales and distribution.

2. Co-branding. Co-branding allows companies to combine their technological, business and/or other assets under a single brand, thereby creating a unique product or service which can expand both their businesses and create greater profits for both parties.

3. Franchising. A franchise is essentially a licensing arrangement wherein the franchisor licenses its trademarks, trade secrets, know-how and other types of intellectual property to the franchisee, who then markets and sells under the franchisor’s brand using the franchisor’s prescribed business methods.

4. Additional Income Stream. Licensing can create additional income streams and thus be a source of added revenue, especially in a down economy. For example, even if a company has a technology or other intellectual property which it is not currently using, such technology can be licensed to another party which is in a position to use it and thereby generate royalties and/or license fees for the licensor.

5. Globalization. Licensing is a means which has been used by many companies, from small businesses to multinational corporations, to expand their businesses into global markets. A common method is for the licensor to license a product or technology to a foreign licensee, which is responsible for establishing facilities, manufacturing, supply chain management, and even retail sales in the relevant country. This type of licensing arrangement makes it easier for a company to expand into global markets because of the relatively small investment required of the licensor.

Licensing Misconceptions
While many companies understand that licensing might be beneficial to their businesses, there are certain misconceptions which often keep them from adopting licensing as a business strategy, among the most common of which are as follows:

Misconception #1: “Licensing is mostly for high-tech or entertainment companies.”
While licensing transactions are often associated with high-tech, software, entertainment and similar industries, licensing is a business strategy that many types of entrepreneurs, inventors, authors and corporations in various industries, from health and fitness to machine tools to pharmaceuticals, can and do employ. Moreover, in addition to intellectual property rights related to high-tech inventions, such as patents or copyrights, there are various other kinds of rights and products that are not necessarily technology-related, yet can still be licensed. These include trademark rights, trade secret rights, and even know-how. And, while not all companies have patentable or copyrightable materials to license, most have trademarks, trade secrets and know-how which are economically valuable and, under the right circumstances, could be licensed.

Misconception #2: “My technology is a couple of years old, isn’t being used, and thus can’t be licensed.”
Another common misconception regarding licensing is that technology which is a few years old, or which a company is no longer currently using because of newer technology, cannot be licensed. It is true that, once a patented or copyrighted invention or work of authorship has reached the end of the applicable period of legal protection and enters the public domain, it generally may not be licensed, however, companies and inventors often stop using a patented or copyrighted invention (for business or other reasons) far before the term of legal protection actually expires. This leaves the door open to licensing to other parties and generating additional income for the licensor. Thus, certain types of intellectual property, including trademarks, business ideas, and product formulas which are subject to trade secret protection or constitute know-how, are not subject to an absolute term of protection, and assuming the relevant legal rights are maintained (such as by renewing trademark registrations or maintaining the confidentiality of trade secrets), can continue to be licensed indefinitely for as long as the trademark, trade secret or other legal status continues to exist.

Misconception #3: “In order to license my products, I must adhere to standard royalty rates.”
Contrary to popular belief, for most industries, there are no universal “standard royalty rates” for licensing transactions to which the parties must adhere. While in certain industries there may be a certain royalty range or percentage that companies use as a basic yardstick to determine what a “fair” or “average” royalty or license fee would be, these are generally negotiable and not subject to any legal rules which would require adherence to such rates. Therefore, the parties must consult with their attorneys and industry experts to devise the most appropriate royalty or license fee system for the particular transaction and business relationship, and in doing so, must examine their own particular products, markets and business circumstances in order to valuate the technology or rights in question, devise a fair royalty or license fee based thereon, and decide upon an appropriate payment structure.

Licensing Tips
The key in licensing one’s intellectual property and other assets is to understand exactly what rights exist, how best to distribute or exploit such rights through licensing, and have the proper legal protections in doing so. The following are a few important tips to consider when embarking upon a licensing arrangement.

Tip #1: Have a proper License Agreement
The foundation of any licensing transaction is the license agreement. In certain industries, such as software, the U.S. model of license agreement predominates. There are a number of reasons for this, including the fact that the U.S. remains the world’s largest intellectual property and technology exporter as well as the fact that international U.S. law firms and lawyers are often called upon to draft and review the relevant licensing agreements. Japan has also become one of the world’s largest intellectual property and technology exporting countries, and given the close economic and other ties between the U.S. and Japan, it is understandable that current licensing agreements in both countries share many similarities. Nonetheless, these agreements must be approached with great care, as they are often lengthy, complex and involve many different types of legal rights in multiple jurisdictions.

Therefore, when embarking upon a licensing transaction, it is important to consult with a qualified licensing attorney who can provide the necessary guidance required to draft a license agreement that is tailored to fit the needs of your company, your position as the licensor or licensee, and also provides the necessary legal protections. Specifically, when defining the scope of a license, one must, in consultation with a qualified licensing attorney, consider a number of basic issues, such as:

1. Scope of the licensed rights (patent, copyright, trade secret, etc.)

2. Royalties and/or license fees (See Tip #3 below)

3. Exclusive or Non-exclusive license (See Tip #6 below)

4. Territorial limits

5. Time restrictions

6. Right to sublicense

In addition, a qualified licensing attorney in the relevant jurisdiction will be able to provide advice regarding local legal requirements, which can be essential for protecting the intellectual property rights at issue. For example, in Japan, certain types of licenses, such as a statutory “exclusive” license (senyo-jisshiken in Japanese) must actually be registered with the Japan Patent Office in order to be valid and maintain one’s rights against third parties.

Tip #2: Beware of “standard” license forms!
This is a corollary to Tip #1, and just as there are no “standard” royalties or license fees, there are also no universal “standard” license agreements that will fit every licensing situation. Different license agreements, though they may superficially appear to be very similar, are generally drafted for a specific type of business relationship, industry, technology or transaction. Therefore, simply adopting a form used by another company for a seemingly similar transaction without carefully reviewing the terms, understanding the background, and obtaining proper legal advice can be very risky. Each license agreement must be tailored to fit the particular needs of the parties as well as the contemplated transaction.

This above is true not just when referencing the form agreements of other companies, but also when wanting to apply the form license agreement of one’s own company to a new business partner. Consequently, when reviewing one’s own standard license agreement, or the standard form of another company, one must always ask:

1. What are the unique aspects of the contemplated transaction?

2. What are the goals of the parties?

3. What is the relative bargaining power of the parties?

4 .Does the agreement adequately reflect our side’s goals and bargaining power?

Only by understanding the foregoing, as opposed to merely focusing on the language of the form agreement, can one properly begin to review, negotiate and draft a license agreement. In short, the form license agreement must be tailored to fit the transaction, not the other way around.

Tip #3: Properly valuate the licensed products and rights.
Royalties and license fees are the basic means by which a licensor is compensated pursuant to a license agreement for the relevant intellectual property or other rights. Royalties are generally calculated as a percentage of net sales of the licensed products by the licensee and are paid monthly, quarterly or in other time increments determined by the parties (referred to as “running royalties”). In contrast, license fees generally take the form of fixed-fee payments negotiated by the licensor and licensee that are paid based upon the achievement of certain milestones or time increments determined by the parties. The amount and method of calculation of royalties and license fees are often among the most contentious aspects of licensing transactions, and both the licensor and licensee must take care to ensure that they carefully formulate, truly understand, and can comply with the license fee and/or royalty provisions which are contained in their license agreement.

There are various methods for calculating royalties and license fees, however, all methods basically consist of a process whereby the licensor and licensee:

1. Quantify or valuate the profit expected to be derived from the licensed products and rights;

2. Devise a fair royalty or license fee which allocates such profit between them; and

3. Decide upon a method and structure of payment
Therefore, the parties must consult with their attorneys and industry experts to devise the most appropriate valuation and royalty/license fee system for the particular transaction and business relationship, and in doing so, must examine their own particular products, markets and business circumstances.

Tip #4: Know your licensee or licensor
As in any business transaction, it is very important to know your licensee or licensor prior to entering into a licensing agreement or transaction. In today’s high-speed Internet driven world, parties often do not take the time required to actually research and know their licensor or licensee and simply enter into a “standard” license agreement in order to quickly take advantage of perceived market advantages. This can lead to some very uneven, and even disastrous, results, such as in the case of entering into a license agreement with a party which has been accused of, or is even being sued for, the violation of the intellectual property rights of a third party. A party entering into a license agreement with such an infringer may also find itself as the defendant in the infringement lawsuit. Therefore, conducting the proper due diligence with respect to a potential licensee or licensor is vital.

Tip #5: Be familiar with the relevant industries
Owners of technologies or intellectual property which they would like to license often wish to expand into other markets and industries, feeling that their intellectual property, inventions or other assets might be applicable to such new areas. However, such potential licensors often neglect to do the proper industry and market research, relying on their knowledge of their own industry in order to make decisions regarding licensing in another industry. This is a very dangerous approach, as it can lead to the incorrect valuation of assets, unfavorable licensing terms, and even the loss of intellectual property rights.

Therefore, in order to be an effective, and hopefully prosperous, licensor or licensee, one must conduct the necessary due diligence and become properly familiar with the relevant industries. Such knowledge allows a licensor or licensee to understand the technologies or other licensed rights at issue, to understand the value of the rights and or assets being licensed, and to have a basis of understanding upon which to negotiate and create the best agreement for the particular transaction.

Tip #6: Don’t get unfairly locked in
Licensing arrangements are often designated as either “exclusive” or “non-exclusive,”. “Non-exclusive” generally means that, within certain contractually defined territorial or other limits, the licensor is free to license the licensed products to other parties, and “exclusive” license means that only the designated licensee has the right exercise the licensed rights within the territory or other defined limits.

As either a licensor or licensee, it is important to understand the differences between exclusive and non-exclusive licenses as well as the rights and obligations that accompany each. For example, from the point of view of the licensor, an exclusive license granted to an underperforming licensee, without the proper contractual protections, can result in a situation where the licensor is “stuck” with such licensee and cannot engage other licensees which could generate more business and profits. On the other hand, from the licensee’s point of view, licensors granting exclusive licenses may attach particularly onerous obligations relating to minimum sales, reporting and transferability.

In addition, not being “locked in” also means that the license agreement should have appropriate termination provisions, which, depending upon one’s position as a licensor or licensee, allow the license to be terminated in appropriate cases, such as in the event of breach of the agreement, underperformance, or other circumstances.

Conclusion
Licensing can be a very efficient and profitable means of marketing one’s products, distributing technologies and know-how to new customers, and expanding one’s business. Nonetheless, it must be done carefully with a knowledge-based approach in consultation with the appropriate professionals to achieve optimum results and return.

Front Row L to R: Charlie Lent, Keiko Suzuki, Tish Robinson, Cathy Bernatt, Annette Karseras Back Row L to R: William Amsden, Olivier Le Lann, Norman Grant, William Nealy, Phillip Green
Photography by Michael Feather

An American working in a small town outside of Tokyo was dating a Japanese female staff member at his Japanese company. As their romantic relationship deepened, he ventured to share privately with her his very negative views of their Japanese boss. Imagine our young American’s surprise and embarrassment when his Japanese girlfriend turned right around and told their boss exactly what he had said!

Was this a situation where communication went outrageously wrong, or since the Japanese boss didn’t fire the American, was it a situation where the best way to say something negative was to do so indirectly through a third party? In cultural terms, was this a situation where the loyalty to the company trumped loyalty to a romantic partner? Could it have been that the young Japanese woman saw her job as more long term than the relationship with a foreign boyfriend? Or could this incident be simply a quirk of fate or personality? Stories like this have the potential to make us more curious about where our cultural stereotypes end and individual idiosyncrasies begin.

(Standing) Elizabeth Handover, Lumina Learning and ACCJ CSR Committee Co-Chair, Efrot Weiss, Lumina Learning

Last month, over 70 ACCJ members gathered at the Roppongi Hills Club to share stories about overcoming cultural and communication barriers. The event introduced Signet Consulting’s Emergent Learning Maps™ and was hosted by the ACCJ Human Resources Management Committee, co-chaired by Eriko Talley and Tish Robinson and vice-chaired by Ginger Griggs.

Stories, in addition to capturing our imagination, provide context for decisions and action. One of the beauties of stories is that they convey insights directly through factual details as well as indirectly through interpretation. In addition to helping us remember complex information, stories allow us to share our experiences and learning in a way “that stimulates the mind, speaks the truth, raises curiosity, enhances dialog and ultimately moves the heart,” as noted by Heidi Sparkes Guber of the Society for Organizational Learning. In fact, neuroscience research finds that reliving a memory takes our body back to that state of experience and connects us to other people by taking them to that experience with us.

Sharing stories with others offers an opportunity to develop fresh insights on old memories and helps us generate alternative interpretations about what happened. Listening deeply to others’ cross-cultural stories taps a collective intelligence that helps us gain new insights about people and transcend cultural stereotypes. Nicole Watanabe, a cross-cultural consultant, observed that, “When we are aware of cultural tendencies these generalizations can often cause us to assume we already know the other’s style, and we don’t take the time to really get to know the people and interact with them as individuals. It is the building of relationships that is key to successful communication.” Stories provide rich insight into who we are, and help us toward getting to know each other more deeply.

What follows below is a brief summary of the stories shared by ACCJ members around turning points when communication between different cultures went outrageously wrong or turned out well. Hearing each others’ stories gives us the chance to begin to connect themes across isolated incidents. Patterns that play out again and again contain collective power that we can tap to generate hypotheses and put into action to bridge communication gaps.

Briefings Across Cultures: Creating Safe Containers for Questions

(Discussions facilitated by Cathy Bernatt, Norman Grant, and Annette Karseras)

Story 1. A Japanese and American manager met to discuss plans for a new product. The Japanese manager asked a myriad of probing questions about minute details. The American thought the Japanese manager was trying to trip the project up and find some flaw in the plan by asking such minute questions. Finally, the American manager stopped a moment to check his assumptions, and asked the reason for so many questions. It came out that the Japanese manager was very interested in the proposal, and so wanted to understand more about the details.

Story 2. A new American manager with a very perfunctory communication style arrived from overseas to lead a team of Japanese. She would call a meeting to brief everyone on the task, and then leave them to get on with the work. The Japanese staff felt at a loss. They did not have a clear enough understanding of the situation to be able to act, but because of the American manager’s perfunctory communication style they were nervous about the reaction they would get if they went back to her. One of the Japanese team members finally plucked up her courage to go to the American manager and ask the questions that were on everyone’s mind. The courageous Japanese team member became a mouthpiece for her colleagues, enabling them to get the information they needed to feel comfortable enough to proceed.

Story 3. A German manager called in two Japanese staff to give them a task that had just come in from their German headquarters. Germany wanted to know the key weaknesses of their main Japanese competitors. The German manager asked his Japanese staff to, “Just take an hour and give me a quick report.” They refused. They wanted to know who was asking for the information, why they wanted the information now, and the purpose it would finally be used for. The German boss was irritated, because this happened a lot, even for the simplest of tasks.

Story 4. An American manager in Japan announced the launch of a new product and asked for input from his Japanese team about the huge supply chain and lead time challenges that would have to be overcome. His questions were met simply with muzukashii (“That could be difficult”). Reading between the lines, the American manager heard yarimasen (“Don’t want to…”) or shinai (“won’t”), and sensed a lack of willingness to cooperate. He was not able to elicit any of the background detail he needed to satisfy his boss in the U.S. His own anger and frustration was mounting steadily even though he realized this was not going to help anything. He wondered what he should do to get things back on track at the next meeting in two days.

Story 5. A foreign lawyer with a Japanese secretary was suddenly called to the U.S. for an important business meeting on very short notice. While he rushed to get ready for the meeting, he asked his secretary to find the best flight. When he returned from the business trip, one of the partners in the firm said the secretary was leaving. It turned out that the foreigner had been too abrupt and had not given her enough detail. She was panic stricken, without sufficient detail regarding seat preferences, class of ticket, etc. Looking back, he realized that he needed to provide more information and explain the “What,” the “Why,” and the “How.”

The core of that experience, though, was in rolling up his sleeves and designing software, and later figuring out what platform could make the results viable. “Since I myself come from a development background, I think I understand the minds of developers better than most executives. When I am discussing things with the developers here, I am not just a bystander.”

Iwata later admitted after a few years at the helm that he would have had no chance of succeeding by imitating the older man, Yamauchi. Rather, he tried to make his relative youth, lack of company baggage, and candor assets for the firm, while elevating the profiles and self-esteem of those working for him, even if they were older or had more Nintendo experience, which was almost always the case.

The Board

Iwata initially reported to Vice President Atsushi Asada, while an executive committee assisting him included Shigeru Miyamoto, Genyo Takeda, Yoshihiro Mori, and Shinji Hatano. His first job at Nintendo had been coordinating Miyamoto’s software development group with Takeda’s hardware division as head of the Corporate Planning Division, and now that brief had expanded and become essential to the company’s revival plan. Takeda had led Nintendo’s Research & Development since 1980, and was responsible for its many technological advances, as well as shepherding the production of its last two TV-linked consoles, the GameCube and Nintendo 64.

A major creative voice within the company since its laser–shooting range era in the 1970s and its first video games, Takeda became a Nintendo director in 2000, but had spent recent years talking about hansei, or “reflective regret,” for the sales failures of its hardware. As Nintendo prepared to bring his GameCube to market at nearly the same time as Microsoft’s Xbox, plans were already under way for its next generation of consoles, as was standard development policy. Iwata’s background as a game creator was sound training to understand the environment facing the GameCube and the mind-set of software supplier firms, which had seen sales fall as the gaming population stagnated and had become increasingly gun-shy about resource commitment. The number of Japanese gamers had declined by about 20 percent, meaning outside software firms faced a tougher time recouping their substantial investment and thus had become more selective in their allegiance.

Without such advance development, a new console such as the GameCube would be short of games, creating a deadly spiral if its sales did not quickly merit third-party software production. Indeed, that worst-case scenario was starting to brew with the new console, and that designer flight would torpedo its sales potential. Still, as Iwata took the helm in June 2002, he boldly predicted total sales of 50 million GameCube consoles by 2005.

That vote of confidence for Nintendo’s latest Cadillac, though, stretched the imagination, as the PS2 had only sold 30 million in its first two years, and Sony expected just another 20 million consoles in the third. However, in a way that Yamauchi could no longer impart convincingly, Iwata’s new role also included championing and selling products, whether great or not, honing this skill as GameCube pitchman at the E3 game summit in Los Angeles in 2001.

Iwata continued to tout the “Nintendo difference” compared to rivals Sony and Microsoft, showing games, including “Luigi’s Mansion,” “Metroid Prime,” and Miyamoto’s latest “Pikmin” edition. Analysts, though, said the company would need to find software reinforcements by the Christmas holiday season or it would not be a happy new year, and that call proved correct. However, there were also missteps. In the same role at the 2003 E3 event, Iwata touted a four-way version of retro favorite “Pac Man,” which some observers said was stupefying, as it underscored every preconception of Nintendo losing its way and grappling for old standards, while the rest of the now $27 billion industry focused on adults.

Sony Ericsson’s Xperia Play features a slide-out game pad to unleash smartphone gaming’s full potential

Today’s crowded smartphone market leaves little room for error. Companies compete for anything and everything from who can attract the most customers to who is first to unveil the latest, game-changing technological innovation. The smartphone is the new technological frontier, where the rules have yet to be set in stone and its full potential remains largely unexplored.

One of the more noteworthy “side effects” of the smartphone boom has been its influence on the gaming industry. In the blink of an eye, the marriage between social networks and smartphone gaming has given birth to the era of “mobile social gaming.” Companies such as Nintendo and Sony are now seeing areas over which they once reigned supreme usurped by newcomers such as Apple, Facebook, DeNA and Gree as casual gaming grows increasingly popular.

For Sony the gradual decline from its glory days has been particularly sobering. When future historians look back and try to pinpoint the origins of the portable tech phenomenon, they will need look no further than the Sony Walkman. However, in recent years the company has struggled to attain a similar level of success. Apple’s iPod is now synonymous for “mp3 player.” Amazon’s Kindle continues to be the e-reader of choice. The iPhone and Blackberry remain the heavy hitters among smartphones.

For these reasons, Sony’s foray into the world of smartphones presents the company a valuable opportunity to play to its strengths. Rumors of a “PlayStation phone” have been buzzing around the tech community since June 2009, fanned in recent months by coy hints from several Sony executives. On top of rumors, several tech blogs eagerly leaked photos of early prototypes of the phone. The most prominent leak came courtesy of popular tech weblog Engadget, which released an exclusive review of an advanced prototype in late January 2011. The report revealed that the phone would be released by Sony Ericsson under its Android OS Xperia smartphone series as the “Xperia Play.” In addition to a slide-out game controller, the phone featured a 4-inch multitouch LCD screen, 5-megapixel camera and the standard Wi-Fi/3G capability—an offering on par with most smartphones currently on the market.

Although Engadget’s report all but confirmed the existence of a PlayStation phone, it wasn’t until Sony aired a clever teaser commercial during the Super Bowl that the rumors were officially laid to rest. Furthermore, in lieu of a traditional press release, the company decided to spread the word via a Facebook fan page, complete with a live stream of the official unveiling at Mobile World Conference on February 13, 2011. Despite the fact that Sony Ericsson is technically a joint venture between Sony Corp. and Sweden’s L.M. Ericsson, the Xperia Play marks the first time the two companies have fully collaborated to create an original product.

If Sony were merely offering a gaming-oriented smartphone, there would be little to assess aside from the novelty of its built-in game pad. But the long-awaited confirmation of the Xperia Play also follows two ambitious announcements from Sony that may signal the coming of a new era. At the 2011 PlayStation Meeting, Sony Computer Entertainment President and Group CEO Kazuo “Kaz” Hirai unveiled the equally long-awaited successor to its PlayStation Portable (PSP): the Next Generation Portable (NGP). On the surface, the announcement did little more than steal some of Nintendo’s thunder regarding its upcoming Nintendo 3DS and offer updates to the original PSP’s specs (a larger screen, analog sticks, front-and-back cameras plus a nifty track pad located on the back of the device). A closer investigation reveals Sony’s true concerns lie closer to Facebook and the iPhone than with Nintendo.

The rise of mobile social gaming—evidenced by the popularity of DeNA’s Mobage-town, Zynga’s FarmVille and Apple’s Game Center—has demonstrated perhaps better than any other indicator the increasingly blurred borders between games, social media and the Internet. Sony’s NGP will feature a new user interface called LiveArea, which will emphasize the social networking aspect of gaming through PlayStation Network, Sony’s online multiplayer gaming and game delivery service. LiveArea will allow users to interact with other players via live updates of their friends’ in-game accomplishments without having to lose progress within their own games.

The NGP will also come pre-installed with an application called ‘Near’ that combines the NGP’s GPS and Wi-Fi/3G capabilities. “Near” will allow users to view other NGP owners in their vicinity, what games they are currently playing, as well as what games they recently played. Users will also have the option of meeting their “friends” virtually by swapping their game information.

Hirai’s other offering, PlayStation Suite, stood in the shadows of its flashier counterpart. Considering that PlayStation Suite is a not a tangible product, the comparatively skewed media coverage towards the NGP was to be somewhat expected. However, despite all the hype surrounding the NGP, in the long run, the PlayStation Suite could prove to be the ace-in-the-hole that propels Sony ahead of its competition.

Photography by Robert Holmgren

Entrepreneurs are generalists who put together teams of people and assemble resources and capital. To do this effectively, they must have a general set of skills. Individuals may be endowed with a general set of skills, but endowments can be augmented by investment in human capital. It is shown that formal schooling is used to supplement the skill set of those who choose to become entrepreneurs.

Entrepreneurs perform many tasks. Consider the founder of a new small restaurant. In addition to being a good cook, the founder must be able to obtain funds, hire workers, choose location and decor, obtain food supplies at a reasonable cost, keep books and market the restaurant. Being a good cook is insufficient for success. In order to hire someone to perform the other tasks, it is necessary to have at least some basic knowledge of the outsourced area so that the right vendor decisions are made.

As a consequence, entrepreneurs must be jacks-of-all-trades to some extent. Although they need not be expert in any single skill, they must be sufficiently good at a wide variety to make sure that the business does not fail. There is a “weakest link” feature to running a successful business, which means that entrepreneurs must be multi-skilled.

Even if individuals are not endowed with the complete set of skills necessary to start a business, they can acquire those skills. The theory, which predicts that entrepreneurs should be generalists, whereas those who work for others should be specialists, implies that human capital investment patterns should differ between those who end up being entrepreneurs and those who end up working for others.

Using data from the Stanford MBA alumni, it is found that those who end up being entrepreneurs study a more varied curriculum when they are in the program than do those who end up working for others. That result, coupled with other findings on on-the-job training patterns reported, provide support for the notion first, that entrepreneurs are generalists, and second, that they make their skills more general by following a particular investment profile.

This view of entrepreneurship is at odds with the intuition that many have who believe that entrepreneurs are technical specialists who base their new company on innovation. The Stanford data and other information from the Current Population Surveys (CPS) and The German Socio-Economic Panel (GSOEP) strongly reject this view. To the extent that entrepreneurs are innovators, for the most part they are business innovators. The innovation may be as seemingly minor as recognizing that a particular strip-mall would be a good location for a dry cleaner. Most entrepreneurs are non-technical people who form businesses in non-technical fields.

Theory

The production function contemplated for the analysis is the following. Those who work for others can specialize in one skill, but entrepreneurs are limited by their weakest skill. Let there be two skills, x1 and x2. To make this concrete, albeit extreme, let income of specialists be given by

(1) income of specialists = max[x1, x2]
and
(2) income of entrepreneurs = λ min [x1, x2]

where λ is a market determined parameter that sets the price of entrepreneurial talent so as to equate supply and demand. This formulation captures the point that entrepreneurs must be good at a number of different skills to put a business together.

Individuals are endowed with some basic talent, but they also can augment those skills by acquiring certain types of human capital. Define x10 as the initial stock of skill x1, x20 as the initial stock of skill x2, and x1 and x2 as the (final) attained level. Let the individual obtain levels of x1, x2, given the initial stock according to the cost function

C(x1, x2, x10, x20)
with C1, C2 >0 , Cii>0 .

Let x1 to be the skill with which the individual is endowed in the largest amount. Although it is not necessarily the case, as long as C1 is not too much larger than C2 at the endowment points, the individual who plans to specialize will augment his investment by investing in x1 so as to

Max x1 – C(x1, x2)
x1
with f.o.c.
1 – C1(x1, x2) = 0 .

Someone who is going to specialize will only invest in one of the two skills. There is no value to augmenting a skill that will not be used. It is possible that C2 is sufficiently low relative to C1 that the individual will ignore his higher endowment of x1 and instead specialize in x2. This is of little importance. Essential here, is that the specialist invests in one or the other, but not both. Now consider an individual who is going to become an entrepreneur. His constraint is the minimum skill, defined to be x2. Should the aspiring entrepreneur invest in x1, in x2 or in both?

Since the constraint is x2, there is no point in investing in x1 unless x2 is brought up at least to the level of x1. If there is an interior solution for x2, then it satisfies

λ – C2(x1, x2) = 0 .

Thomas Clark, ACCJ APEC Task Force co-chair
Photography by Lorenzo Barassi

It was a clear November evening as the trademark blue and white jet descended from the clouds, its wheels lowered and ready to land at the newly renovated Haneda Airport in southern Tokyo. In the distance, an airport worker waved his batons as he guided the jet emblazoned with the seal of the President of the United States down the tarmac to a complete stop. On the ground, a throng of photographers checked and then re-checked their cameras as various Japanese and U.S. government officials bustled about taking care of last minute preparations.

At the front of the crowd, Japanese Foreign Minister Seiji Maehara straightened his tie as U.S. Ambassador John Roos flicked imaginary dust off his shoulder. All eyes remained glued to the airplane door as workers wheeled the airstairs into position. In an instant, the air was filled with the sounds of shutters whirring and cameras flashing as President Barack Obama stepped out of Air Force One, greeting Japan with a wave and a tired, yet genuine smile. It had been a long week, starting with a difficult mid-term election and followed by a whirlwind tour through three countries to promote American economic interests in Asia. Prior to landing in Japan, the President had charmed Indian leaders, revisited his childhood home in Indonesia and attended the G-20 summit in South Korea. The APEC 2010 Leaders Summit in Yokohama would be his fourth and final stop before Air Force One whisked him back to Washington D.C.

Despite his busy schedule, the President also managed to take some time to enjoy traditional Japanese culture. Sitting under the watchful gaze of the Great Buddha in Kamakura, the President relived a moment from his youth as he sampled matcha ice cream with chief monk Takao Sato. It would be a short respite from the flurry of meetings with the world’s foremost economic leaders, CEOs, and some of Asia’s most influential political figures. Amid the swarms of police officers and protestors crowding the streets of Yokohama during the weekend of APEC 2010, President Obama reaffirmed to the world that the United States remains committed to the Asia-Pacific region and was here to stay.

Though mid-November saw many newspapers chronicling both the President’s visit and APEC 2010, few if any, paid tribute to the intricate network of players who made it all possible. Among the multitude of organizations involved, the ACCJ played a particularly significant role in bringing together both Japanese and American business entities. In fact, the happy coincidence of Japan and the U.S.’ successive hosting of APEC 2010 and 2011 made the ACCJ perfectly suited to assist leaders in identifying the pertinent issues where real, tangible economic progress could be made.

“APEC brings together a huge number of key stakeholders in the relevant ministries from 21 member economies in one place, and that’s something where the ACCJ felt there was a real opportunity to get involved, to strengthen our relationship with our Japanese partners,” explained ACCJ APEC Task Force co-chair Thomas Clark. Clark currently serves as GE Capital’s Vice President of Government Relations and has over a decade’s worth of experience in Asia. In addition to the APEC Task Force, Clark has served on the Board of Governors for the National Center for APEC, and currently co-chairs the ACCJ’s Banking and Finance Committee. Pausing only momentarily to occasionally to catch his breath or focus his thoughts on a particularly salient topic, Clark sat down with the ACCJ Journal to offer an in-depth reflection on APEC 2010.

Founded in 1989, APEC focuses on promoting freer trade and regional economic cooperation. “The thing that distinguishes APEC is that it is a real working forum, and has a real convening function to bring together ministers in several important areas,” said Clark. “While there are other organizations like the G-20 and WTO that focus on binding agreements, and often times that leads to a somewhat confrontational approach to things, APEC is a forum that does focus on voluntary movement toward achieving goals.” Over the past two decades, the Asia-Pacific region has flourished into the world’s economic hub, with APEC’s 21 member economics accounting for a whopping 54 percent of the global GDP and 44 percent of all international trade.

However, as the Asia-Pacific region thrives, Japan, once regarded as the gold standard model of an Asian economic success story, has stumbled into a period of prolonged stagnation in what some experts are calling the “lost decades.”

“The fact remains that although there has been a period of lower economic growth than many would have hoped for, Japan remains the largest—or second- largest depending on whose data you believe—economy in East Asia,” Clark said in response to why Japan remains a relevant choice to host the APEC forum.

2010 was also significant in that it marked the first assessment of the Bogor Goals among developed APEC member nations. Established in 1994, the Bogor Goals consisted mainly of open market provisions aimed at removing barriers to trade such as flat prohibitions of foreign imports, tariffs, and duties. While assessments by METI and MOFA indicated that there had been significant progress towards accomplishing these goals, according to Clark, discussions at APEC 2010 revealed that “the world had moved on from Bogor.”

Groupon CEO Andrew Mason
Photo by Techcrunch, used under the creative commons attribution licence

Battered veterans of the technology business hoping to shrug off the economic doldrums of 2010 with a boost of financial optimism need only look to Groupon’s aggressive New Year message delivered on January 10 titled: “Groupon Raises, Like, A Billion Dollars.” In fact the company’s latest round of financing was actually worth $950 million and included investors such as Andreessen Horowitz, Battery Ventures, DST, Greylock Partners, Kleiner Perkins Caufield & Byers, Maverick Capital, Silver Lake and Technology Crossover Ventures.

The heart of the Groupon model (its name is a portmanteau of “group” and “coupon”) revolves around crowd-sourcing discount deals on a daily basis (restaurants, events, and services). So while vendors are compelled to offer significant discounts, the guaranteed group sales serve as a compelling offer for both consumer and seller alike. The service is so popular that Groupon claims that one of its biggest problems is the inability to service all the requests from vendors hoping to being profiled as a daily deal.

The other key component to the site’s success is its focus on editorial—specifically, sales copy. Although many have opined that the site’s group discount model is hardly unique, the company’s clever, often sarcastic sales pitches (all writers must attend the Groupon Academy, a creative writing seminar) has been one of the company’s linchpins in the way of garnering consumer attention. Launched in 2008, Groupon claims the service has saved consumers over $1.5 billion to date.

These two features describe Groupon’s general approach, but there is yet another aspect of the company that may ultimately help it to continue to distinguish itself from the crowd, especially in Japan: accountability. Much was made of a recent snafu in which Groupon oversold a deal for traditional Japanese New Years osechi meals via Groupon Japan. The vendor restaurant buckled under the strain of trying to fill over 1,000 orders, resulting in meals that were delivered up to three days late, in some cases in completely inedible condition (customers even posted photos of the ruined meals online). The company’s response was to offer an online apology, distribute refunds, and offer the aggrieved customers 5,000 yen coupons toward another purchase. A relatively solid and fair response by most accounts.

But then Groupon CEO Andrew Mason took it one step further and delivered a personalized, heartfelt video apology to Japanese customers in English with Japanese subtitles (see the video here: http://tinyurl.com/Grouponapology). Whether the 30-year-old Mason has been to Japan before or not is unclear, but to those familiar with the Japanese market, it’s obvious that this single act of Japanese-business-style contrition may do more to ensure Groupon’s long-term success in the country than anything else.

According to the company, the new round of financing is designed to allow Groupon to continue expand globally (read: snap up local Groupon clones), invest in technology, and most importantly, allow employees and early stage investors to take some money off the table and relieve the pressure to sell the growing brand to an outside entity. The most notable entity rumored to have Groupon in its acquisition sights in 2010 was Google. According to Wall Street Journal, as recently as this past November, Google was prepped to acquire the company for around $6 billion. Ultimately, the deal never materialized, and in the following weeks Mason took a playful, albeit veiled, jab at Google’s wide ranging efforts (which include robotic cars) in an interview with PBS host Charlie Rose. In December, the paper also claimed Groupon’s annual revenue is in the neighborhood of $2 billion, a figure that, if even close to accurate, easily explains the company’s Google rebuff.

Commenting on the new round of funding Mason said, “We’re thrilled that Groupon has earned the confidence of some of the world’s most respected investment firms. With their support, we will continue on our mission to change the way people shop locally and serve the world’s local businesses.” Indeed the company has been one of the fastest growth stories in the history of the Internet, having recently grown from 2 million to 50 million subscribers and boasting a presence in over 35 countries.

In the wake of the company’s startling growth and new funding, talk of an imminent IPO began to heat up in mid-January with reports popping up in The New York Times and on CNBC that the company was gearing up for an initial public offering that could value the Chicago-based company at as much as $15 billion. Tech investors and pundits around the globe are watching the activity around Groupon with guarded optimism. The memory of Web 1.0 days of super-IPOs that turned a frothy bubble market into an economic bust of epic proportions weighs heavily on the minds of those who still bear the scars of being seduced by IPO fever the first time around. Now with rumors swirling that Facebook will likely go for an IPO in the next 24 months as well, the hand wringing, coupled with barely contained enthusiasm, has encouraged all but the most bullish to maintain a poker face when speaking of 2011 tech IPOs. Despite the jittery posture of those with long memories, in general Groupon’s multi-billion-dollar story has injected a surge of confidence in the tech sector.

Nevertheless, even fueled by such growth and investor cash, the company faces challenges on the international front from competitor and clone sites that threaten to diminish its rosy business picture and potentially hobble it in terms of long term growth. In Australia, the company is engaged in a skirmish in which local player Scoopon, an entrenched deal of the day site, registered and refused to relinquish the Groupon.com.au domain. In China, aside from the scores of Groupon look-a-like services like Meituan, Lashou, and 24quan, there’s even one site at Groupon.cn that copies Groupon’s logo and overall branding. And while Japan is not similarly burdened with such a blatant clone site, the local competition is intense with services such as Recruit’s Ponpare and Piku offering local group buying options well-tailored to the needs of Japanese consumers.

Communication Within the Japanese Firm: Japanese Language (Nihongo)

The most obvious obstacle for non-Japanese managers is the Japanese language—Nihongo. The Japanese language is, without doubt, one of the most complicated languages. It takes a minimum of 2 or 3 years of intensive study to master this language at a conversational level, and there are “few Westerners who have systematically learned both—realistically, doing so requires a university-level intensity of study.” The writing system consists of three different character sets: kanji (several thousands of Chinese characters) and hiragana and katakana (two syllabaries of 46 characters each, together called kana). Japanese texts can be written in two ways: in Western style, horizontally from top to bottom, or in traditional Japanese style, vertically from right to left. Both writing styles exist side-by-side today.

Honorific Language (Keigo)

There are three basic levels of Japanese language: the “low” level, used when addressing subordinates; the “intimate” level, used when conversing with family members and close friends of the same age; and an “honorific” level (keigo), used when addressing superiors and respected elders. Essentially, keigo refers to the distinctive style of speech or writing used to show respect to persons and sometimes to sacred things such as shrines or temples. For instance, there are more than five different words for the English word “you,” each of which is used depending on whom the speaker is talking to. In formal situations and in business negotiations, an honorific language level (keigo) is used. Keigo can be broken down into three separate categories: sonkeigo, respectful or honorific language; kenjogo, humble language; and teineigo, polite language. Sonkeigo is used when addressing or speaking about a person of higher status; in this case, honorific vocabulary is used to show politeness. Kenjogo is used when speaking about oneself (or one’s company) to a person of higher rank. Here, the speaker uses humble and modest words to show respect. Teineigo is the term for generally speaking politely. Foreigners are often advised to use teineigo because it is easier to use than the two other forms.

Communication Styles: High-Context Communication

Based on the idea of keeping harmony, communication in Japan is often indirect. Hall and Hall (“Hidden Differences: Doing Business with the Japanese” 1987, Anchor Books) define this as high-context communication. Every message communicated by a Japanese person is surrounded by a context, which needs to be understood by the person who is spoken to. If a Japanese person, for example, says “maybe,” he or she is saying an honorific “no” in a less direct manner. When speaking to a Westerner, who assumes that the word “maybe” refers to the possibility that an event might take place, this can lead to great misunderstandings. The Japanese communication style is therefore considered to be highly dependent on context: every message is surrounded by some unspoken information that both communicators are supposed to understand. The message can only be correctly understood if both communicators share a context and know or sense what the other person intends to say. Western communication, on the contrary, is considered low context, as the message content is the exact message and there is no invisible message beyond the words exchanged. “No” means just “no,” and “maybe” means there is a 50 percent chance of things happening.

Reading the Air (Kuki wo Yomu)

The context in which messages and information are exchanged is extremely important in Japan, and from an early age, Japanese people learn to read the context surrounding a message or to interpret the atmosphere of a conversation. High-context orientation and a need to respect other people’s feelings lead to a great sensitivity for feelings and intentions, even if they are not explicitly stated. The Japanese call this “reading the air” (kuki wo yomu). A person who can read the air understands things without being told and can sense if a friend or colleague is angry or stressed. Being able to “read the air” is a virtue in Japanese society. The Japanese often expect Westerners to be able to do this, too, but most Westerners find it easier to understand other people’s feelings if they are expressed in words. The directness involved in this is often considered rude in Japan and can lead to cross-cultural conflict.

Private and Public Opinion (Honne and Tatemae)

The Japanese differentiate between public and private life and also between their “public” (tatemae) and “private” (honne) opinions. Honne can be translated as the private opinion and tatemae as the public opinion. In business, tatemae is a must during negotiations or on other official occasions. This means that speakers (businesspeople or others) will express an opinion that is expected from them even if this is not what they really think or consider correct. Honne, on the other hand, expresses the speaker’s real and “honest” opinion, which may not always be expressed in public or in the corporate environment.

Honne and tatemae are present in all contexts of modern Japanese life and are probably the two concepts that are most difficult to understand for Westerners. Foreigners often perceive Japanese communication styles as vague and as avoiding straight business talk. Practically, a suitable approach in tackling the difficulties in communicating with the Japanese is to ask many polite and indirect questions. This may help to develop a better sense of a counterpart’s true opinion.

Kurokawa, 74, has spent fifteen years in various top-class medical institutions around the U.S., and this has given him a unique perspective for Japanese of his generation. He points out that he was not following the orders of a company or any other institution by going to the U.S. “I was certain that Japanese institutions would not accept me on my return, because I am completely alien,” says Kurokawa. In fact, his career since his return has been marked by success, which has been recognized both internationally—as shown by his selection as the ACCJ Person of the Year for 2010—as well as within Japan.

Single-track Careers Kill Initiative

Photography by Irwin Wong

Kurokawa has little doubt that his independence from major institutions is one of the main reasons for his success in influencing Japanese thought. He has little time for the one-company careerist who can only answer “I work for [insert name of company]” when asked how they make their living. “When I came back to Japan and I saw these smart kids in Tokyo University, and I thought to myself ‘these kids are bright,’ you then have to ask yourself why after ten years in a large company are they so dumb.”

He once gave a lecture where he asked his audience of Bank of Japan staffers about their opinion on whether or not the Japanese economy was stagnating. The vast majority of the audience did not want to commit themselves to an answer. His saddened answer to them: “You must have been working here since graduation, so you can’t ask questions. I see no hope for your male-based society—but you are not out of the ordinary.” He adds, “I have been fairly outspoken since I came back, but if I talk to a group, and they don’t ask questions, they’re just a masochistic bunch of men.”

He is equally critical when it comes to Japanese academia. He references “the four-line résumé,” where academics are content to gradually progress from graduate, senior staff, associate professor, and finally to professor at the same university until they retire. “It says nothing about you or your achievements, just about the positions you held.”

How to Turn a Sinecure into a Real Job

Of course Kurokawa has held many positions of his own, but he has refused to regard them as mere sinecures. One of the most prestigious posts he has held was President of the Science Council of Japan. Founded after the Second World War, the group has been compared by some to the U.S. National Academy of Sciences, and the UK’s present-day Royal Society, but in point of fact serves various functions that are not directly similar to the afore-mentioned institutions.

However, Kurokawa was not content to treat this as a ceremonial post. Seeing the decision-making capabilities of the U.S. and UK bodies, he was keen to expand the practical uses of these assemblies of talent and worked to found the InterAcademy Council (IAC), which is composed of members of leading nations’ scientific advisory bodies. The IAC has produced reports and provided recommendations to the world’s leaders, including then UN Secretary-General Kofi Annan and the Gleneagles G8 summit. As Kurokawa explains, “[The idea was] to provide policy recommendations based on the best available science, with funding secured from independent foundations, such as the [Alfred P.] Sloan Foundation.”

Founding the IAC has given Kurokawa personal links and ties to top scientists outside Japan. He explains, “Because I spent 15 years in the U.S., I am reasonably trusted by the U.S. science community.” He has also built up close links with the Science Advisors to Presidents and Prime Ministers of G8 countries who meet twice a year—without secretaries or bureaucrats—to hold discussions.

Kurokawa also served a term as President of the International Society of Nephrology (1997-1999) where he pushed hard to move away from the usual round of seminars and conferences towards outreach to the developing world and bringing nephrology to such regions.

Advice to the Politicians

Kurokawa also served for two years as an unofficial science advisor to Japanese Prime Ministers, as well as a member of the Committee on Science and Technology Policy. With the Prime Minister consulting him on a regular basis without the presence of bureaucrats, he laughs that he is upsetting civil servants by bypassing them.

However, he feels that most Japanese politicians have little to say, and what they do say, they say badly. One exception is former Prime Minister Junichiro Koizumi, whom he compares to former British Prime Minister Tony Blair for his ability to listen to long explanations, understand them and communicate them competently. “I worked briefly with Tony Blair’s team on the Breaking Climate Deadlock initiative two years ago and I told him: ‘Even CO2 reduction by 50 percent by the year 2050 is irrelevant. That is the reason everything has to happen 10 years ahead of that to reach the goal. You are one of the few political leaders in this world who can say it, and people tend to listen.’”

As far as the current U.S. Administration is concerned, Kurokawa says, “Obama has so many issues like health care, Lehman’s, and jobs and Pakistan and Taliban, Iraq and Gaza, he’s not sending a lot of strong messages to Asia-Pacific compared to other issues, ­creating a vacuum…I think the Chinese see this as a great opportunity.”

He regards the current Japanese government as being inexperienced. Indeed, the inexperience applies not just to the DPJ but to Japanese political decision-making as a whole. “You can replace a minister each day, and nothing will change,” he says, referring to the way the LDP held power for roughly five decades while decisions were made by the civil servants.

Kurokawa also attributes the current impasse between civil servants and the DPJ to a lack of prior experience. Though Japan has been a nominal democracy for some time, the multi-party system has only just started to work. The fact that few in the ruling party have had experience in developing policies, making decisions or negotiating with the Cabinet Office, etc., is a drawback, but not an insuperable one. “They’re smart, and they have knowledge,” he says, “but they lack experience.” He also feels that current Prime Minister Naoto Kan sometimes lacks the ability to delegate his powers and enforce a sense of discipline within the Cabinet. “And,” he adds, “they have to go through failure before they learn.”

Photo courtesy of the White House

President Obama speaks with Chilean President Sebastián Piñera (left) and Mexican President Felipe Calderón Hinojosa at the Economic Leader’s Meeting on November 14

President Obama with South Korean President Lee Myung-bak (left) and Japanese Prime Minister Naoto Kan at the APEC 2010 Closing Lunch on November 14

Gary Locke, U.S. Secretary of Commerce speaks to ACCJ members at the APEC Special Cocktail Reception on November 11

President Obama shakes hands with Vietnamese President Nguyen Minh Triet at the Economic Leader’s Meeting on November 14

President Obama speaks with Australian Prime Minister Julia Gillard (left) and Peruvian President Alan Garcia (right) at the Economic Leader’s Meeting on November 14

In the weeks leading up to November 13, 2010, the only visible signs that Japan was about to play host to some of the world’s foremost economic leaders were a handful of strategically placed posters in some of Tokyo’s most crowded subway stations. Despite a lack of fanfare, this year’s Asia-Pacific Economic Cooperation (APEC) summit in Yokohama represented important opportunities for both U.S. President Barack Obama and the ACCJ.

APEC is a series of meetings held by 21 Pacific Rim countries throughout the year that culminates in an annual summit between the leaders of each member state. Put simply, its goals are to promote economic partnership in the Asia-Pacific region, which generates over 50 percent of the global economy and 45 percent of all international trade. For President Obama, APEC 2010 marked the last stop in a 10-day tour of Asia that included India, Indonesia, and the G-20 summit in South Korea. After a raucous mid-term election season back home, the trip served as an opportunity to reset the economic conversation in America by engaging international leaders on the global stage. High on the President’s list of priorities was the issue of free trade. In what was dubbed the “Yokohama Vision,” President Obama joined his fellow APEC leaders in pledging to take steps towards creating a Free Trade Area of the Asia Pacific (FTAAP) by 2020.

On the sidelines at APEC, President Obama led negotiations regarding the expansion of the Trans-Pacific Partnership (TPP). The TPP, a heretofore unknown multilateral free trade agreement between Brunei, Chile, Singapore and New Zealand, has garnered attention as a potential gateway towards establishing the elusive FTAAP. In addition to the four original countries, Australia, Malaysia, Peru, the U.S. and Vietnam have also expressed a desire to join. Japanese Prime Minister Naoto Kan has also pushed for Japan to join the TPP, but was met with protests from farmers who argue that eliminating tariffs would steal their livelihood. Nevertheless, a determined Kan participated in TPP talks as an observer, with President Obama noting that he “very much welcomed Japan’s interest in the Trans-Pacific Partnership.”

The two leaders also met outside of APEC where they reaffirmed the strength of U.S.-Japan relations. Though they primarily discussed expanding trade, President Obama also reaffirmed the U.S.’s commitment towards Japanese security, afterwards telling reporters, “We are partners in Asia and around the world.” In light of Japan’s recent political engagements with China and Russia, the President’s support eased tensions that had arisen between Washington and Tokyo over the past year regarding the relocation of military bases in Okinawa.

Starting with the APEC Task Force’s White Paper in April, the ACCJ also played a vital role in promoting U.S.-Japan business relations at APEC. The White Paper offered 42 policy proposals from six different industry sectors and served as a guideline for U.S.-Japan cooperation at this year’s APEC. Spearheaded by the efforts of Bruce Ellsworth and Tom Clark, ACCJ members have been busy working with a host of Japanese business organizations such as METI, MOFA, the Keidanren and the Japanese APEC Business Committee. “The ACCJ had many, many member companies in attendance at the APEC CEO Summit and met with dozens of visiting Trade Ministers, Prime Ministers and Presidents in side meetings,” said ACCJ President Michael Alfant.

The ACCJ also co-hosted a reception with the U.S. National Center for APEC and the 2011 Hawaii APEC Host Committee in Yokohama for visiting U.S. delegates to APEC. The reception featured speeches from Senator Daniel Inouye and Secretary of Commerce Gary Locke, and introduced a new APEC Policy White Paper.

Sponsored by the U.S. National Center for APEC and Asia-Pacific Council of American Chambers of Commerce, the report highlighted key achievements at APEC 2010 and recommended priority areas to focus on for APEC 2011. “[This] is the first time that U.S. industry created such a broad report covering all industry sectors and with broad support from U.S. business organizations in all 21 APEC member economies,” Alfant explains. “The report content has been coordinated within each and across all industry sectors, so the U.S. government officials do not have to worry about policy conflicts between different companies or industries.”

As the new year begins, the U.S. and its international partners now prepare to engage once again for a round of proactive talks at APEC 2011, where it will be the U.S.’s turn host the meetings in Hawaii.

Photo by Irwin Wong

Nicholas Benes, ACCJ Governor, Tokyo, is a man with a mission. Observing the recent changes in Japanese government, along with a receptive U.S. Embassy here in Tokyo, Benes and his ACCJ colleagues, such as Kumi Sato, Michael Alfant, Allan Smith (see sidebars) and others, recognized the opportunity for an active task force that could contribute to the discussion.

The intellectual strength of the task force is typified by experienced Japan-based business leaders like Benes. As the Representative Director of the Board Director Training Institute of Japan, an NPO that provides training to corporate management and directors in governance and related issues, Benes says, “Director training is something in the public interest–it’s not just a bunch of activists–it’s for everyone.” He is also currently seeking accreditation from the Cabinet Office for the Institute as an NPO foundation. Drawing on his 26 years of experience here in Japan (Benes has worked in the banking industry, as well as a spell as director of the rehabilitated Livedoor), he led an ACCJ Task Force several years ago devoted to producing a report on Foreign Direct Investment (FDI) which ultimately helped to change Japanese society’s perception of this issue, thus opening the door to new investments.

The ACCJ Growth Strategy Task Force, comprised of about 70 members, decided to produce another report to benefit the business community of Japan, this one titled “Charting a New Course for Growth—Recommendations for Japan’s Leaders.” What follows are key insights and observations Benes and his colleagues gleaned from the process of constructing this comprehensive report.

Journal: Obviously this was a major undertaking. What was your role in the report’s development?

Nicholas Benes: Well, I joke that I spend 80 percent of my time on this report, and the other 80 percent on my BDT Institute work. I’m busy! I was lucky to have worked with Professor Fukao from Hitotsubashi University and Professor Kwon from Nihon University. The mix of business and academia in this sort of thing is unusual. Professor Fukao in particular is a wonderful researcher, and unusually so for a Japanese professor—perhaps for any professor—he has no ego. He takes out his notebook and writes down suggestions, and he loves to get to the bottom of things. He tells me that I’m just as shitsukoi (persistent) as he is, and he means it as a compliment. For funding, we raised money from fifteen corporate sponsors from large to small companies. Given the ambitions we had, it wasn’t quite enough money, but we did manage to supplement this sponsorship.

Journal: Can you talk a little about the timing of this report?

Benes: This is a great opportunity with the DPJ in power and being open-minded, the umbilical cords to the bureaucrats being cut, all these cost-reduction programs, and a sense of change in the air. We have a great opportunity here to get heard, because there’s a huge vacuum in policy-making and for the first time there seems to be someone new who’s willing to listen to new ideas. This is our chance to position ourselves here for what we are—stakeholders here in Japan for the long term—we’re not going away, and we care about the place.

So once in a while we produce a report that isn’t 100 percent self-serving—we do something that’s good for the society as a whole. It’s also good for us as stakeholders, of course. And this was the angle I took when I pitched the idea, and it was well received.

Spectators watch a demonstration of Panasonic’s 3D Viera TVs.
Photography by John Boyd

Several trends were apparent among the hundreds of products and technologies demonstrated at this year’s CEATEC 2010, Japan’s largest tech fest held annually since 2000 at Makuhari Messe in Chiba. 3D technology, no longer a niche novelty offered by a few manufacturers, has blossomed into a dynamic industry segment with a wide choice of TVs, mobile devices, and new ways of creating 3D content. The technology also took a major leap forward with the announcement of glasses-less 3D TVs slated for a December release and with the promise of glasses-free 3D mobile devices for 2011.

Another newish technology undergoing rapid market consolidation is the tablet computer. Amazon.com currently leads the e-book reader market with the Kindle, while Apple’s iPad dominates the market for multipurpose tablet computers. At CEATEC, a number of new competing products were on display that can be expected to do well in the Japanese market and possibly abroad.

With Japan’s big three mobile carriers all making room for new products based on Google’s Android operating system (OS), we can expect to see this OS provide a real challenge to Apple’s iPhone in the Japanese market over the next 12 months, just as it has in the U.S.

Thirty minutes after the CEATEC doors opened, hundreds of attendees lined up and waited over an hour to enter Toshiba’s booth to see its glasses-less 3D TVs. Toshiba showcased a variety of actual products: the REGZA GL1 20-inch and 12-inch 3D TVs, a 56-inch prototype TV, and a prototype notebook computer capable of displaying 3D wholly or partially in a window of any size in any location without the need for special glasses.

Currently, many 3D TVs on display at many consumer electronics stores throughout Japan rely on electronic shutter glasses that open and close in sync with the screen’s refresh rate to deliver separate images to each eye. The brain then translates the two images into what we call 3D.

To eliminate the need for awkward glasses, Toshiba has developed a complex, albeit expensive, way to do all this within the actual TV by adding a sheet of tiny lenses over the display. This enables customers to view the image from different angles. In addition, Toshiba employs its Cell Broadband Engine which works in tandem with a 3D Cell REGZA engine to create nine separate 3D images of the original image and display them in high definition on an LED backlit screen optimized for 3D. All this is done in real-time and lets you experience smooth 3D viewing within a certain viewing zone.

I found the 3D experience to be most impressive on the 56-inch prototype as it was free of any image blurring or discomfort. It was a similar (though a less impactful) experience for the 20-inch model, but much less impressive on the 12-inch and decidedly poor on the prototype notebook PC. Note that the 12-inch TV and PC do not use Cell technology, which explains the lower quality of the 3D image. Both the 20-inch and 12-inch sets will go on sale in December with high price tags of 240,000 and 120,000 yen apiece. At these prices, it’s no wonder, then, that Toshiba plans to produce only 2,000 of these TVs monthly.

Spectators wait for over an hour to view Toshiba’s glasses-less 3D TV models.

Toshiba is not the only manufacturer providing glasses-less 3D technology. Earlier this year, Sharp announced it was developing a second generation of small glasses-free 3D displays for mobile devices such as cell phones and video game players. Sharp has taken a simpler approach than Toshiba, employing an electronically controlled parallax barrier—an overlay on the display that separates the two paths the light takes to the viewer’s right and left eyes. When the barrier is switched off, you have a 2D display. When switched on, you get the 3D effect without the need for glasses—providing you stay within a limited viewing zone—which should work for small mobile devices.

At CEATEC, Sharp demonstrated this 3D technology on small and 10.6-inch displays. Nintendo says it will release a glasses-less 3D hand-held video game player next February, which is widely believed to use Sharp’s technology.

Photography by Lorenzo Barassi

Jiro works for a Japanese company. He is unhappy in his job and wants to quit, but he is afraid he will not find another job, since most Japanese companies do not hire laterally. So he stays put and simply disengages psychologically. In another office building on the other side of Tokyo, Akira works for an American company in Japan. Akira feels he has the option to change jobs if he wants to, but since the downturn, he has become afraid of being laid off. In the current economic environment, after the “Lehman Shock,” will he, too, become disengaged? How does employee engagement differ in Japanese companies and American companies in Japan? And what can we, as managers in American companies in Japan, do to keep employees like Akira engaged?

The ACCJ Human Resources Committee invited leading Human Resource Management directors to take a look at the situation surrounding employee engagement in American firms in Japan. Here, they consider how it has changed since the Lehman Shock. More importantly, they share what we as managers can do about it. The following HR leaders shared their insights and advice as part of the ACCJ HR Committee’s focus on employee engagement: Vikram Cardozo, Human Resources Leader, Asia Pacific, GE Capital; Robin Conn, Human Resources Manager, Asia Pacific, Bloomberg; Sherry Greenfield, Vice President, Human Capital Management Division, Goldman Sachs; Mari Ikegaki, Executive Director, Human Resources Department, Morgan Stanley; Jun Morita, Executive Director, Human Resources, 3M Japan Group; and Bianca Wong, Managing Director, Human Resource Service North Pacific & APAC, HR Information System and Solution, FedEx Express.

CURRENT SITUATION OF EMPLOYEE ENGAGEMENT IN JAPAN

Mari Ikegaki, Executive Director, HR Department, Morgan Stanley

To begin to define employee engagement, GE Capital’s Cardozo notes, “Highly engaged employees are willing to put in discretionary effort towards the company’s success. They perform significantly more effectively than those who are moderately engaged, and are less likely to leave the organization.” Based on a sample consisting of half Japanese companies and half multi-national companies in Japan, a 2010 Towers Watson survey found that 5 percent of Japanese rated themselves as “engaged” (compared to 21 percent globally), and 14 percent rated themselves as “disengaged” (compared to 8 percent globally). Yet Bloomberg’s Conn points out that, “It is difficult to assess and compare non-Japanese and Japanese employee engagement. Non-Japanese and Japanese employees express engagement differently. Non-Japanese managers often assume it is only the lively, enthusiastic, vocal employees who are engaged. Yet, many Japanese employees who are not vocal are also engaged. It is very easy for non-Japanese managers to get into the trap where they think Japanese employees are not engaged, when that is not the case.”

“Japanese don’t openly say that they love their companies, but they are often committed nonetheless,” notes Morgan Stanley’s Ikegaki. Speaking out is also more apparent in Western companies in Japan, where employees have much more voice and feel they really can change jobs and do something else if they prefer.

DIFFERENCES IN JAPANESE AND WESTERN CONTEXT

Goldman Sachs’s Greenfield points out contextual differences between Japanese and Western firms that shape engagement: “In traditional Japanese companies with seniority promotion and lifetime employment, people are in the same place a long time and can become complacent or lose inspiration.” FedEx’s Wong continues, “In contrast to employees in firms with lifetime employment, those in foreign-affiliated firms are more inclined to move if they are unhappy. With lifetime employment, employees feel they have no place else to go if they are unhappy in the current position.” 3M’s Morita adds, “Employees in Japanese firms still fear changing jobs. The mid-career labor market is an unknown world. Even if they don’t like their jobs, they feel they have no choice but to stay. Instead of leaving the company, they check out psychologically. Physically they are here, but not mentally. This increases disengagement.”

Definition Fair Trade/Fairtrade

Fair trade refers to a market-based approach that aims to provide higher wages than typically paid to producers and serves as a way to help producers develop the skills and resources to that will ultimately improve their lives. The prices charged for certified Fairtrade products are generally higher than those of normal products. The umbrella association Fairtrade Labelling Organizations International (FLO) represents the various international fair trade organizations, certifies the products with the official label and monitors the implementation of long-term contracts with regional manufacturers. In addition, there are still several other organizations that carry out fair trade all over the world. However, the value of products being sold by other organizations are not included in the official reports issued by the FLO. In contrast to the concept of fair trade, which is not protected by law, the term Fairtrade (written as one word) refers to products and actions under license.

The history of fair trade started in the 1950s in the United States when American NGOs and religious groups began to purchase products from developing countries. The first products were handicrafts such as jute goods and cross-stitch work from Puerto Rico and primarily functioned as a way to indicate that a donation had been made. The project aimed at improving the living conditions of the underpaid, poor producers working the third world. A few years later the first fair trade shop in the U.S. opened.

A new awareness of the role that social sustainability and corporate responsibility plays in the global market place has revolutionized the relationship between businesses, consumers, and producers around the world. Fair trade is one important aspect of this movement. While fair trade has, by and large, successfully penetrated the markets of Western countries, some would argue that today the concept still receives little attention in Japan.

According to the Japanese Fair Trade Representative Office, Fairtrade Label Japan (FLJ), the market volume for fair trade products in 2009 in Japan has been approximately 13.4 million euros. Meanwhile, about 80 Japanese companies import, produce and sell a total of 250 different fair trade products. Since the label’s implementation in 2002, the annual growth rates amounted to roughly 30-50 percent as of 2008.

However, in 2009, the Japanese spent only 19 cents for fair trade products per person on average. The year before, the figure was just 7 cents. Likewise, the Japanese Cabinet Office estimated that the fair trade consumption of a Japanese household with an average of 2.5 persons in 2007 amounted to about 19.3 yen (about 16 cents). In contrast, the world champions in per capita consumption of fair trade products are the Swiss, who spent an average of about 23 euros (2,630 yen) on fair trade products in 2009.

Although the industry has recorded comparatively strong growth since 2002, the positive trend seems to have somehow stalled: The volume of retail sales grew by only 2 percent in 2009. Further, of almost 800 Fairtrade Towns in 20 countries, which support and promote fair trade, not one is in Japan. Although those statistics should be examined against other data that serve to offer a broader view of the overall situation, they nevertheless serve to offer much needed perspective regarding the role of fair trade in Japan today. 

The Fair Trade Movement

With an average growth rate of 40 percent per year, fair trade is one of the fastest growing markets worldwide. More than 800 producers from 60 developing countries supply the industrial countries, especially in North America, Europe and Australia, with over 27,000 products. According to Fairtrade Labelling Organizations (FLO) (the international federation of Fairtrade organizations) the worldwide market volume in 2009 accounted for almost 3.4 billion euros. This amounts to an increase of 15 percent in the period spanning 2008 to 2009. 

Besides the bestsellers—coffee, tea, fruit and chocolate—sales of products such as cut flowers and wine have grown significantly in recent years. The largest players are the United Kingdom, USA, France, Germany and Canada. While other systems aim at protecting the environment, farmers and workers are the focus of the actions surrounding fair trade. According to FLO, fair trade is the only certification system singularly devoted to combating poverty and strengthening the roles of producers in developing countries. 

Fair Trade in Japan

In Japan Fair trade began in the early 1990s. The NPO known as Wakachiai was one of the first initiatives that began making fair trade certified products available in Japan. Since then the organization has leveraged the proceeds to support various development programs, including refugee camps in Africa. Up until 2002 fair trade in Japan was primarily promoted by small non-profit organizations and interest groups.

But soon, larger companies added their corporate heft to the issue. U.S. coffee chain Starbucks began to sell fair traded coffee in 2002 in Japan. Gradually, several Japanese coffee farmers and food manufacturers such as Ogawa Coffee and S & B Foods followed suit and began to extend their range with fair trade products as well. Today, even well-known Japanese department stores such as Muji, and the convenience store chain Ministop offer fair trade products.

Photography by Hiromi Iguchi

Where are the Ashtrays?

The idea of a coffee shop with a light bleached-wood interior, serving lattes in paper cups, was not one that many pundits thought would survive the discriminating tastes of the Japanese customer. Not to mention that the stores were to be non-smoking. Before Starbucks arrived onto the scene, the typical Japanese coffee shop was somewhat dark, and typically smoke-filled. As Le Marrec points out, many customers may have actually been attracted by the non-smoking aspect of the chain. Certainly, Starbucks was ahead of its time as far as this is concerned–earlier this year, Kanagawa prefecture introduced a non-smoking ordinance for bars, restaurants, and the traditional local chains. Competitors to Starbucks have, to a greater or lesser extent, all provided or expanded upon existing non-smoking areas.

The Siren Lure of Starbucks

Despite some of the initial gloomy prognostications (including the relatively high price of the coffee), the green and white Starbucks logo displaying the double-tailed siren has now become a familiar sight on streets of Japan. The first Starbucks store here opened in Ginza over 14 years ago—the first Starbucks outside North America—as the result of the efforts by Mr. Yuji Tsunoda, who was chiefly responsible for bringing the brand to Japan. This initial store has now been joined by nearly 900 others in 43 prefectures, with all but 32 being company-operated (the rest operate as licensees). Most of the stores are main street stores, but there are 87 drive-through stores, with others inside corporate offices, hospitals, or with ties to other businesses (Shinsei Bank branches and Starbucks are often found in close proximity to each other).

The operation in Japan (Starbucks Coffee, Japan, Ltd.) is a joint venture, with 40 percent of the company owned by Starbucks Company International, 40 percent by Tsunoda’s brother’s Sazaby League (associated with various retail and catering brands in Japan), and 20 percent being public equity.

>Brand Curation via Culture

So many things that come to Japan undergo a seachange (squid and potato pizza, anyone?). So the question that may be asked is whether Japanese Starbucks customers have the same tastes as their U.S. counterparts. The answer is both “yes” and “no.” Naturally, the core coffee products that originated in Seattle have made their way to Japan almost unchanged. But Japan, as we are constantly reminded, is “different,” and this has expressed itself in a number of different Starbucks products, some of which have crossed borders. Green tea (matcha) and coffee jelly frappucinos first saw the light of day in Japan, but have successfully found niches in other markets, including the U.S. Furthermore, Japan is not alone in its practice of exporting unique Starbucks recipes; a “Black Sesame Frappucino” developed in China is due to become part of the lineup outside its country of origin. Typically, these ideas are developed in the local markets, as are the marketing and sourcing, but with the head office in Seattle acting as overall supervisor to ensure that the new product meets the requirements of quality that define a Starbucks beverage.

However, an example of a domestic Starbucks product that remained firmly local is the “Sakura Steamer.” Developed for the Japanese cherry blossom season, it failed to find favor outside its home market (likely due its combination of sweet and salty flavors). Of course, beverage discrimination works both ways—a “Pumpkin Spice Latte” developed in Seattle failed to hit the spot with Japanese consumers (as well as customers in other Asian markets) despite the high expectations of the Seattle International Operations. This served as an object lesson to the team as they were setting up their international marketing. “We really realized how important it is to take local insights into consideration, and if the local team tells you ‘this isn’t going to work,’ you listen to them,” adds Le Marrec.

Even when a product bears the same name worldwide, it may actually differ depending on the market in which it is being sold. The VIA product is a perfect case study that bears this notion out.

Nevertheless, we now live in the age of social media (the tools and platforms—also known as Social Networking Services in Japan), in the service of social networking (the usage of said tools and platforms), and social media makes strategic silence difficult. Why? Because polite social media etiquette means being always on, and always ready to respond to your thousands of “friends” (read: approximately 70 percent passive gawkers, 20 percent loose connections, and 10 percent people who are actually intimate friends in the off-line world). Populating the environs of Facebook, MySpace, Mixi, Gree, Twitter, and scores of other services that require increasing amounts of your time to manage notifications, privacy settings, and location awareness, these people take their social media seriously.

Nine months ago, a friend I’ve known for well over 15 years (primarily on the corporeal plane) sent me an email announcing that we were no longer friends because I had apparently blocked him on the micro-blogging service Twitter. That I explained I didn’t know what he was talking about didn’t seem to matter. I had, somehow, made a major social media faux pas, and the damage had been done.

Just last month I missed a social gathering (again, in actual meat space) that had been exclusively arranged on the social networking website known as Facebook. Several attendees remarked that they had expected to see me there. When I mentioned that I had quit Facebook weeks before, the idea that someone might have actually announced the party via email, or by any other means, never seemed to occur to anyone. Social media, once the promise of more salient connections and vibrant interactions with like-minded souls around the digital campfire, has instead become something more akin to the parochial confines and transient vicissitudes of, yes, high school.

Now, months into my Facebook divorce, I can also reveal that I’m on week seven of my Twitter silence. Instead of checking into Twitter every couple of hours to peek in on the list of people whose feeds I’ve subscribed to, today I only check in about once-a-day. In the wake of this change, what soon became apparent was just how often the people I follow tweet throughout the day. To be clear, these are all very busy people with real careers. Nevertheless, their streams of tweets go on with such thoughtful persistence that it is now clear that social networking has become a sort of 24-hour part-time job, with the predominant remuneration coming in the form of amour-propre.

This recursive love affair is perhaps the only thing that has staved off the social networking fatigue that is clearly beginning to fray the edges of this world of Likes, Tweets, and Check-Ins. Still, the signs are unmistakable: the citizens of the social mediascape are weary. We’ve seen this before with “email bankruptcy.” The sickness, still somewhat prevalent, was characterized by people checking their inboxes 20 times a day, valiantly attempting to appear ever accessible, while their ability to hold quiet, steady focus inexorably faded. Just this September, mobile software company Xobni, along with market research firms Harris Interactive and Opinion Matters, conducted a survey of Internet users in the U.S. and U.K. and found that 72 percent of Americans and 68 percent of Brits check their email outside of regular business hours (including vacations, weekends, and non-work days). But now, instead of one or two chirping inboxes, we have an entire menu of hyper-aware social media services following us during our every waking hour.

The incessant nature of this invisible, self-inflicted leash is traceable to the absence of any discernible system. There exists no real epistemology of social networking. For the individual, social networking is often random, aggressively ephemeral, and requires a great deal of attention rewarded by questionable dividends. And, as with most clubs based on loose associations, interest eventually wanes and the crowd moves to the next hot spot—followed dutifully by the businesses hoping to profit from these affinity groups.

But within the digital realm, this never-ending personal news cycle and virtual presence maintenance can be quite tiring for its inhabitants. So now, those among the attention deficit-addled millions driving this phenomenon who still cling to a sense of démodé analog permanence, have begun a slow, barely perceptible, retreat from the albatross of social media obligations.

Illustration by Phil Couzens

The social networking and micro-blogging service Twitter is quite a phenomenon. Created four years ago in the U.S., the site quickly developed into one of the trendiest destinations on the Internet, now boasting a staggering 150 million users worldwide. In Japan, Twitter succeeded where the likes of Facebook, MySpace, and eBay failed: It became one of the very few foreign web brands to have been embraced by the mainstream. 10 million Japanese are currently estimated to “tweet what’s happening” in their lives in messages limited to 140 characters. Statistics show that Japan leads the world in Twitter usage. According to studies, 16.3 percent of Japanese web users tweet, as opposed to just 9.8 percent in the U.S. After English, Japanese is the second most used language on the service with 14 percent of all messages—considerably more than Portuguese (9 percent) or Spanish (4 percent), the number 3 and 5 most used languages on the Internet, compared to Japan’s number 4 ranking, according Nielson research. During a recent visit to Tokyo, Twitter CEO Evan Williams announced that Japan set the world record for most tweets per second this summer: 3,283 at the close of the Japan-Denmark game during the 2010 World Cup.

But what makes Twitter so special for the Japanese? One factor is its simplicity, which allowed a sizable number of early adopters from the local tech community try (and stick to) the service right after Twitter launched in the U.S. The first boom was fueled by Tokyo-based Internet company, Digital Garage, which localized the service into Japanese after forming a partnership with the American company in early 2008. Other languages, such as Spanish or German, followed much later. Furthermore, Japanese users have a distinct advantage over people speaking these languages: By writing in Japanese and Chinese characters, they can squeeze more text into a single tweet. A nine-letter word like “yesterday,” for example, requires just two characters in Japanese. That way, complex messages don’t have to be broken down into two or more posts. Moreover, conversations on Twitter aren’t limited to only serious topics. For example, once a famous movie actor, singer, or sports star registers and starts tweeting, tens of thousands of fans are sure to quickly follow. While this phenomenon can also be observed in other parts of the world, Japanese web users tend to be more interested in the lives of celebrities than their counterparts in the U.S. or Europe. What’s particularly interesting to observe is that many Japanese people tend to reveal their real names on Twitter (identities are usually kept anonymous elsewhere). The reason seems to be related to the nature of the service. Conversations on Twitter are asynchronous and casual, making it easier for cautious Japanese web users to choose who to get in touch with and when to post responses. Social pressure on Japan’s biggest social network, Mixi, is much higher. Conversely, the popular micro-blogging site is more spontaneous, informal, public, and open. It just takes the push of a button to connect with interesting strangers or celebrities, while Mixi is an invite-only site that is closed to non-members (Twitter also gives Japanese people the chance to follow tweets from foreigners, too).

Another factor explaining Twitter’s rise in Japan is that it’s the only country Twitter entered with the support of a partner. Digital Garage has a track record of joint-venturing with foreign technology companies, such as American web portals Excite and Infoseek. In October of last year, the company launched a special version of Twitter tailor-made for cell phones. The service was designed to be used for short bursts (which are especially easy to type while on-the-go), and Japan is the world’s leading mobile nation. Consequently, the mobile versions provided by Digital Garage and other firms can be seen as the true catalysts for the Twitter boom in Japan.

And there is no end in sight. TV channels are touting Twitter as the new “it” service, major publishers are printing a slew of “how-to” Twitter books, and even top politicians are beginning to open accounts. Major Japanese brands now use the service as a low-cost mass marketing tool (i.e. for running promotion campaigns, giving out coupons or simply getting in touch with consumers). Telecommunications powerhouse SoftBank just rolled out thirteen new cell phones that directly link to Twitter from the welcome screen. Twitter’s popularity in Japan is a great win for the American company, but local partner Digital Garage is benefitting as well. The Japanese Twitter site is the only one that displays ads with related revenue expected to more than double to $20 million this fiscal year (operating profit is projected to hit about $5 million). In the U.S. and elsewhere, Twitter has been struggling for years to find a business model that works. It seems making money may be one area where the American company can learn from its smaller Japanese counterpart.

Dr. Serkan Toto is a Tokyo-based web industry consultant and writer for American online media network TechCrunch.

Currently, over 25 million Japanese are using blogs and other social networking services in Japan. While some companies are questioning how to take advantage of these networks, many corporations are quickly realizing the value in developing social media campaigns which, for a low cost, have very broad reach, and can create significant impact. Still, many companies in Japan are missing the valuable data and insights which can be obtained from listening to and analyzing social media conversations which are key to fostering stronger customer relationships.

The explosion of social media and the changes which are taking place in the way people share information offer new opportunities to tap into consumers’ opinions. Listening directly to consumers’ individual voices develops a better understanding of their behaviors and motivations. However, listening alone is not enough. Companies should mine words and text written in social networks and analyze the conversations to understand the “why” behind customer behavior to continue to develop and engage customers. In order to gain the most value from listening to social media, we recommend companies take the time to evaluate and plan for addressing the following three points.

Choose Appropriate Words/Text When Mining Social Media Data

Key words and text statements should be identified in order to mine the volume of conversations taking place on blogs, 2channel, and other social media sites.  The Japanese language adds further complexity to this as words need to be searched in the many ways they might be written, so beware of words that may need to be spelled or written with characters in multiple ways to mine all the comments written by consumers.

Understand the Characteristics of the Different Japanese Social Networks

In order to tap into Japan’s social media, one needs to understand how the voices of consumers will vary on the major social networks.

Blog Services
The consumer voices or comments on blog entries that are written for public dissemination. A blog is a website similar to a journal, where entries are arranged and organized by addressing different topics. Blogs are subjective and can make or break a brand’s reputation depending on the popularity of the given blogger in a given community. Bloggers can be key market influencers and can raise awareness. Providing key bloggers with samples and targeting blogger product trials can speed market acceptance.

2channel (“Ni” Channel—pronounced like “knee” Channel)
2channel is a huge anonymous Japanese Bulletin Board Service (BBS). Generally, 2channel is quite negative and seems to be a place for Japanese to let out their frustrations. Therefore, it is important to monitor 2channel in a unique way to observe any relative changes in negative commentary. In comparison, personal topics, such as male cosmetics, are seldom written about in blogs, but on 2channel, where consumers do not need to disclose their identities, you can find valuable and highly discreet insights.

Twitter
Japanese posts on Twitter are known locally as “mutters” (In the West, these are referred to as “tweets”). Therefore, they are not arranged or organized, but written instantly. One tweet if popular, generates another tweet and information spreads in an unexpected manner. Thus, analysis of Twitter data can reveal key insights enabling companies to react in a timely manner to consumer concerns or to address issues which can vary throughout the day.

Acquire Insights Which Drive Actions

Unfortunately, simply listening to social media does not provide much insight.  Collecting voices or comments, analyzing them, and acting on the results is most important. Recently a consumer goods company mining online conversations discerned a key insight in regards to what people were tweeting about in terms of which product they would like to eat in the morning. Realizing the importance of the topic, a special campaign was developed on Twitter to take advantage of the idea.

The comments in social media are unfiltered customer voices. By collecting and analyzing these voices, companies can acquire valuable real time information from customers, enabling companies to:

• Uncover customer behaviors and motivations
• Measure campaign performance
• React quickly to customer sentiment
• Discover unmet customer needs

The benefits to analyzing customer voices on social media are endless so we encourage you to do more than measure internet “buzz.” By tapping into social media, companies can uncover actionable insights that drive brand sentiments, product preferences, and customer purchases.

Arlene Hostrop, EVP & Daisuke Akiba, Strategic Planner are from Wunderman International, a digital & direct (CRM) marketing services agency in Japan. You can continue this discussion by emailing: Arlene.Hostrop@Wunderman.com

Hilton In Japan

Photography by Hiromi Iguchi

The Hilton group has been in Japan for 45 years now, starting with a hotel opened in Tokyo (central Asakusa) before international hotel companies had entered the Japanese market, and as Lifschitz remarks, “[At that time] the hotel industry was very limited in Japan.” The brand has now spread to nine hotels, chiefly in major metropolitan areas in Japan, with the latest addition to the range of offerings being the Hilton Fukuoka Sea Hawk, located in a prime location next to the baseball dome.

The Hilton brand is indeed a very strong one in Japan. In terms of awareness, the Hilton name has moved to the top of the hotel brand list for the past three years in the BDRC “Asia Pacific Hotel Business Guest Survey.” Lifschitz attributes this high profile to the consistency of the brand marketing, the volume of the marketing, and the spread of the brand over the region. There appears to be very little resistance to the foreign nature of this brand, which appears to have higher visibility to Japanese customers than, for example, the Nikko chain.

Hilton’s Conrad brand, the Japanese incarnation that opened in Shiodome five years ago, attracted a lot of attention at the time. Starting with the Park Hyatt hotel, there was a flood of luxury brand hotels coming to Tokyo at that time, which previously had been very under-represented at this end of the market. Following the “Lehman Shock,” this high end suffered more than the other sectors of the hospitality market. Lifschitz feels that, although it was one of the fastest and hardest hit sectors, the high end market is bouncing back faster than any of the other sectors.

Another point he is keen to make is that during the worst of the recession, domestic travelers took advantage of the reduced “fire sale” rates at these luxury hotels, and this domestically driven demand has helped these hotels to stay in business and recover rapidly.

Growing The Brand In Japan

Lifschitz is energetically sincere when he asserts that “We understand Japan, and we see opportunities to grow our brand here. It should be noted that the Hilton brand encompasses names other than “Hilton,” and the 2006 purchase of Hilton International by Hilton Corporation allowed for greater expansion of the brand image overall.

For example, the Conrad Tokyo exemplifies the luxury brand of the Hilton group–opened in 2005 (slightly before the purchase mentioned above, but opened as the result of an understanding between the two entities that Conrad would be managed by the Hilton Corporation). Other well-known names that also comprise the Hilton family of properties include the Waldorf Astoria, the Hampton and Doubletree chains, as well as the Homewood-branded apartments and Embassy Suites.

Photography courtesy of Hilton

Subsequent to its purchase of Hilton International, Hilton Corporation was itself purchased by the Blackstone Group, and is now a privately-held enterprise. As a result of this move, Lifschitz says, “Resources have been put in place to drive the growth associated with the other brands.” As a concrete example of this, he cites the company’s development department, which has grown from a staff of just three to one of about fifty.

“In Asia we see three big opportunities for growth,” explains Lifschitz. “China, India and Japan. Most of the expansion is taking place in China, where existing hotels are being converted to Hiltons, and there are some ‘greenfield’ developments. For example, we’re opening a Shanghai Waldorf Astoria on the Bund this year, partly built using the century-old Shanghai Club building, with a modern annex added.”

Though Japan is currently written off by many commentators as a depressed market, Lifschitz is optimistic, describing himself as “a great believer in Japan.” He feels that there is tremendous potential for Japan within Asia for tourism from China, Singapore and elsewhere.

The hotel market in Japan is currently crowded, but Lifschitz sees room for growth. At the top luxury end, he believes there is a great deal of opportunity, and he also perceives room for geographic growth, with the Hilton-branded hotels to be opened in new locations, and even places where there are already Hilton hotels. In London, for example, Hilton operates over 40 hotels, “So there’s no reason why we shouldn’t have more Hiltons in Tokyo,” says Lifschitz.

Photography by Hiromi Iguchi

Location, location, location—those are the oft-cited three most important factors for real estate success, and by extension, a profitable business venture. That being the case, Tokyu Gourmet—the food and beverage unit of rail operator and conglomerate Tokyu Corporation—enjoys an enviable advantage in Japan’s cutthroat culinary industry, with access to prime locations close to stations along the Tokyu’s train lines.

However, under the leadership of chief executive Tomoo Kimura, the 100 percent-owned subsidiary of Tokyu Corporation is not content to simply rely on the commuter catchment of clientele via its network of tried-and-tested franchised brands such as Kentucky Fried Chicken (KFC), Doutor Coffee, Segafredo and Vie De France, though those concerns do generate a steady stream of revenue.

Rather, Kimura—whose first assignment after joining Tokyu Corporation in 1986 as a fresh graduate was to check commuters’ train tickets at the platform gates—has been actively engaging in bringing in exclusive foreign franchise deals and has plans to export its proprietary Japanese restaurant brands overseas.

Tokyu Gourmet was formed in 2003 through the merger of a unit focusing on Japanese restaurants such as soba shops in the train stations—namely, Shibu Soba and Sapporo Ramen—and another unit overseeing franchises of international food brands near the train stations and family restaurants in the suburbs. The business generated around 6.4 billion yen in net sales in 2009.

“We want to develop more of our own brands, which we can feel more proud of, also because there is only so much control we can have over franchised brands,” said Kimura, whose past designations within the Tokyu Corporation involved working at a gasoline stand owned by the conglomerate, running a buffet-style restaurant and setting up a pasta restaurant, before taking over the helm of Tokyu Gourmet in 2006, then aged 42.

As a result, Tokyu Gourmet has embarked on several unique gastronomic forays, such as developing a Singapore-style ethnic restaurant called Singapore Magic! at Futako-Tamagawa, which consists of several ethnically-themed sections based on cuisines available in Singapore—from Arab, Chinese to Nonya, which is a mix of Chinese and Malay cultures unique to the Straits of Malaysia, and of course, Singapore food court or hawker-style street food.

Singapore Magic! recently celebrated its first year of operations on July 1, and this willingness to try something new has paid-off—Tokyu Gourmet is now well-positioned to ride a recent boom of ethnic food from Southeast Asia in Tokyo.

“We have been constantly refining our recipe to get the right tastes and I believe we have a very good menu now,” said Kimura.

Photo courtesy of Tesla Motors

Kevin Yu arrived in Japan in 2008 from the U.S. to lead the PayPal charge, heading up the operations of the micropayment system here. Earlier this year, he changed fields, and joined Tesla Motors as Director of Asia Pacific. Tesla is the designer and maker of the Tesla Roadster, a car that has confounded the world by being a high-performance, good-looking sports car that uses not a drop of gasoline—being all-electric.

Hollywood celebrities have lined up to purchase this piece of advanced technology, and Japan is one of the first markets outside the U.S. to offer this truly revolutionary product.

A little before this interview took place, Tesla and Toyota announced some tie-ups, with Toyota agreeing to buy $50 million in common stock of Tesla upon the completion of its IPO, selling a California assembly plant to Tesla and announcing technology sharing tie-ups.

Photography by Lorenzo Barassi

Journal: How would you describe your role at Tesla?

Kevin Yu: My role is to function as the Director of Retail Operations in Asia Pacific, meaning I am effectively the senior person on the ground here in Asia, and my job is to build a team to get our cars on the road in all Asian markets, outside Australia. My brief from Elon [Elon Musk, co-founder of Tesla] was “Bring Tesla to Asia, and do whatever it takes to make that happen.”

Our first targets are Japan, Hong Kong and Singapore. Then we’ll focus on China, Taiwan and Korea and other Southeast Asian markets over the next year or so.

Journal: What about servicing the cars once you’ve sold them?

Yu: We see ourselves as more of a technology company than a traditional auto dealer. We have teams of professionals, “Tesla service rangers” who make house calls to work on your car. Maybe not so unusual in Japan, but pretty rare in the U.S. Access to this service is part of the price of the car.

The Roadster is a new product; people need to get comfortable with the product, and if we don’t keep them 100 percent satisfied with it, they won’t buy a second one.

When I talk about a “second one,” remember the Roadster is hand-built, the parts are very expensive, and our margins are low, so I’m talking about the future Sedan model here. In order for the Sedan to sell, we have to ensure our initial customers are convinced that electric vehicles are for real, they’re reliable, and they’re here to stay. Reliability also comprises the after-sales care—the service rangers are a key part of this.

Journal: I guess that’s an important sales point in Japan?

Yu: Yes. All over Asia, we’re looking at service centers even before the showrooms. After all, we’re selling through word of mouth, we’ve never done a media buy or print campaign. We decided not to talk to media until we had cars on the road. We didn’t want to be seen as selling vaporware. It’s super-important that people can actually see and touch the car and then buy it.

Most companies in the technology industry release a lot of news, but don’t release a lot of products. It’s one of the reasons I was attracted to working at Tesla—one of the few companies who seem able to follow through on their promises. If you keep announcing products that will come out “two years from now,” people will lose faith in you.

Journal: But doesn’t a sports car seems a strange choice for the first vehicle?

Yu: Not really when you think about it. A car weighs about 800kg, it can’t be much less than that. In our car, about 50 percent of the total weight (1280kg) is battery. To make the rest of the car, we have to go exotic—carbon fiber, etc. which is expensive—in order to get the range. That’s not going to work with something like the [Nissan] Leaf. No-one’s going to pay $80,000 for a Leaf, which is what it would cost with carbon fiber, the Roadster’s competition is the $130,000 Porsche 911 turbo (23 million yen in Japan). At that price point, carbon fiber makes sense and the car becomes more than an R&D exercise inside a major corporation. So when you sit down and look at the economics, a sports car is logical.

Also, to ramp up the industry so that economies of scale start to kick in, you need interest. And interest comes from excitement. So you build a sports car. We’re not just making a box on wheels, we’re making a sexy box on wheels.

The eco-points were introduced as a trading stamp scheme to encourage consumers to buy environmentally-friendly home electronics. Since, according to the Ministry of Environment, the majority of energy consumption in private households is caused by air conditioners, refrigerators and television sets, the program initially focused on these three product categories. In order to assist the complete digitization of the country’s TV broadcasts by July 2011, the subsidized flat-panel TV sets have to be capable of receiving terrestrial digital broadcasts.

Eco-Points & Eco-Labels

Illustration by Phil Couzens

The eco-points that consumers receive for the purchase of an environmentally-friendly appliance are worth 5-10 percent of the purchase total and can be exchanged for a product that either protects the environment or a locally produced good, which directly benefits the regional economies. To obtain the eco-point label, and thus become qualified for sale as part of the program, the devices need to comply with the guidelines of the Ministry of Environment.

Depending on the efficiency and size of the product, the quantity of the eco-points—each point is worth one yen—is determined. The bigger the device, the higher the subsidy. This allows the buyer to acquire up to 36,000 eco-points by buying one of the bigger digital television models. In addition the consumer can receive 3,000-5,000 eco-points if she exchanges an old, non-efficient product for an eco-friendly one.

Eco-success

According to the Ministry of Environment, the number of eco-products sold as of the end of March 2010 exceeded the 10 million mark. A total of over 160 billion eco-points were issued by the government. The most popular items were digital flat-screen TVs, for which approximately 82 percent of the eco-points were given out. 7.4 million devices, rewarded with over 130 billion eco-points, were sold. The Nikkei reported an increase of 57 percent (approximately 16 million units) of domestically shipped flat-screen TV sets in April compared to the previous year.

Panasonic, as the largest player in the TV-producing sector, recorded an increase of 20 percent in TV sets sold in 2009. The boom in the industry in Japan was even strengthened due to a rising demand from China and the developing countries. According to GfK Market Watch, Panasonic recorded an increase of 23 percent in refrigerator sales, so the company has maintained its leading position in this product category as well. Companies such as Sharp and Hitachi managed to improve their profits in 2009 by about 15 percent. Such figures suggest at least a temporary success related to the rollout of the eco-point campaign.

Bureaucratic Hurdles

In spite of these numbers, the program initially was, especially on the consumer side, plagued by a few growing pains. Thus, in the beginning it was not clear how and for what the points could be exchanged, primarily because detailed information issued by the government arrived about one month after the start of the program, rather than giving consumers more time and information to prepare for the program.

However, the biggest problem of the subsidy program was in the subsidy itself: the eco-points. The eco-points could be redeemed only for certain products from certain retailers and the retailer request system has become a complex and time-consuming process. Many documents and forms need to pass several check points before the eco-points can be approved and finally be redeemed for the product. Furthermore, the correct completion of the applications also seemed to present a hurdle, as, according to the Yomiuri Shimbun almost 468,000 of the 5.91 million entries were filled out incorrectly and had to be sent back to the applicants.

Eco-exchange

Because of this enormous effort and the comparatively small number of devices and products offered, customers have re-invested about 97 percent of the eco-points in gift certificates and prepaid cards, which enjoy great popularity in Japan. The certificates cover a wide range of products and services, such as coupons for public transport, hotels and food products. The most popular certificates were those of the big department stores and credit card companies, which accounted for about 70 percent of the program participants.

Although the environmentally-friendly products manufactured in rural areas were officially supposed to build an essential component of the campaign, according to the Ministry of Economy, Trade and Industry, not even 1.5 percent of all eco-points were spent for national and prefecture-specific products.

As President Obama noted in his recent West Point commencement address, “From the birth of our existence, America has had a faith in the future—a belief that where we’re going is better than where we’ve been, even when the path ahead is uncertain. To fulfill that promise, generations of Americans have built upon the foundation of our forefathers—finding opportunity, fighting injustice, forging a more perfect union.”

As we celebrate those values which our great nation was founded upon 234 years ago, let us also celebrate the enduring partnership between Japan and the United States. Our fates and our fortunes are intertwined as never before. We are allies who share the same values of freedom and democracy, and together we are working together to ensure a more peaceful and prosperous future for ourselves and the Asia Pacific region.
Japan’s hosting of APEC this year, followed by the U.S. in 2011, gives us another great opportunity to build on our partnership. The ACCJ is playing an important role in this, with its recommendations on ways that Japan and the U.S. can cooperate through APEC to increase trade and bring sustainable economic growth to all APEC members.

It is my pleasure to extend Fourth of July greetings to all the ACCJ Journal readers among your 1,300 member companies, and to express my sincere appreciation to our gracious hosts, the Japanese people, for their continued friendship and support. May both our great nations continue to enjoy the blessings of liberty.

John V. Roos
Ambassador
United States of America

Originally from Indiana, Brooke was one of the first women to work in Ernst & Young’s Indianapolis office in 1990. In 1993, during the Clinton administration, she was appointed advisor to the president within the Department of Treasury and also sits on boards of various charitable organizations such as the National Women’s Leadership Hall of Fame Advisory Council.

Brooke, 49, spent the last few years crisscrossing the globe in an effort to advocate equal opportunity for women. Pre-Lehman crisis, Brooke hoped that the strength of her reasoning alone—that diversity makes for a more robust organization—would carry through to the corporations that she visited in countries yet untouched by the effects of the credit crunch. But it seems that the financial meltdown may help this message resonate with a sense of urgency.

The idea that a global mindset—with its broad-based thought processes and inclusive ways of thinking—is a prerequisite to recovery is not new. But at this year’s World Economic Forum at Davos, the notion “became more mainstream,” says Brooke. There were discussions around the issue of gender and more focus on women as an emerging demographic for sourcing talent, decision makers and customers.

Also, a good number of CEOs in attendance acknowledged an insufficient understanding of this demographic. It was at Davos that Brooke, and Ernst & Young, presented their commitment to the business case for the adoption of “a diversity of perspectives, and for empowering diversity within the company” to address new and unique challenges. According to Brooke, this means “a more balanced view of risk and opportunity.”

Backing up her ideas with sound and convincing research, Brooke cited mathematical certitude and statistical significance to illustrate the power of diversity as a strategy for success. It was found that diverse groups consistently outperform homogenous groups, by a substantial margin. This held true even if the homogenous group members are among the best and brightest. This perspective is based on the findings of Scott Page, a professor of complex systems at the University of Michigan at Ann Arbor.

In his Diversity Prediction Theorem, he found that “the collective ability of any crowd is equal to the average ability of the group, plus the diversity of the group.” Diverse groups experience creative friction. It’s this creative friction (not conflict) that can lead to different ways of representing a problem, of solving a problem and eventually to better decision making. Thus, in an environment where a competitive advantage depends on continuous innovation, adopting diversity as a business strategy is not only the right thing to do, but the smart thing to do.

When Brooke talks about diversity, she is referring to those human experiences that are based on differences in age, cultural background, education, professional training, and personality. This life experience differential affords a corporate team a unique perspective that is now fundamental to business success in the new global marketplace.

Brooke also believes in giving back to society. In addition to public service, she has been involved in community work with Technoserve, an organization devoted to helping entrepreneurs in developing countries, and a focal point of Ernst & Young’s Corporate Responsibility Fellows Program. One mission reminded her first hand of how important it is to recognize that different people notice different things.

During her recent ACCJ presentation, she told a story about a family whose primary source of revenue was their small chicken farm in a remote village. Brooke and her team managed to provide them with sustainable energy support in the way of solar lanterns. When they asked the couple where they wanted the lanterns positioned, the husband quickly responded, “In the living room, bedroom and kitchen.” But the wife, after a long pause, said, “One must be placed with the chickens.” She understood that the light would help the chickens to produce more, as well as keep predators away, and that in turn was good for the family. Different perspectives for sustainable solutions.

The key to diversity as business strategy is finding and keeping talented individuals who are comfortable with different perspectives, and who understand the notion of creative-competitive collaboration. Expect to find talent in unexpected places because, “The good news,” says Brooke, “is that talent, not opportunities, is always equally distributed.”

In fact, the other message that Brooke brought to Japan and to the ACCJ was that women, being over half of the world’s population, are the largest and most accessible diversity group. Women represent a huge economic force in emerging and developed markets and can act as a catalyst for growth.

But in Japan, with so few key role models promoting diversity, the opportunities to highlight the value of women’s experience and perspectives are limited. In many instances, women are not valued for their talent, but rather as a ready supply of part-time workers, or as a target market. As consumers, Japanese women can make or break a brand. But in the boardroom, they are barely visible. With women representing only 3 percent of senior management positions and 15 percent of board seats in America’s Fortune 500 companies, Japan is not alone in this regard.

Yet results of research studies by the Conference Board of Canada, the Catalyst group’s 2007 report titled “The Bottom Line: Corporate Performance and Women’s Representation on Boards,” and McKinsey’s 2007 study titled “Women Matter,” all confirm that the more women there are in senior management positions and on corporate boards, the more opportunities there are for better performance. According to Brooke, however, “Just giving a seat to one woman or minority voice is not enough. Critical mass is essential to experience any impact from diversity. This would mean for example at least three women on management committees of an average membership of ten persons.”

Of all cultural (national, corporate, and familial) barriers that may serve to prevent the inclusion of women’s potential in the global economy, corporate culture is the easiest to change. Determined, passionate and competitive, Brooke has had the benefit of access to excellent mentors along the way. Now in a position to inspire and to lead, Brooke offers words of advice from the field. For any leader embracing the issue of diversity, Brooke recommends, “Present the undeniable research, an evidence base on the benefits to outcomes from diversity. Then create a safe environment to discuss the unconscious biases that we all have. Discuss openly our social programming and how that causes us to stereotype. Make the conversations safe. Be a leader in them. Acknowledge your own biases and judgments. Lead the dialogue on a sustained basis.”

And for those who want to be the change, she suggests that they, “Believe in the research. Have confidence. Seize leadership roles rather than waiting to be asked. Ask for a leadership role, otherwise you will be ignored. Seek allies in the message. Celebrate leaders who understand the value of diversity and exhibit it. Call out those who don’t. At the end of the day, people value outcomes. Produce them.”

ACCJ Governor and Community Service Advisory Council member Jeffrey Shimamoto leading the walk, together with U.S. Embassy Deputy Chief of Mission James Zumwalt, ACCJ President Tom Whitson and Chubu Chapter Vice President Chris Zarodkiewicz

Undeterred by the rain, participants of the 19th Nagoya Walkathon complete four 1.25 km laps of Tsuruma Park, raising near 7 million yen for charity.

Walkathon Committee Chair Steve Burson, ACCJ President Tom Whitson and Nagoya City Deputy Mayor Satoshi Onishi at the pre-walkathon Welcome Reception at the Hilton Nagoya.

This was the 19th Annual Walkathon, and while attendance levels did suffer due to the rain, the event set a record for the largest volunteer attendance yet—more than 250 people volunteered their time on this day to make the event a ringing success (in the photos volunteers are in the yellow t-shirts).

Participants were encouraged to walk for charity by completing four 1.25 kilometer laps of Tsuruma Park, while receiving different colored wrist bands for each lap completed. Proceeds taken from the 2,000 yen tickets for walking, for which participants received a well-designed Walkathon t-shirt, went to local organizations including orphanages, the homeless, victims of child abuse, service dogs, the physically and mentally challenged and many other needy people. Fourteen of the recipient charities also participated in the event this year, and helped us to educate the Chubu community about the nature of charity work and its importance to all our lives.

This year’s special addition was IBM Japan’s “IBM On Demand Community” project which enabled kids to enjoy science in the park, and, as per tradition, Boeing Japan had the boys and girls making paper airplanes and “fizzing” rocket launches.

Other children’s activities included a stamp rally among the charities, face painting, a beads corner, bingo in English, animal balloons, and overall fun activities regardless of age.
In addition to interactive activities, the stage was action packed from start to finish with the best musicians and performers in Nagoya featured, along with three raffles that drew in the audience for their chance to win return air tickets overseas.

It was a truly fantastic day. Great people, in Nagoya, supporting great causes and great smiles—all day long. The end result should be 6-7 million yen in contributions to local Chubu charities and we are all lining up to be involved again next year in the 20th Nagoya Walkathon!

Photography by Hiromi Iguchi

Competition policy has become an increasingly hot topic in Japan with a number of recent high-profile and international investigations and recent amendments to the Antimonopoly Act. With further amendments pending in the current Diet session, and the new DPJ government’s eagerness to continue reform, further developments are on the horizon.

In 2008, the ACCJ launched its Competition Policy Task Force to ensure coordinated advocacy of the Chamber’s positions on any legal or policy developments. Two years later with amendments passed, and healthy dialogue with government, industry, and legal entities, the task force is positioned well.

The Journal’s Michael Condon joined task force vice chairs Joy Fuyuno (Partner, White & Case LLP), Yumiko Ito (Executive Officer & Associate General Counsel for Legal & Corporate Affairs, Microsoft Co. Ltd.), and ACCJ Special Advisor Larry Bates (General Counsel, Japan, Director, Government Relations, Asia-Pacific, GE Corporate) to discuss the progress made and challenges ahead.

Journal: The ACCJ Competition Policy Task Force started 2 years ago at a time when there was sense of change in the air regarding regulatory procedures in Japan. Can you take us through that initial phase?

Joy Fuyuno
Partner, White & Case LLP

Yumiko Ito: The government had recently passed substantial amendments to the antimonopoly law, effective in 2006, which included many developments such as the institution of a leniency program. We believed this was a good time to start the taskforce. Penalties improved, but on the other hand procedures had not really been improved. So we hoped we could contribute to the creation of better laws in Japan.

Joy Fuyuno: It took a fair amount of foresight to see that at that time, because the currently pending procedural amendments weren’t on the table and people weren’t really talking about due process then. Now “due process” has become a bit of a buzzword, so we should be clear about what it means. What we mean by due process, in the broadest sense, is fair procedures in every stage of an investigation through to the appeal phase. And I don’t think people were really looking at that, at least not the way they are today, at the time the task force was formed.

Thanks to the advocacy efforts of the task force and the ACCJ generally, as well as the new party (DPJ) being interested in these issues, it’s amazing that due process is being discussed in exactly the places you want it to be discussed—the JFTC (Japan Fair Trade Commission), the various ministries, the Keidanren, all kinds of business and legal groups. These days all of these entities seem to be very aware of and interested in these procedural issues, which is amazing considering a few years ago nobody seemed to be talking about it.

Yumiko Ito
Executive Officer & Associate General Counsel for Legal & Corporate Affairs, Microsoft Co. Ltd.

Journal: What changed?

Ito: The Japanese industry associations like Keidanren began collaborating and discussing these issues with the government, as well as academics and practitioners. Also, we have been quite actively participating in those discussions. These activities have been quite successful.

Fuyuno: A lot of things converged. The JFTC’s enforcement became much more active after the 2005 amendments. There were a number of high profile investigations and so people started becoming aware of competition policy issues as a result. The amendments not only expanded the scope of the AMA, but they also increased penalties across the board. And for whatever reason, although they are based on set percentages, we’ve seen higher penalties, as well as more surcharges and consistent statements by the JFTC that they would like to continue their active enforcement activities. All of that happened around the same time and led to increased concern about fair and transparent procedures.

Larry Bates: There was an increasing recognition in Japan that a lot of these major anti-trust related investigations did have an international dimension, and that they were more related to economics than some of the traditional bid-rigging cases. There was also the start of some recognition that the procedures that govern these kinds of investigations in different countries were all quite different. For example, you might disclose a document that was created by an in-house legal team in one country and present that to the authorities in that country, let’s take Japan as an example—there’s no legal privilege here. So would that document then lose its legally privileged status that it might have in the United States? This in turn leads to a host of other due process issues.

Larry Bates
General Counsel, Japan, Director, Government Relations, Asia-Pacific, GE Corporate

Jumping a couple of years ahead, we have this APEC opportunity—it really is a way in which, in the due process area, Japan and the U.S. could set a kind of developed world example for the developing, emerging economies of Asia.

If we have the appropriate procedures in place, they may not be identical in Japan and the U.S., but if we can relevantly harmonize them, and if they are perceived as fair, efficient and effective, in line with the goals of enforcement, that then perhaps creates a better competition environment in the rest of Asia.

Journal: Just rewinding a little bit to the issue of due process…

Fuyuno: The specific issues that have come up over the last couple of years are very different. Last year, when we were talking about some amendments to the substantive law, for example, there were some due process-type issues that got wrapped up in that, for example in the exclusionary monopolization guidelines which came out last summer.

A key point with respect to substantive guidelines is that they should not be vague so that they overly deter what would be otherwise competitive conduct—so our task force looked at those guidelines very carefully to try to ensure that they would provide clear guidance to companies so that they know what is okay. For example, in the area of low prices, this is something that you would generally consider to be good for the consumer, so what is considered anticompetitive low pricing (predatory pricing) needs to be defined very carefully and clearly.

Photography by Hiromi Iguchi

Now into its 16th round, the Japan Market Expansion Competition (JMEC) can perhaps best be described as a professional development program started by the foreign business community to help international interests flourish in the challenging Japanese market, as well as to nurture promising entrepreneurs through the process of crafting a business proposal.

“JMEC has evolved greatly since its inception, growing from a small business plan writing competition to a non-profit organization,” said Tanja Bach, JMEC Assistant Program Director and former participant in 2007 (JMEC 13).

The entrepreneurial movement was initiated by the Australian and New Zealand Chamber of Commerce in Japan in 1993, based on the New South Wales Enterprise Workshop, and is currently supported by 13 foreign chambers of commerce—including the ACCJ, a platinum sponsor—as well as corporate sponsorship from the Japanese business community.

No doubt the two-part program, which consists of a series of lectures by business leaders in the first phase followed by around 250 hours of market research and meetings in the second, is oft- referred to as a “mini Masters of Business Administration”—but a lot more affordable at 100,000 yen for the 5-month duration.

In an interview with the Journal, Jim Weisser, CEO of telecommunications provider PBXL and member of the JMEC executive committee, cited four common uses of the program: As an MBA sampler; to learn how to start one’s own business; as a way to seek exposure to business management from an unrelated field; and, for corporations, as a professional development course for staff.

Weisser, who is also an ACCJ governor, said he is sponsoring one of his employees to be a participant in the ongoing JMEC 16. Corporate sponsors can send up to seven staff to JMEC as a form of business training at no cost, depending on their level of sponsorship to the program.

Unlike a formal MBA, participants of JMEC—who average 31 years in age—get the opportunity to work on a real project with a real client, not just theoretical case studies. Such a priceless opportunity prompted over 100 applicants to sign up for the program this year, of which only 60 were selected to work on the cases of 10 participating clients. The next JMEC program will run from July 1 of this year to June 30, 2011.

JMEC Program Director Laura Loy

A recent survey of JMEC clients—which includes the likes of National Australia Bank, Crafts Americana Group, Groupe Synergie Alliance Inc., Lloyds TSB Bank, and the Swiss Chamber of Commerce and Industry in Japan—showed that every two out of three business proposals get implemented within six months of receiving them. To date, a total of 140 business plans have been presented.

Regarding some of the proposals that fail to come to fruition, Weisser explains, “Sometimes, the teams come to the conclusion that it would be better for the client company not to go through with the original idea of the client, and suggest a better alternate proposal.”

But 1,000,000 yen—the cost to clients for a business solution from JMEC—is a small price to pay to avert a potential business error, said Weisser. Clients also receive a proposal which is the result of over 1,200 hours of market research.

The promise of innovative business solutions is the primary draw for most clients who approach JMEC for its unique suite of services and market insight. This also leverages JMEC’s diverse base, which counts a total of nearly 800 participants hailing from 45 countries since the program started 16 years ago. JMEC participants are also encouraged to challenge the traditional way of doing things when change is needed.

Taking place on the last Saturday of March each year, the idea of Earth Hour is that all non-essential electric lights and appliances be turned off for one hour. Years ago, when the initiative first launched, 2.2 million Sydney residents responded by turning off non-essential lighting for the requested period. In the following years the message has spread, to the point where it is now a truly global event, with up to one billion people all over the world now participating. Naturally, saving one hour of electricity is little more than a drop in the ocean when compared to the world’s overall annual electricity consumption. Indeed, it has been reported that power production (as opposed to consumption) remains largely unchanged in many regions during Earth Hour events. Even so, the overall effect of so many people turning off their lights can be quite impressive–for example, Vietnam reported a drop in electricity demand of 500,000 kWh during this year’s Earth Hour. However, the main goal of the event is not to save electricity and energy per se, but to raise awareness of the effects of electricity consumption on the climate.

Earth Hour 2010 saw some 4,000 cities in 128 countries and territories participating worldwide, including Japan, where the Tokyo Tower and Hiroshima Peace Memorial, among others, were darkened for 60 minutes. Organizers claimed that part of the reason for Japan’s first significant participation in the event has been the Hatoyama government’s pledge towards a significant reduction in carbon emissions which has raised public awareness of the issues involved. Also included in the roughly one billion participants worldwide were an estimated 90 million Americans, and in the U.S. (as elsewhere around the world) many famous illuminated landmarks, including Mount Rushmore, had their lights turned off for the hour. In fact, Mount Rushmore from now on will be darkened on a permanent basis from 9 p.m. rather than the previous 11 p.m. Even if Earth Hour itself is seen merely as a token step towards energy conservation, it has acted, in this case at least, as a call to action, with other famous landmarks and building complexes also engaging in more permanent energy-saving efforts, such as in Chicago, where the Building Owners and Managers Association has developed guidelines to reduce the carbon footprint of buildings in that city.

In Japan, a similar movement to turn off lights, a “Cool Earth Day,” has been in existence for some time, but in order to promote the international nature of Earth Hour within Japan, the ACCJ’s Energy & Environment Committee encouraged members to participate in the 2010 Earth Hour. Leading by example, all lights and non-essential appliances in the ACCJ offices were turned off for this 60-minute period.

Companies who participated in this initiative were asked to fill in a pledge form, to turn off the lights in their offices for the requested period, and also to encourage their employees to do the same at their homes.

Rebecca Green, co-Chair of the Committee, explained that there were no definite targets set for this year, partly because this was the first year in which the effort has been given special focus here, and said that, “We didn’t really know what to expect.” However, in the end Green said that she was “very pleased” by the response, given that the only real push for the event was through a limited Internet communiqué rather than a concerted “hard-sell” promotion. “We didn’t set out to do a mass campaign this year,” she explained, “seeing that this was the first year we have been involved and it was, quite frankly, a little late when we started. It was very much a voluntary effort this time.”

Despite this, 32 companies returned their pledges, which Green describes as “impressive,” given that there was no active recruitment involved, and the companies’ involvement was purely based on their respective individual responses to the email invitations.

Those companies that returned their pledges and participated in the 2010 Earth Hour included: Air Products Japan, Inc., Asian Tigers Premier Worldwide Movers, Bodycote Japan K.K., Cabot Microelectronics Corporation, China Airlines, Chuo Sogo Law Office, P.C., Crimson Phoenix K.K., ERM Japan, Fullcircle Innovations K.K., GE Japan Corporation, GE Nissen Credit Co., Ltd., Hill & Knowlton Japan, IBM Business Consulting Services/IBM Japan, Index Consulting, Inc., IPE Academy, Jones Day, Kaneko Law Office, Microsoft Co., Ltd., Morrison & Foerster LLP, Ito & Mitomi, Newport Ltd., Nippon Becton Dickinson Company, Ltd., NK Plastics, Oakwood Serviced Apartments, Peter Hahn Associates Limited, PricewaterhouseCoopers, Quint Wellington Redwood Japan K.K., Richco Japan Inc., Robert Walters Japan K.K., Toys ‘R’ Us-Japan, Ltd., United Airlines and The American Chamber of Commerce in Japan.

Next year, the Energy & Environment Committee intends to increase ACCJ membership participation in Earth Hour with a larger publicity push and an encouragement to collectively “turn off the lights.” As Green notes, “It’s an easy thing to do, and we hope that next year more companies will participate.” It’s likely that the increased publicity and support from the ACCJ will also help to inspire Japanese companies and individuals to participate in this unique event that ultimately points the way to a brighter, more sustainable environment for the entire planet.

Illustration by Phil Couzens

But for a country that can’t wait more than three minutes for noodles to cook, Japan isn’t a place where foreign investors can make an instant profit. Harking back to its agricultural past, Japanese relationships require patient cultivation before any fruits of labor can be reaped.

Those in a hurry may favor the allure of China, which prides itself on doing things faster and cheaper. And much in the same way that the Shanghai Maglev Train—which can achieve a record speed of 501 km per hour by magnetic levitation—makes Japan’s Shinkansen seem like a snail’s crawl by comparison, China’s booming economy is threatening to surpass Japan as the world’s second largest economy.

But as in any race, maintenance is the hard part. Like the Shinkansen’s impeccable reputation for punctuality and safety over the past half century since it first began operation, Japan’s track record as an orderly and efficient business venue should keep it a natural destination for foreign investors looking to expand in Asia.

Inevitably feeling the heat of the global economic meltdown, Japan’s real Gross Domestic Product for 2009 back-wheeled 5 percent from the previous year, marking the steepest decline since records began in 1955. China, on the other hand, powered ahead to hit 8.7 percent real GDP growth over the same period.

Thus, Japan’s need to ensure a constant infusion of capital from overseas to remain robust on the world stage—or risk degenerating into an insular economy wistful for the good old days of self-sufficiency.

As part of the bitter pill to recovery, the government has set a target of attracting Foreign Direct Investment (FDI)—a key driver of globalization as businesses invest overseas to access markets, technology and talent—to the tune of 5 percent of its GDP by 2010.

However, Japan’s balance of payments data for 2009 shows that FDI in Japan slid by 55.7 percent compared to the previous year. According to a 2008 survey on Japan’s attractiveness to businesses conducted by the Japanese External Trade Organization, China is by far the largest host country for FDI projects in Asia.

In 2007, 38 percent of the FDI projects in Asia were directed to China, followed by India, while Japan ranked fifth with a market share of 5 percent. FDI in Japan amounted to 3 percent of its economy, compared with between 17-20 percent of GDP in the U.S. and the European Union respectively.

Mirroring this global tussle for investment dollars on a local level are Japan’s regional cities, which are engaged in a fierce domestic rivalry for foreign investment dollars, gamely hoping to challenge Tokyo’s hegemony as the city of choice for the headquarters of foreign business interests.

City Scan

Illustrations by Phil Couzens

While Tokyo may be Japan’s capital city, it certainly isn’t the only city attracting foreign capital.

Responding to the Journal, the Japan External Trade Organization said, “Where to base your business depends on the function of the company or the type of industry the company belongs to.”

To the west, Osaka, the second most densely-populated city in Japan, touts itself as Japan’s center of enterprise and innovation.

Neighboring Kyoto, the capital of Japan for over 1,000 years from 794, is where consumer electronics and tech giants like Nintendo, Murata, Kyocera and Nidec call home, cultivating a Silicon Valley-style ecosystem with over 40 universities working in close contact, along with the Kansai Science City located in south Kyoto as well as the Kyoto Research Park.

Nagoya, in the central mountains of Honshu, is gaining traction as a value-for-money business center. Fukuoka in the south, said to be one of the oldest cities in Japan, has the largest population west of Osaka and has gained repute for being very livable while heavily industrialized.

So while Japan has a reputation for being a very homogenous society, there are regional subtleties and differences to bear in mind. Of course, business ethos aside, a major deciding factor for business location is cost.

Rent, labor, and other costs of living and doing business in Tokyo are prohibitively expensive, explaining the preference of SMEs to set up shop outside the capital.

Osaka claims to be 30-50 percent cheaper than setting up a business in Tokyo. Indeed a cost comparison by JETRO revealed—among the cities featured here—Tokyo to be the most expensive followed by Osaka, Nagoya, Kyoto and Fukuoka.

David Case: Mr. Nagayama, I would first like to thank you for coming and speaking to the ACCJ in December. The talk was highly informative and very well received by the audience. During your talk in December, you gave us a very helpful overview of changes to the Copyright Law implemented in January 2010. But before we get to the revisions to the law, could you please speak a bit about the purpose of the Copyright Law in Japan?

Photography by Hiromi Iguchi

Yuji Nagayama: In Japan, the Copyright Law is administered by the Culture Agency. In other countries, it may be the case that other administrative agencies have this responsibility, but I think Japan is unique in that our agency has this role. Hence, the purpose of the Copyright Law is the important need to keep (Japanese) culture intact. To that end, it is important to protect the rights of persons who create cultural works and to ensure that they benefit from their creations.

Likewise, people who support creators of cultural works, such as in the case of music, record companies or management agencies, also need to be protected. This infrastructure for cultural works forms the basis of Copyright Law here in Japan.

Case: The recent revisions to the Copyright Law took effect at the beginning of this year. I am sure there are many points you wish to highlight, but if you were to highlight some of the recent changes, which would you touch upon?

Nagayama: Due to the advent of the Internet, tailoring the Copyright Law to take technological improvements into consideration was one of the challenges in drafting these revisions to the law. But we believe significant strides were made to this end. For example, in the case of search engines, no global rules exist for how search engines may copy, save and transmit copyrighted works as part of search results. In the U.S., fair use rights largely govern how search engines handle copyrighted works.

In Europe, there are cases where the rights holders have the rights to decide how their works are used. In Japan, the law was unsettled and a fair amount of discussion took place between rights holders and users. As such, in the case of Japan, because there was a need to support search engine businesses here, we made rules concerning what can be protected when searching for things on the Internet.

In a nutshell, even without the consent of the rights holders, copyrighted works that are cached on a server or displayed in search results by a search engine are not considered a violation of a rights holder rights. To balance rights holder’s interests, a rights holder can make their website “non-searchable” by placing certain “tags” on their site, and this must be respected by search engines. Also, if a search engine learns that its search results contain infringing goods, it must stop displaying such results.

Something else which has more impact to the everyday lives of people here in Japan is the new provision that users are held liable for downloading copyrighted works that they know have been posted illegally (for example, music). There is no “penalty” per se, but nevertheless, the significance is that people will be aware of what they are doing is legally wrong.

Case: Could you please speak to the revisions to the law that permits the use of copyrighted works for research purposes?

Nagayama: Yes. Large amounts of information collected for the purpose of analyzing data will not be considered a copyright violation. To be more specific, say, for example, a company wanted to copy newspapers from the last 50 years just to analyze how the font of kanji changed over time. This would not be considered a copyright violation to copy the newspapers for such propose. Another example is visual data. If a company were to collect visual images for the purpose of conducting some sort of research, such activity would also allowed.

Case: That was very helpful, Nagayama-san.

Nagayama: Any further questions can be directed to us at: www.mext.go.jp.

Illustration by Phil Couzens

Recent statistical data detailing the current global demographic shift indicates that Japan is by far the most severely affected nation with both a rapidly aging and shrinking population. This dramatic demographic shift comes as no surprise to veteran Japan market analysts and has spawned a number of studies focused on the future of the nation’s workforce. In recent years, one particularly foreboding term that has come into regular use is the “Year 2007 Problem.”

The “Year 2007 Problem” (nisen-nana-nen mondai) came about as a term designed to describe the anticipated retirement of the Japanese baby boomer generation from 2007 onwards. This generation consists, by definition, of those born between 1947 and 1949 and comprises a significant percentage of the labor force. Including also those born in 1950 and 1951, there are a total of 10.7 million people in the baby boomer generation, with 8.2 million belonging to the labor force in 2006—more than 12 percent of the entire labor force.

Nisen-Nana-Nen Mondai: What Was It All About?

The original forecast, made by many market experts, predicted that a large percentage of these baby boomers would retire when they reached their 60th birthday between 2007 and 2009. The expected retirement wave, in combination with the aging and shrinking population, was predicted to be the cause of severe problems on a micro- and macroeconomic level. For one thing, a large percentage of the potential retirees were knowledge experts; for another, the looming labor shortage was a cause for worry in terms of human resources in a country not known for encouraging mass immigration.

Indeed, even now, if no measures are taken to increase the number of seniors and women working in corporate Japan, the working population will see a dramatic decline. According to a white paper by the Cabinet Office, the labor force population that numbered 66.57 million in 2006 will decline to 42.28 million by 2050. And, by 2030, a decline of more than 10 million is feared. The outlook for Japan is indeed gloomy, even by international standards, as shown by the percentage change in the working age population covering those in the 15–64 years of age demographic (See Figure 01).

Another important factor that comes into play when considering the impending retirement of aging employees (often the most seasoned experts in their areas) is the distinctly Japanese business culture approach toward managing expertise within large organizations. Often based primarily on tacit know-how, these roles, and the subtleties associated with them, are difficult to encode or somehow store in a database to be applied to a new hire. Because Japanese companies tend to focus on the direct transfer of know-how via personal communication and interaction, a company’s discreet knowledge base is hardly ever externalized, that is, translated from tacit to explicit knowledge.

Moreover, the need for systematic and explicit documentation of knowledge is far less important in companies with a traditional Japanese employment system—lifetime employment and the seniority system—than in companies with a higher turnover, as is the case for many companies in Europe and North America. Know-how in Japanese companies is mainly passed on personally—during working hours and during social occasions in the evenings via “nomunication” (Japanese nomu = to drink)—and intrinsically in the context of on-the-job training. Of course, the transfer of tacit knowledge and its externalization require time, and thus the simultaneous retirement of several experts creates a significant problem.

Good business development allows businesses to profit by doing something that is tangential to their core mission. Sometimes the profit is so good, it becomes part of their core mission; other times, it supports the brand and sometimes it just makes money. And often it’s a little guy who can be flexible enough to make things happen.

Examples:

Photo by Kohji Shiiki

• Starbucks licenses its name to a maker of ice cream and generates millions in royalties.
• A rack jobber like Handleman does a deal with a mass marketer like KMart. KMart gives them room in the store to sell records and gets a cut; Handleman does all the work.
• AOL buys AIM instant messaging software and integrates it into their service.
• Years ago, I licensed the rights to Isaac Asimov’s “Robot Series” novels from a business development person at his publisher and turned the books into a VCR murder mystery game which I then licensed to a business development person at Kodak, a company that was experimenting with becoming a publisher. (Isaac made more from this project than he did from many of his books.)
• Best Buy offers extended warranties on appliances you buy. They don’t provide the warranty, of course; a business development person did a deal with an insurance/service company to do it and they share the profit.

The Princeton Review built a huge test prep business, but only by licensing their brand to a series of books which did the lion’s share of their marketing for them.

You don’t see business development from the outside, particularly all the potential deals that fail along the way. Many companies, though, spend millions of dollars a year looking for deals and then discovering that they pay off many times over.

Others, particularly smaller competitors, are so focused on their core business that it never occurs to them to consider partnerships, licensing, publishing, acquisition and other arrangements that might change everything. Harley Davidson probably makes more money on business development than it makes on motorcycles.

The thing that makes business development fascinating is that the best deals have never been done before. There’s no template, no cookie-cutter-grind-it-out approach to making it work. This is why most organizations are so astonishingly bad at it. They don’t have the confidence to make decisions or believe they have the ability to make mistakes.

Think about the Apple-Nike partnership on making a device that integrates your iPod with your sneakers. This took years and cost millions of dollars to develop. Most companies would just flee, giving up long before a deal was done and a product was shipped.

Of the five trade myths he discusses, in each instance Enzio explains that anachronistic beliefs about trade could lead to an impaired U.S. economy with a simultaneous jump in interest rates having widespread repercussions.

The first so-called myth is that “imports kill jobs.” Enzio readily dismisses this as self-serving for politicians wanting to avoid inconvenient truths. In short, politicians (the key subjects of Enzio’s work) would rather blame outside forces for their constituencies’ economic troubles rather than acknowledge failing policies in areas such as education and matters such as burdensome taxation.

Enzio also questions how the U.S. can be expected to increase its headline trade surplus as it employs fewer people in manufacturing. And it turns out that as imports rise, so does employment, primarily in services.

Yet, if all so-called “unfair” imports were banned, America’s multi-national corporations (MNCs) would suffer heavy blows since their foreign-made products could not be imported back into the U.S.

The second so-called myth is that “exchange rates drive trade.” The argument that if other countries’ exchange rates were stronger, America would not have a deficit, does not hold water, explains Enzio, since a devalued U.S. dollar brings trouble of the kind explained above.

The third so-called myth is that “trade balances are a national matter.” He opines that, given the interconnectedness of the global economy, viewing trade balances nationally is purely mercantilist thinking and potentially subjects MNCs to host government protectionist retaliation.

The fourth so-called myth is that “America’s trade deficit is ‘bad.’” Two keys to this notion are that non-U.S. MNCs are more than ready to take market share from U.S. MNCs; and it doesn’t necessarily require a ban on U.S. MNCs operating abroad, since U.S. politicians angering a host country such as China could result in the same dire consequences. Enzio wonders just how disaffected U.S. MNCs would respond in terms of their political contributions.

The fifth and final so-called myth is that “foreigners finance America.” Once again, he regards this as a political ploy (whether deliberate or naively inadvertent) playing on vulnerability and blaming foreigners for ills.

However, taking a step back, Enzio enlightens readers on two other fronts. The first is that one must review just who the foreigners that own U.S. debt are and what percentage of the whole it comprises. Interestingly, Enzio explains that news reports are misleading: Foreigners as a whole owned 25 percent of Treasuries outstanding in 2006, but of that an increasing amount is held by private investors (such as hedge funds and also MNCs) as opposed to institutions or governments, thus lessening the impact if there were ever any dumping.

Data suggests a very strong correlation since 1970 between the growth of FDI and the “foreign” ownership of Treasuries. The other point here is that even if foreign holders were to dump Treasuries, there is no other market that offers the depth, liquidity, and sophistication of the U.S. Enzio notes that the size of the U.S. bond market is greater than that of the EU, UK, Japan, and Switzerland combined.

The remainder of Enzio’s tome includes an explanation of the drivers of trade flows, the history of the economics behind trade, and his suggestions for how to remediate the discussion of trade.

In closing, while Enzio duly notes that political self-interest can prevail during economic downturns, I was compelled to reflect on an earlier quoted passage from the late Professor Daniel Boorstin, which Enzio recaps in stating: “[America's] politicians/leadership recognizing the U.S. itself is the largest stakeholder in the globalized economy will be the necessary first step in the process of transforming mindsets about America’s trade balances and trade policies.”

Although salary levels in New York and London are now comparable with those in Tokyo, and setting up a Japanese operation is no longer the prohibitively expensive business that it once was, problems still remain regarding recruitment and the retention of staff when compared to the rest of the world or, indeed, when compared to other Asian locations such as Hong Kong and Singapore.

Thus the ever-present question of “expatriate” versus “local hire” presents itself, and even when the decision has been made to use “local hires,” the additional question of whether to hire Japanese or non-Japanese personnel raises its head. In Japan, it cannot be automatically assumed that the English language will act as a lingua franca between customers and the Japanese subsidiary of a foreign enterprise—indeed, it may not be possible to operate the Japanese operation using English as the common internal language.

These linguistic and other cultural barriers afflicting newcomer businesses to Japan influence hiring decisions and, to that end, many smaller HR consultancies and hiring agencies have sprung up in the past, often serving niche markets (for example, financial IT staff). As a result, competition was fierce, without much of the global brand leadership pattern that exists outside Japan.

Recently, however, more global players have entered the Japanese market, one of them being Robert Walters, whose Australian Managing Director and head of recruiting, David Swan, talked to the Journal.

Robert Walters in Japan

This UK-based recruitment agency set up shop in Japan ten years ago, with the Japanese office specializing in the recruitment of Japanese mid-career staff, mainly, but by no means exclusively, for multinational companies operating in Japan.

Swan, with 13 years of experience in the field, explains that the larger overseas recruitment companies’ profile has increased considerably from what it was in the past.

Previously, several smaller local Japan-based firms were doing the work until the larger “brand name” foreign companies, one of the first being Robert Walters, entered the market at the beginning of the century and raised the level of competition.

“When you have a market with fairly low competition, you don’t get a rise in standards,” he points out, claiming that clients are better served in the Japanese marketplace by these heavy-hitting entrants.

Other major longer-term players in Japan include Michael Page, Hudson, and Wall Street Associates, with other players, such as Hays, Robert Half and others coming at a later date.

Prior to this, the Japanese “lifetime employment” system was often perceived as being inviolable, discouraging any attempt by London and New York head offices to break into the Japanese market, which was held, to a large extent, to be an impossible nut to crack.

“I don’t think we [the foreign recruitment firms] have caused the changes in Japanese business culture, with traditional bonds between employers and employee breaking down,” he says, while pointing out that these changes have made it easier for foreign companies to recruit Japanese staff to fill the gaps in their organization charts, and thereby have increased demand for recruitment services of a global standard.

Despite some recent changes, Japanese business culture is still very different from that of other parts of Asia which means, according to Swan, that the expectations related to doing business in other countries do not necessarily apply to Japan.

For example, he says, “It tends to be a little harder to get candidates in Japan to change jobs than in Chinese-style cultures like Hong Kong and Singapore. Candidates there are often more driven by monetary concerns, while Japan workers tend to take into account factors other than purely monetary ones when considering a job move.”

Such mid-career “bilingual Japanese professionals,” in Swan’s words, form the mainstay of Robert Walters’s work, and he also emphasizes strongly that Japanese language ability is of paramount importance in the majority of cases handled by Robert Walters, unless it is for a post with very specialized skill requirements.

“Otherwise they need pretty much native Japanese,” he explains. “Fluent Japanese is sometimes acceptable, but fluent Japanese doesn’t equal native Japanese in terms of ability to do business.”

There are exceptions to this rule, and Robert Walters does recruit from outside Japan to fill those specialist positions where it is impossible to find a suitable candidate from inside the country. Chiefly, though for foreign clients, Robert Walters acts as the “boots on the ground” for head offices who need to appoint local staff to fill the needs of the Japanese office, typically at “specialist mid-level.”

Illustration by Phil Couzens

First, a few personal facts. My involvement with China goes back to the early ‘60s as a diplomat in Hong Kong where I was learning Mandarin.

For a while I served as the China desk officer in Canberra’s foreign affairs ministry. Then, during Cultural Revolution days, I finally got to travel to China by organizing an Australian ping-pong team (over Canberra’s opposition).

Since then I have visited China many times on both reporting and university business. And while my conclusion is not quite as colorful as the famous Newsweek description of Japan during the heady ‘80s—an economic juggernaut out of control—I have to admit to fairly strong optimism about China’s economic, and to some extent political, future.

Let’s begin with the obvious: The economic progress we are seeing in China today is almost a carbon copy of the dynamism we saw in Japan’s high-growth economy of the sixties and early seventies. And for the same reasons. Take a large, reasonably well-educated population keen to have the basic essentials of life—TVs, refrigerators, housing, transport equipment—combine that with a high savings rate, some foreign investment, access to technology plus competent entrepreneurs and bureaucrats, and rapid progress is inevitable.

Nor was it just in Japan. We saw the same growth pattern in South Korea and Taiwan, then in non-Sinitic Asia, Malaysia, Thailand and now even Indonesia.

With Japan there was also the further advantage of a large domestic market. Hence the 7 to 8 percent growth rates running right through to the 1973 oil shock. In terms of domestic market size China today is even better favored than Japan was, which is why we see those nine to 10 percent annual growth rates.

Some fret over claimed regional disparities, saying growth is concentrated in coastal areas. Clearly they have not visited Wuhan, Chungking or Chengdu lately. Others warn darkly of over-heating, but Japan, too, had its frequent mini-booms which, until the late ‘80s were, as in China, quickly cooled down by intelligent Keynesian policies.

A more valid criticism is the urban-rural gap. The trickle-down effect is gradually spreading from the main cities—to a radius of almost 200 kilometers by my count. But this still leaves a large area to be covered. And, given the lack of a safety net, when the Chinese are poor they are really poor.

But a poverty gap does not mean an end to economic progress. It simply means the glass is half full. Open a packet for say the “Made in China” gadgets on sale at your local home depot. Check out the details: A maze of metal nuts and bolts, complex pieces of plastic and other materials needed for assembly, the instructions in Japanese, even the wrapping paper and the sticky tape holding it all together. Most of this had to be supplied by someone outside the gadget factory. Then think of all the other things needed to get that packet to you—a financial system, sales agents, skilled labor, repair shops, communications, transport links, harbors with good facilities and so on.

All this adds up to what I call “the industrial base.” Without it, no economy can move (a major reason why all the money, training and technological aid poured into Africa produces little result).

On top of all this is what I call “the snowball effect.” In today’s world there are only two factors that decide relative profitability—cost of labor and cost of factors provided by the industrial base.

With each investment the industrial base improves. With each industrial base improvement more investments are attracted. Before long China will probably have an industrial base equal to any in the world. Combined with an undervalued currency—the other key factor deciding international competitiveness—China really could become a juggernaut out of control.

And, as with Japan in the ‘80s, the only problems that could slow things down are rapid upvaluation of the currency due to excessive export orientation and rising labor costs (Japan suffered a further blow—bad economic policies since the late ‘80s).

Illustration by Phil Couzens

In January, Apple’s Steve Jobs unveiled his company’s latest offering, the iPad. In a category all its own, the iPad has many uses, one of the most interesting to many people being its potential as an e-book reader.

Japan definitely has a population that reads, but over the past 10 years or so, commuter habits in particular have moved away from reading and more toward using cell phones to play games, to communicate, and yes, to read.

An Impress R&D Institute analysis quoted in The Mainichi Daily News put the value of the Japanese e-book market at 46.4 billion yen (FY2008) and, according to Takayoshi Koike, a research analyst at Deutsche Securities Inc., 90 percent of all e-books in Japan are being read on mobile devices, i.e. cell phones.

Although Japanese phone screens are becoming larger, a more book-sized screen such as the iPad’s would appear to be a winner when it comes to digital publications, including graphics-based content.

Manga Culture

Koike’s figures claim that manga (comics) currently account for some 80 percent of the e-book market. However, these publications are ephemera—the paper versions are read once by their purchasers and then thrown away. Purchase of e-comics would seem to be somewhat of an overkill.

Accordingly, Mikio Amaya, President and CEO of the Papyless distributor, provides a rental service for these popular products, feeling that rental is a model that suits this particular consumption pattern, given the “disposable” nature of the material.

Founded in 1995, Papyless may be one of the world’s oldest e-book distributors, starting outright book sales in the pre-Internet era through a BBS, but the recently introduced rental system allows registered users to purchase the use of a comic book, viewable on a variety of devices, including the iPhone, for a set period (typically 48 hours, enough to read an average-sized manga).
Server-side cookies allow the user to pick up from the last point read, when switching to a different device (work or home PC, or cell phone during the train commute), providing a similar syncing experience to Amazon’s “Whispersync” technology.

Amaya sees the larger color screen of the iPad as ideal for the graphical display of comics and similar material and is looking forward to the device’s introduction in Japan.

The Papyless system for distribution of content is also available as an API (Application Programming Interface) to other Web sites, meaning that this technology has gained the number one sales spot on most mobile carriers, beating out over 100 competitors in the field.

Amaya is now keen to expand outside Japan, with foreign distributors of manga and related material using his system, either for distribution of Japanese-sourced content to overseas, or sales of material from overseas to Japanese customers.

photo by Un Climate Change, www.flickr.com/people/45289935@N08/, used under the Creative Commons Attribution license

While the general sentiment towards the hazy outcome of the recently concluded United Nations COP15 Climate Change Conference has been one of disappointment –especially amongst the business community–the annual convention, held in Copenhagen last December, was far from a complete copout.

Most significantly, the event convened all major greenhouse gas (GHG) emitters such as the United States, China and Japan, notes Rebecca K. Green, Chair of the American Chamber of Commerce in Japan Environmental Committee, and senior consultant for green business consultancy Environmental Resources Management.

In particular, the U.S.’s role in steering negotiations is significant given the fact that America stayed out of the 1997 Kyoto Protocol, neither ratifying nor withdrawing from the treaty which sets binding targets on industrialized countries’ GHG emissions, due to China’s exclusion from the restrictions.

China surpassed the U.S. as the biggest GHG emitter in 2007, but on a per capita basis the U.S. still outstrips China by nearly four times.

“While COP15 did bring together the major emitters, limitations of the Copenhagen Accord will undoubtedly perpetuate climate change policy uncertainties, reinforcing the need for advocacy efforts in this area,” said Green.

President Barack Obama announced that the U.S. would agree to a 17 percent cut in carbon dioxide output by 2020 compared to 2005 levels, China offered to cut carbon levels per unit of Gross Domestic Product by up to 45 percent by 2020 versus 2005 levels, and Japan’s Prime Minister Yukio Hatoyama announced the ambitious target of reducing Japan’s GHG emissions by 25 percent from 1990 levels by 2020, and by over 60 percent from 1990 levels by 2050.

Green Light For Eco-Friendly Business Operations

Photography by Hiromi Iguchi

Amongst the complex issues the COP15 conference was tasked to resolve, perhaps the most perplexing–and pressing–one was to set mid-term targets for GHG emissions reduction when the Kyoto Protocol expires in 2012.

“Without knowing how much countries will have to commit to reduce their emissions, by when and how such reduction commitments will be made, it can be difficult for businesses to make decisions on carbon and energy efficiency investments and strategies,” said Green.

A clear agreement on climate change would allow companies to more confidently price and evaluate the adoption of low or lower carbon technologies, such as wind farms and biomass programs.

It is also crucial information for energy-intensive industries such as coal power plants. For example, before building a new coal power plant, an energy company might want to know whether it will have to buy costly carbon credits–financial instruments based on how much carbon individual power plants emit in excess of applicable limits–under a global climate change treaty.

Carbon credits, which allow companies to offset their total CO2 output, could potentially add millions to the cost of a single plant and make it uneconomic compared to plants using other fuel sources such as natural gas or nuclear energy.

“Due to the many remaining uncertainties following COP15, there is simply not enough detail to price the value of carbon post-2012, making it hard for businesses to confidently and decisively move ahead with low-carbon investments,” said Green. “Firms will need to develop their own scenarios.”

In effect, that means countries adopting a program of reductions that investors can have confidence in based on the firmness of commitments and their measurement.

Illustrations by Phil Couzens

We demand ever more from our gadgets. Phones are now expected to record and playback high-resolution videos, play music, surf the Internet and keep us reminded of what’s happening to our friends. The cars we drive every day carry, in a much-quoted (and little-understood) statistic, more computing power than the Apollo spacecraft carried to the moon, as they constantly monitor and correct driving and road conditions, and entertain us on the move.

All of these demands produce constraints on technology, and on the developers who bring this technology to fruition. For a long time, the makers of CPUs—the chips that form the “brains” of our devices—engaged in “clock wars,” whereby the speed of the processors constantly kept increasing, enabling them to do more work in a shorter amount of time.

But this leads to problems. Power consumption goes up, and this is no trivial matter in a battery-powered device. Heat also increases, and while it may be acceptable for an automotive computer located under the hood to run hot, it’s a completely different matter for a cellphone in your pocket or even a video player in your living room.

Two Heads Are Better Than One

Twenty-five years ago, Hironori Kasahara, now a professor at Waseda University, and Director of the Advanced Multicore Processor Research Institute, became interested in the technique of harnessing CPUs together. He was not alone in this, of course, with researchers around the world developing similar techniques (reportedly early versions of the Tomahawk cruise missile used a “cube” of 27 interconnected CPUs for terrain contour matching), but this pioneering work has borne fruit for Kasahara with the advent of multi-core chips.