Tom Whitson
ACCJ President
twhitson@accj.or.jp

Fukuzawa Yukichi (1835-1901) is best known as the founder of Keio Gijuku (now Keio University). But he is much, much more.

He was part of a group of late Tokugawa samurai who helped Japan understand and respond to the changes that arose from monumental internal and external pressures on nearly all of Japan’s institutions. The situation is similar today.

I knew that KPMG hired a lot of Keio grads, and I knew that I appreciated their practical, analytical approach to business problems. But until I read “The Autobiography of Yukichi Fukuzawa” translated by his grandson Eiichi Kiyooka, I didn’t realize the philosophy and world view that underlay the education that KPMG’s Keio grads brought to work at our firm.

Fukuzawa was born into a low ranking samurai family in a rigidly hierarchical feudal society. He spent his youth in the Nakatsu clan territory (Oita) and only started his education at 14 or 15 with the Chinese classics. In his book, he expressed his discontent with his station in life, his poverty, and his prospects. He resolved to change his future by going to Nagasaki to study Dutch. After five years of intense effort, he had mastered Dutch. But in 1859, when he visited Yokohama, he couldn’t read the signs or communicate with any of the foreigners he met there. For a fellow Dutch scholar/translator, the uselessness of what he had worked so hard to achieve, was crushing and he returned to Kyushu. However, Fukuzawa resolved to learn English and he succeeded. In 1860, he persuaded the captain of the first Japanese-officered transpacific ocean voyage to take him along as a servant. Fukuzawa mentions that once he was able to get an audience with the captain, he was quickly accepted since there were few volunteers for this risky voyage. Fukuzawa took many notes on American society and economy some of which became the basis for his later bestseller “Seiyo Jijo” (Things Western). Many of the Japanese had their pictures taken in San Francisco. Only Fukuzawa posed with the photographer’s daughter to create a unique historical photo.

Reading about Fukuzawa’s keen interest everything that was going on around him and his perseverance in overcoming the shock of finding that his Dutch learning, which would have enhanced his status in the 17th and 18th centuries, was not what he needed as a 19th century man, has parallels today. What did we learn at university which is still useful or relevant today? Today our tools, our understanding of science and technology, and our ability to draw on so many new sources of information and knowledge are unimaginably different from what I learned at university. And I expect that we will see similar fast and furious changes in the future. Therefore, what we most need is mental flexibility, agility, and perseverance to overcome the limits of our backgrounds, our experience, and ourselves.

Many of today’s young Japanese are sophisticated, rich, healthy, educated and have unlimited opportunities. They can travel freely and challenge conventions—like Fukuzawa. They live in the most dynamic and exciting part of the world and are well positioned to take advantage of the opportunities it presents. I would like to see more young Japanese who challenge intellectual, political, and business tradition like Fukuzawa did 150 years ago.

Thinking about Tesla, and the entrepreneurial spirit in general, I was reminded of a Brian Eno quote from the 2007 Daniel Lanois film “Here Is What Is”:

“Everybody thinks that Beethoven had his string quartets completely in his head—that they somehow appeared there, formed in his head, and all he had to do was write them down and they would kind of be manifest to the world. But I think what’s so interesting and what would really be a lesson that everybody should learn is that things come out of nothing, things evolve out of nothing. You know, the tiniest seed in the right situation turns into the most beautiful forest. And then the most promising seed in the wrong situation turns into nothing.

“I think this would be important for people to understand, because it gives people confidence in their own lives to know that that’s how things work. If you walk around with the idea that there are some people who are so gifted, they have these wonderful things in their head, but you are not one of them, you are just sort of a normal person, you could never do anything like that, then you live a different kind of life. You could have another kind of life where you can say: ‘Well I know that things come from nothing very much and start from unpromising beginnings. And I am an unpromising beginning and I could start something.’”

When JB Straubel and Elon Musk started Tesla in 2003, the idea of a beautiful, all electric sports car was something that largely resided on the stages of auto shows as futurist concept designs with no commercial release dates in sight. And before that, the idea of an all electric car of any shape had been largely deemed impractical by a business community still wed to the conventions of the past. It took imagining something big, something that didn’t exist, and then having the audacity to actually attempt to execute on that imagination that brought so many of today’s innovative companies like Tesla into the mainstream reality.

The irony that economic adversity often leads to the some of the most enduring and impactful business innovations is an aphorism many seasoned business leaders are aware of. But sometimes, it’s nice to have an audacious reminder. As you move forward into the following pages, we hope that the companies and ideas in this issue serve as that reminder, and inspiration.

Adario Strange
Editor-in-Chief

Please contact us

Illustration by Phil Couzens

Three of Japan’s top information technology companies, Fujitsu Ltd., NEC Corp and Hitachi Ltd., are joining forces for a global marketing offensive in cloud computing in a bid to take on industry leader IBM Corp.

In a shift from hardware to software, the trio is counting on their cutting-edge, telecommunications technology backed cloud computing services to take the market by storm and prove a serious contender to IBM, which logged a pretax profit of $18.1 billion in 2009.

By restructuring their Internet-based, on-demand computing services, the manufacturers aim to offer uniform services to clients around the world. Costs saved from this restructuring will help keep their annual operating profits in the 100-200 billion yen range over the next few years, according to a report by the Nikkei.

NEC President Nobuhiro Endo is confident the company will keep reporting a 100 billion yen group operating profit from this year onwards. Helping to boost this bottom line is the merger of NEC Electronics Corp—a subsidiary whose 300 billion yen in net losses over five years weighed on earnings—with Renesas Technology Corp. to create Renesas Electronics Corp.

Fujitsu improved its earnings through a series of divestments, including the sale of its hard disk drive business. The company is targeting a group operating profit of 185 billion yen for the current fiscal year, nearly double last year’s result.
Hitachi expects its information and telecommunications business to post an operating profit of 100 billion yen, up 6 percent. However, the firms still trail far behind foreign IT giants such as IBM in terms of profitability and their shares of key global markets. Indeed, the firms are no match for IBM in terms of global operations, sales volume and software services.

IBM had already sold off low-margin hardware businesses such as its HDD, personal computer and printer units, while acquiring an array of software developers and consulting firms, giving it the lead in terms of software and service operations.

Moving on, IBM is expanding its global operations by capitalizing on growing demand in emerging markets, and cutting costs through leveraging on its worldwide network. Sales in markets outside of North America accounted for over half of IBM’s total worldwide sales in 2009, compared to 37 percent for Fujitsu, which has been on an overseas expansion drive in Europe.

IBM controls 32 percent of the global market for servers, while NEC, Hitachi and Fujitsu comprise 5 percent or less each, according to U.S. IT research firm Gartner Inc. As part of its offensive, Fujitsu will fork out tens of billions of yen this fiscal year to boost the capabilities of its data centers in five countries. NEC has developed a new telecom technology-based system that allows companies to halve their initial investments in data centers.

Generating Global Green Opportunities

Japan’s major trading houses have been trying to get a spot in the sun overseas given the bright growth prospects of the solar power generation business. Sojitz Corp, which plans to bring strategic solar power investment opportunities to Japanese utilities, announced it will be taking a minority stake in U.S.-based Solar Power Partners Inc. (SPP) via a 10 billion yen investment.

California-based SPP, the third-largest participant in the U.S. solar industry, owns, manages, and operates over 50 solar energy systems totaling approximately 23 million watts. SPP plans to build five to ten solar farms, each capable of generating 10-20 megawatts, mainly in the states of California and Arizona.

Sojitz also intends to buy an interest in a solar farm operator to be created by SPP, which has already developed 50 farms. Japanese manufacturers will supply solar panels through Sojitz to the U.S. partner.

Itochu Corp. and U.S. giant General Electric have agreed to a comprehensive collaboration on renewable energy operations such as wind and solar power infrastructure, according to official company announcements.

Beverage makers Kirin and Suntory are aiming to boost sales of non-Japanese tea drinks with ad campaigns centered around food.

Illustration by Phil Couzens

Late last spring a Suntory Oolong Tea campaign was launched underscoring the connection between “food” and “beauty,” taking advantage of a concept that is gaining momentum in the Japanese market today. Teaming up with fashion magazine Anan, Suntory held a contest encouraging people to eat delicious food and drink their tea. Anan is calling beautiful people who equate food with beauty tabekawa. By using Japanese celebrity model Anne—a woman who says she loves to eat—to represent the effort, Anan and Suntory are defying the usual perceptions that dictate that dieting is a key to being beautiful.

Kirin is taking a similar direction by making food a prominent part of its campaign for the release of a new plain tea. The Gogo no Kocha line “Plain” tea ad encourages consumers to combine their sugarless tea with fresh and wholesome food. Indeed, increased interest in local products and agriculture has been on the rise in Japan since last fall, so Kirin might be on to something.

MEN WANT GOOD SKIN TOO

Manufacturer Daikin is looking to attract male consumers for a type of product typically associated with women. Its air conditioning system “Ururu & Sarara” is meant to aid skin through hydration by monitoring humidity and temperature. Their choice for sponsor is 20-something actor Shunsuke Daito, a self-professed skincare fanatic.

By participating in a campaign like this Daito is also, in part, complicit in highlighting a generation of young men interested in sweet foods and looking good—sometimes even to the point of being a bit “girly.” But this new generation isn’t embarrassed about this increasingly dainty profile.

In fact, when asked at the press conference what he thought about the possibility of going too far in his interest in skincare—above and beyond some girls—Daito paused before saying, “But, it’s not a bad thing.”

WHEN YOU’VE GOT TO GO

Constipation medicine campaigns have to take a sensitive line when communicating benefits, but if all else fails, there’s always humor.

Surulac by SSP launched an online campaign this summer that prompted users to virtually write on a piece of toilet paper the things they want to “let go of,” a humorous play on words that simultaneously poked fun at the company’s own product. To top it off, the messages are even “flushed” down a toilet on the website.

Consumers got a chance to win prizes and had the ability to view the notes uploaded by other users who wanted to let go of things like “my icky skin” and “when I accidentally called someone else Mom.” The site even listed how much toilet paper in meters has been used.

The key here is a sense of participation: The campaign simultaneously engaged consumers while letting them have a laugh either at their own or someone else’s expense.

SAMURAI POWER

Ryoma Sakamoto, a samurai of historic note, has been wildly popular in Japan this year, coming on the heels of the NHK drama “Ryomaden.” The trend of rekijo or “history girls,” a surge in young women who love history, is also contributing to the boom.

The result is a wide and never-ending variety of goods ranging from Ryoma bento boxes and Ryoma water to Ryoma boots, all of which can found in department and convenience stores and museums all throughout Japan. Until next February a Nagasaki “Ryoma Gallery” is showcasing photographs and information about his life.

Sightseeing companies are taking advantage of the fact that Ryoma traveled far across Japan, with packages around places like Shikoku, Nagasaki and Kyoto. Even chocolate manufacturer Lotte is following in Ryoma’s footsteps with the release of “Ryoma-flavored” sweets representing his travels.

WALKING IS THE NEW JOGGING

Walking has emerged as an active new trend to keep pace with that of jogging. Kao held a summer campaign urging consumers to walk at least 10,000 steps a day, the recommended amount for a healthy lifestyle, while drinking their green tea beverage Healthya, said to boost metabolism. Users could then go online to input their daily amount, which is converted into distances before being given to a virtual on-screen character. The character is then seen “walking” across Japan.

Consumers may be drawn to walking as a relaxing way to take a time-out from their busy day while getting a good form of free daily exercise.

Mobile phone providers are capitalizing on this boom and many handsets now include pedometers. Docomo’s recently launched service “i Bodymo” utilizes the pedometer function to provide consumers with data on their daily walking habits and even give advice.

In fact, popular singer Crystal Kay stormed the media in June to declare her love of walking. She said she spends hours each week strolling through Tokyo. She showcased her favorite walking shoes to prove it, and even credited her new hobby as the key to her good looks and healthy body.

Nicole Fall is co-founder of Tokyo-based innovation and trend-forecasting agency Five by Fifty. She can be contacted at: nicole@fivebyfifty.com

While consumers in the U.S. and Europe mainly visit Amazon or eBay to shop online, the “800-pound gorilla” in Japan’s e-commerce market is Rakuten. Established in 1997, the eponymous company behind the service has evolved into the country’s biggest online shopping mall operator. Over 33,000 merchants opened shop at Rakuten Ichiba, the company’s B2B2C market place, so far, serving a staggering 60 million registered members. The company has 6,000 employees, generated over $3 billion in revenue last year and boasts a $10 billion market capitalization. Amazon doesn’t break down country-specific financials, but industry experts believe its Japan branch doesn’t even come close to Rakuten’s numbers.

Illustration by Phil Couzens

But how exactly did Rakuten manage to keep the American retail juggernaut, one of the world’s iconic web companies, at arm’s length for so long? The main reason for its success can be found in the strong entrepreneurial spirit of Rakuten’s founder, Hiroshi Mikitani. It was he who first saw a business opportunity in supporting Japanese brick and mortar stores by setting up customized storefronts on the web. Toward the end of the 1990s, building and maintaining websites was costly and usually needed to be outsourced to specialized IT vendors. Mikitani disrupted Japan’s e-commerce sector by undercutting fees of existing vendors by up to 80 percent, hiring an aggressive sales force, and providing every merchant who opened a Rakuten store with individual service (i.e. phone support, seminars etc.). In return, retailers had to pay their virtual real estate fees upfront, which not only helped the startup reduce risk, but also maintain cash flow. This basic charge model still applies today, with Rakuten also pocketing around 3 percent of the revenue each retailer generates as commission fees. Today the site offers everything from groceries, fashion items, electronics, books, software to automobiles—around 60 million different items in total. Rakuten established itself a quasi-monopolist in Japan’s e-commerce space, even though Amazon entered the country as early as 2000.

However, the early success wasn’t enough for Mikitani, a Harvard graduate and offspring of a wealthy family from Kobe. Rakuten’s next goal was massive horizontal diversification, and that endeavor worked well, too. The company is now active in fields as diverse as credit, online payments, travel, securities, auction services, TV and even professional sports. In most of these sectors, Rakuten holds a leadership position.

Amazon Japan, on the other hand, is still mainly positioned as a B2C platform. But even without the synergy effects Rakuten has thanks to its wide ranging business segments, Amazon’s operations in Japan are said to be profitable. In fact, the company has been continuously expanding its business in this country in recent months. For example, the company has begun building additional distribution centers and offering “cloud computing” services to local IT firms. The Americans should be warned, however, as Mikitani is ready to shift gears yet again. Rakuten currently plans to set up its own distribution centers and offer same-day shipping, putting itself in direct competition with Amazon. The first such center, to be opened in Chiba this fall, is expected to ship up to 100,000 products (offered by Rakuten itself) per day. Rakuten will set up at least five more centers of this size by 2013. Simultaneously, the company is rapidly deploying its globalization strategy, more so than any other Japanese Internet firm in the past.

Mikitani never made a secret of his plan to eventually challenge Amazon even outside Japan, and recent developments have shown there can be no doubt he means it. In May, Rakuten acquired California-based shopping portal Buy.com for $250 million and paid the same sum for France’s leading e-commerce platform PriceMinister just one month later. The company has built up subsidiaries in Taiwan, Korea, Thailand and other markets, too. At present, however, just 8 percent of online transactions come from overseas. Rakuten aims at raising the rate to 70 percent by expanding into 27 different countries in the next few years. Mikitani also showed how serious he is about transforming his company into a global player by making it the first large Japanese company to ordain English as the official in-house language, even among local staff. Industry observers will be watching closely for clues as to how Rakuten will transplant its know-how to countries steeped in very different cultures.

Dr. Serkan Toto is a Tokyo-based web industry consultant and writer for American online media network TechCrunch.

Illustration by Phil Couzens

Seth Sulkin is the President and CEO of Pacifica Malls K.K., a Tokyo-based real estate asset manager specializing in commercial properties.

Having just come back from another visit to Shanghai, the contrast between Japan and China is starker than ever. Shanghai is in a speculative frenzy with locals and foreign investors assuming never-ending growth. In Japan, “wide shows” on television are predicting that Japan will soon be a vassal of China and are comparing the coming wave of Chinese investment in Japanese real estate with the Japanese companies of the bubble era that acquired U.S. trophy assets such as Rockefeller Center and Pebble Beach.

This month, Japan is drastically lowering the visa requirements for Chinese tourists. It is clear both from anecdotal discussions with friends and business colleagues in Shanghai, as well as official sources, that Japan is a very popular tourist destination for middle- and upper-class Chinese. A number of businesses have cropped up in both countries to serve the needs of Chinese individuals looking to invest in Japanese real estate, and property tours are becoming an important part of the Tokyo travel itinerary. Chinese investment in Japanese real estate is good for Japan, as is spending by Chinese tourists at Ginza department stores and Akihabara electronic stores, but it is not enough to turn around the economy.

As long as allowing large-scale immigration is off the national agenda and the government fails to take aggressive action to increase the birth rate, any spending in Japan by foreigners is welcome, but it won’t be enough to overcome Japan’s systemic problems. As is widely known, Japan’s regional areas are suffering far more than Tokyo. The lack of economic activity leads to a drain of population as young people move to big cities for jobs, becoming a vicious downward cycle.

Hida Takayama in Gifu Prefecture is an interesting example of both the benefits of tourism and the problems of a small town. In June, I visited Takayama for the first time in more than 20 years and I had forgotten what an architectural gem of a town that it is. Most people probably think of Takayama only for its famous thatched roof country houses, but the old part of the city is a remarkable collection of beautifully preserved buildings, including the former city hall, which is one of the best historical museums that I have ever seen in Japan.

Even though Takayama has a very inconvenient location (2 1/2 hours from Nagoya), the number of foreign tourists has risen substantially in the last several years. In a town with a population of only about 93,000, the number of foreign tourists is about 150,000 per year and about a third of those come from Europe, so they really stand out walking down the street. The problem is that while businesses catering specifically to foreign tourists are enjoying the benefits, the contraction of the Japanese economy more than offsets this growth. In the last five years, as the number of foreign tourists to Takayama grew by 250 percent, the number of Japanese tourists fell by 275,000 to about 3.9 million, so the total visitor count is actually lower than before the foreign surge started. Takayama’s population, meanwhile, which peaked five years ago as a result of a merger with surrounding towns, has been falling 0.5 percent or more per year. In a town of only 93,000 people, the loss of 500-800 people per year is devastating, and without a university to keep young people at home, there may soon be a shortage of people to take care of Takayama’s precious tourism assets.

Increasing the birth rate is the best solution to all of these problems, but at the moment, the Japanese government seems too distracted by the upper house election and the World Cup to focus on the future.

Illustration by Phil Couzens

Jesper Koll is a Managing Director and Head of Research at JP Morgan Japan Securities Inc. He has been analyzing and investing in Japan since becoming a resident in 1986.

So it seems the world is turning Japanese after all. For longer than a generation, global investors have tried hard to lecture Japan’s corporate community on the supposed evils of keeping high cash balances and saving too much. Now over the past year, corporations around the world appear to be competing to build higher and higher cash reserves. Indeed, data suggests that corporate cash-piles in America now stand at their highest levels in almost two generations. “Cash-is-king” seems to have become the rallying cry for corporate leaders around the world in the current post-financial crisis era.

For serious economists, there is no easy answer to the question as to why the corporate preference for cash has suddenly surged. In my view, a key top-down insight is that we are going through a period of massive “crowding out”—government deficits have been surging lock-step with increased public intervention in almost all aspects of the economy. The impact in the real world is that this cuts down private entrepreneurship and investment opportunities. It also raises risks of higher regulatory costs and, longer term, almost ensures that taxes will have to go up. All said, corporate leaders will want to build reserves for future costs, rather than go out and invest aggressively in increasingly uncertain future returns. In the money world, the growing need to fund budget deficits traps these private savings in government bonds.

Before we get too complex and theoretical, Japan’s corporate community offers many insights into why firms are savings so much. To lighten the debate a bit, let me tell you about the “hyaku-oku club” rule. It goes like this: The most exclusive clubs in the Ginza entertainment district have always been very clear about their membership policy. If you work for a company that has less than “hyaku-oku”—10 billion yen—in liquid cash on its balance sheet, you can not get admitted, no matter what. Clearly tastes in status symbols and preferences in leisure and entertainment may differ globally, but here in Japan there is no question that, for many corporate leaders, this iron rule of the Ginza Mama-san offers a perfectly fine incentive to hoard cash. It seems you’re better off entertaining your shareholders in one of these exclusive clubs than earning an extra ten or twenty basis points of return on equity.

The Ginza Mama-san does, of course, have a point: The higher the cash reserve, the greater the chance of survival during a crisis. Cash is a very tangible cover against hidden liabilities arising from, say, sudden lawsuits, a banking crisis, a global recession, an earthquake or the political regime changing to a system of imposing stricter regulations. The greater the uncertainty, the greater the value of cash holdings. Let’s not forget that at the height of the post-Lehman global financial seizure, even global Fortune 50 companies were denied letters of credit for simple cross-border trade finance.

So it seems that the prudence of the Ginza Mama-san was a leading indicator of global developments. Unfortunately, the actual result of this has not been a happy one here in Tokyo. Compared to the early 1990s, about one out of two clubs in Ginza had to close down for lack of business and relentless structural recession. In the end, high cash balances may be a good first line of defense in a crisis, but they do nothing to guarantee growth, management acumen, wage and employment growth, or value creation. Make no mistake: The Ginza Mama-san rule is lousy investment advice. Personally, I am not sure what is more tragic, the fact that about half of the Ginza clubs went bust, or the prevailing reality that all of the supposedly inefficient Japanese companies with excessive cash balances are still in business. In Japan, everyone seems to have lost. High cash prevails and so do low returns. The only real change is that we have fewer clubs to choose from.

On a more serious note, the new global corporate savings dynamics is starting to have a potentially negative impact on policy debate here in Japan, in my view. Can you imagine the schadenfreude-laced snickers in many boardrooms in Tokyo right now, as American companies, in particular, are busy building their cash-piles faster than ever? Policymakers and technocrats are also overjoyed: If foreign corporates are changing to “become Japanese” and save rather than invest, surely it must mean that Japan-specific factors—the tax and regulatory regime or corporate governance and ownership structure—are no longer a valid argument to push for change in Japan. The global corporate savings glut is but another development helping to justify the Japan status-quo here in Tokyo.

Illustration by Shane Busato

Recently, there has been rising concern amongst Japanese about Japan’s international business presence—or lack thereof. Fueling this sense of anxiety is a recent string of setbacks: The fact that Japan has lost its No.2 position as the world’s second largest economy in terms of Gross Domestic Product to China, the sharp decline of Japan’s international competitiveness according to the latest IMD (International Institute for Management Development) report, that Korean companies are enjoying more success than leading Japanese companies in the international market, and that the ports of Japan are being overtaken by Korea’s and China’s in terms of traffic.

These are just some of the hard facts backed by statistics to prove Japan’s sliding competitive power in the international arena. What are the causes of Japan’s woes? Maybe it’s due to the terribly poor quality of Japanese political leadership, or perhaps globalization and the Internet economy has taken some shine off the traditional Japanese strengths in manufacturing, sales and business practices.

Whatever the actual reason, a thorough study seems to be in order for Japan to regain its power and vitality, and reemerge as a revitalized country. Other than the statistically-proven facts cited above, in my opinion, the more serious challenge for the Japanese to conquer, in order to play a more meaningful role in the modern international arena, is an ongoing lack of communications capabilities.

This is not just a question of language capability, such as English or other foreign languages, but a more essential human factor. The Japanese often say, “Silence is Golden,” the “Eyes tell you more than the mouth,” and “Heart to heart communication is the key.” Indeed, we can find many proverbs or old sayings of this kind such as “A talkative person is usually not trustworthy,” and “A tree with beautiful flowers attracts people without saying a word,” and the like.

Historically, it seems that the Japanese have not respected words, or spoken language, as a communications tool to convey messages to others. More important tools in effective communications have traditionally been the senses of feeling and empathy communicated between the parties concerned—interpersonal dynamics that cannot be conveyed in words. Therefore, the most important success factor for anybody endeavoring to succeed in Japanese society is his/her ability to build relationships based on trust and empathy with the people who matter.

In that sense, Japanese society is more geared toward gemeinshaft (community) rather than gesellshaft (association). This empathy-oriented society presents a difficult barrier for foreigners hoping to successfully penetrate the inner workings of Japanese business. Ironically, it is this very same cultural construct that acts as a serious handicap for Japanese attempting to effectively navigate the ever-changing terrain of an increasingly globalized business environment where mutual understanding and collaboration among various kinds of people is often required to create new value.

Hence, we Japanese need to change our way of thinking in such a way as to be harmonious and cooperative with other countries in the world with the common goal of building a better future. Unfortunately, it will take quite some time before this vision is realized.

On the other hand, as one widely-read John Hopkins Institute report once pointed out, it is extremely important for the top executives at American companies in Japan to make greater efforts to get acquainted with the movers and shakers in Japanese society in order to achieve success in this market. Just having a good product, service and competitive pricing is not enough. Although the report was issued in 1991, the message is still very valid today.

As long as Japan remains attractive as a viable business market, foreign-affiliated companies will continue to be interested in doing business in Japan and make efforts to surmount these barriers. However, as a concerned Japanese citizen, I worry about a possible future in which foreign-affiliated companies lose interest in the Japanese market and leave the country, while we continue to be self-satisfied as an inward-looking society until it is too late.

Japanese decision makers are becoming increasingly aware of the need to change and have begun to engage this issue more aggressively. My hope is that more and more business leaders will decide to participate in this movement to improve Japan’s profile as an attractive place to live and do business for people from all around the world.

Homare Takenaka is the Chairman & CEO of LBS Co.,Ltd.

Illustration by Phil Couzens

Japan’s current debt-to-GDP ratio is approaching 200 percent, the highest in the industrialized world, while the U.S. faces daunting Congressional Budget Office predictions that its debt-to-GDP ratio will increase from 53 percent to 90 percent over the next 10 years. Economists Kenneth Rogoff and Carmen Reinhart recently hypothesized that the critical debt-to-GDP ratio is 90 percent, at which point economies risk being destabilized and foreign investors take their money elsewhere. As discouraging as this vision is for the U.S., Japan’s deficit has already exceeded these frightening levels.

A consequence of Japan’s spiraling debt load is a continued struggle to attract foreign investors. Japan should take note of what nations like Great Britain, and even some economists in the United States, are beginning to recognize: Revenues from consumption tax will be critical to survive this recession. In Japan, former Keidanren Chairman Mitarai had called for the immediate implementation of a long-term plan to increase the consumption tax beginning in 2011 and reaching 15 percent by the mid-2020s. The significance of the Keidanren, the world’s largest and arguably most influential business lobby, calling for additional taxes that will reduce consumption should not be overlooked.

The European value-added tax (VAT) is similar to Japan’s own consumption tax and can provide guidance as the future of Japan’s consumption tax remains hotly debated. Great Britain recently announced plans to raise its VAT from 17.5 percent to 20 percent to stimulate its economy, a move the British Retail Consortium has predicted could reduce Britain’s deficit by $16.6 billion in just one year.

Economists in the U.S. have begun calling for a European-style VAT, mirroring the consumption tax in Japan. It has been suggested that even a 7 percent American VAT could raise additional revenues to equal the predicted $1 trillion deficit in 2020.

According to Paul Previtera, a Tokyo-based tax attorney, “Increasing the Japanese consumption tax will help reduce national debt, stabilize the economy, and attract foreign investment. Though this raises the price of consumer goods and therefore reduces consumption, the macroeconomic benefit could create a more promising Japanese marketplace.” Despite reduced consumption initially, the Keidanren recognizes and advocates the viability of this solution, and the Japanese government should not turn a deaf ear.

With Naoto Kan’s ascendency to the head of the Democratic Party of Japan, the likelihood of a hike in the consumption tax has become an imminent reality. While tax increases will always face opposition, Kan seems to understand that this increase is critical to stimulate the Japanese economy. On June 17th Kan reiterated his desire to reach a nonpartisan agreement and forge ahead with the consumption tax hike despite political liabilities. Kan’s aggressiveness on this issue could be the key to attracting foreign investment and in turn stabilizing and revitalizing the Japanese economy.

Dean Page is CEO of Accounting Asia. He is qualified as both an attorney and as a CPA and was formerly a partner with Ernst & Young. Dean.Page@Accounting.Asia

Adam Blair is a student at the University of Miami School of Law

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.

Photos courtesy of Naoto Maeda

Founded in 1931, Taimeiken in Nihombashi is one of the legendary yoshoku establishments in Japan, famed for its “tampopo” omuraisu (omelet and rice) and loved by its faithful clientele for its nostalgic Meiji era-esque ambience, evoked by its dark wooden-framed interior and stained glass lamps.

The classics of yoshoku comprise omuraisu and beef stew, both of which Taimeiken prepares to rich, melt-in-your-mouth perfection. “Tampopo” omuraisu—developed by restaurant owner Masaaki Motegi for the 1985 Juzo Itami movie “Tampopo,” which focuses on the sensuality of food—has captivated the imagination of many a foodie for the way the plump, wrapped omelet unfolds with a golden yellow flourish into a tampopo (dandelion)-like blossom upon being sliced, fully covering the bed of ketchup-infused, stir-fried rice on which it is rested with its rich and runny yolky contents.

In contrast to the omuraisu, where seconds of overexposure to heat will destroy the dish, the beef stew is simmered for up to five hours, and the demiglace reduced over three days into a velvety sauce that is flavorsome at just the right consistency.

As these portions are pretty substantial, Taimeiken has also created a course of around 20 small dishes for those who would like to sample a variety of yoshoku in kaiseki style in a menu called 小皿料理, or literally, small dish cuisine. Here, one can sample seasonal ingredients as well as popular dishes such as beef tongue stew that literally melts on one’s tongue and crab cream croquettes, fried to (seemingly) oil-less crunchiness. Rounding out the meal is a very nostalgic shina soba (another name for traditional shoyu ramen).

Yoshoku, both familiar yet alien, offers a good culinary choice for foreigners who want a taste of Japan, but who aren’t too keen on raw fish or eel. As the restaurant closes at 9pm, it’s also an ideal venue for that brisk business dinner.

Restaurant Taimeiken, Nihombashi 1-12-10, Chuo-ku

tel:03-3271-2464 web: www.taimeiken.co.jp

Justice Jack B. Jacobs of the Delaware Supreme Court on corporate governance and M&A in the U.S.
Photography by Hiromi Iguchi

Corporate takeovers—hostile or otherwise—remain a rarity in Japan and will continue to be so unless certain changes in corporate governance take place. Leading experts in the field of mergers of acquisitions, both in the U.S. and Japan markets, gathered at the Roppongi Hills Club for an ACCJ panel discussion on June 17th themed “Will we see a market for corporate control in Japan in our lifetime?” to share their views on whether these changes have more to do with the structure of corporate law, or Japan’s corporate culture itself.

Laying the foundation for the discussion, Stephen Givens—formerly managing partner of the Tokyo office of law firm Gibson, Dunn & Crutcher—outlined the two types of merger and acquisition deals usually seen in Japan: Those by abusive acquirers and tender offers by established businesses for strategic regions.

Givens cited Internet service company Livedoor’s bid for Nippon Broadcasting System (NBS) in 2005 and U.S.-based hedge fund Steel Partners’ bid for Bull-Dog Sauce in 2007 as two main hostile takeover bids to have taken place in Japan over the past decade. An example of an acquisition bid for strategic purposes was Oji paper’s bid for Hokuetsu Paper Mills Ltd in 2006, where Oji intended to commence a tender offer of 860 yen per share, or at a 34 percent premium.

“All these bids ended in failure not because Japanese law is hostile to hostile bids, but because shareholders didn’t want the bids to go through,” said Givens, a veteran U.S. corporate lawyer with extensive experience in cross-border mergers and acquisitions involving Japanese companies.

“Shareholders in Japan aren’t motivated by takeover premiums, but by their relationship with the target,” he said.

Indeed, Japanese companies fall short of their European and U.S. counterparts in performance indicators such as return on equity. Analysts often point to lax corporate governance standards that entrench management as the root cause.

Bull-Dog Sauce Co., a Japanese sauce and seasoning company, exercised Japan’s first poison pill defense—or measures taken to thwart takeover bids—to dilute the stake of Steel Partners by issuing three equity warrants for each Bull-Dog Sauce share to existing shareholders except Steel Partners. Steel Partners had launched the unsolicited bid for Bull-Dog Sauce on the premise of maximizing company performance and enhancing shareholder value. Yet, over 80 percent of Bull-Dog Sauce’s shareholders voted in favor of the company’s takeover defense measure, and the Tokyo High Court declared that Bull-Dog Sauce’s move did not run counter to the principle of shareholder equality.

Despite the perception that Japan is moving closer to Delaware General Corporation Law, known to be pro business development and for its extensive records of case studies, Givens pointed to the outcome of the Bull-Dog Sauce case to show that corporate Japan has yet to fully endorse the spirit of Delaware takeover law.

In the United States, the courts took the lead in answering questions raised by hostile M&A activity, such as who should have the power to determine whether an unsolicited bid should be put to shareholders. Market players then adapted to the rules developed by the courts. In this way, the United States reached a working equilibrium as to how the poison pill system operates.

At the other end of the spectrum, and speaking from a Delaware perspective, Justice Jack B. Jacobs of the Delaware Supreme Court noted that it is as yet unclear whether or not U.S. shareholders will be become either the beneficiaries or victims of recent amendments to the Delaware General Corporation Law, such as regulations aimed at increasing and ensuring the independence of board directors through stricter requirements of disinterest. These bylaws will allow companies to impose more restrictive procedures for nominating directors than will be imposed under federal law.

“This is restricting the number of directors qualified to sit on company boards, and may result in fewer board directors who actually know anything about the business of the company. By right, directors should bring value to a company, not just judge what is right or wrong,” said Justice Jacobs.

Summer is marked by the pace of Tokyo’s social activities slowing as our temperatures rise. But before we know it, September returns, families are back in town, and the weather again invites us to get out and enjoy the great outdoors. So mark your calendars now! On Sunday, September 12th, join us for the ACCJ’s 2nd Annual Charity Walkathon Tokyo, at Shiba Park, Area 23 (NW corner of Shiba Park across from Tokyo Tower). Building on the success of last year’s inaugural walkathon, the ACCJ 2010 Charity Walkathon Tokyo will be an enjoyable event for all, with the addition of food booths, children’s games and live entertainment.

Individuals, families, and groups willing to walk for charity or just to have an enjoyable day in the park are welcome to join in the festivities. To participate in the walk itself, ACCJ members, families and guests can purchase tickets at the ACCJ office for ¥2,500 per person, ¥1,000 for children under 18. Sponsors and participants include United Airlines, Santa Fe Relocation Services, Coca-Cola, Johnson & Johnson, Asian Tigers Premier Worldwide Movers, K&L Gates, IBM On Demand Community, Reebok, Gotemba Brewery, Legend’s Sports Bar & Grill, Tokyo American Club, To the Moon and Back Catering, Metropolis Magazine, Allied Pickfords and HSBC.

The walkathon is a lead up to our ACCJ Charity Ball in December. All net proceeds from both events will be donated to the three ACCJ 2010 Charity Ball “Primary Charities”: Tokyo English Life Line (“TELL”), a multifaceted, nonprofit organization that has been serving the international and Japanese communities since 1973, Seishonen Fukushi Centre (Youth Welfare Centre), a transition home for children and young adults who can no longer stay in government funded children’s homes and the ACCJ Mike Makino Fund for the Homeless, a fund established by the ACCJ for charities that focus on helping the homeless in Japan.

Please contact the ACCJ for more information.

Sam Kidder
ACCJ Executive Director

It’s time to say thank you. Since arriving in Japan this time last year, Ambassador John Roos has been accessible, engaged and supportive. He has addressed our general membership, met regularly with our elected and appointed leaders, and attended key ACCJ events such as our Charity Walk and Festival in Osaka and the Charity Ball in Tokyo. He has encouraged his staff to work with our various committees and task forces. In particular, his commitment to nurturing a culture of entrepreneurship in Japan has energized our membership. From its inception 62 years ago, ACCJ has always had entrepreneurial members. But these members are an even more important group in 2010 and the Ambassador’s interest is the right theme at the right time. Thank you Ambassador Roos.

Now that we’ve got figures for the first half of 2010 you might be interested to know how programs are going so far. Last year as membership trended downward I often mentioned in this column that activity levels in the Chamber were holding up. I also wrote that we were in a tunnel and not sure what the landscape would look like when we emerged into the light. I do think it is getting lighter and it may be possible to see some of the features of the new environment. First, we are doing more events than ever, but overall attendance is down slightly. As of the end of June this year, we had 279 events with 8,567 attendees. The comparable figures for 2009 were 269 and 9,618.

Second, based on the event surveys, members are very satisfied with the overall quality of the event experience. There was a slight increase in positive responses to the question of whether the respondent would recommend the event to others, but this may not be statistically significant. But when we compare 2006-7 with 2008-10 there is a clear improvement in how members rate the quality of the speaker, event notice accuracy, speaker professionalism, business value and venue quality. We did not survey the attitudes toward the quality of networking opportunities until 2009 so we will have to watch that area closely.

Third, we are seeing a small change in attendee profiles. The percentage of female attendees is up very slightly over last year’s figures but is still only 13 percent. More significant, because the trend has been steady over the past few years, is the increase in Japanese attendees. But that figure is also still shy of 20 percent despite the fact that 40 percent of our members are Japanese. Finally, and perhaps most important to many members is cost. This year’s average cost per event per member is down over 1 percent from last year, but interestingly we are now down over 10 percent from 2008. ACCJ’s leadership and staff are looking closely at these trends and would appreciate any thoughts you might have. And we are particularly looking at how best to set event pricing. In doing so we appreciate your thoughts about how best to meet the challenges of 2010 and beyond.

Illustration by Adam Fitzcharles

The story of Wally Amos reads like a cinematic tribute to the power of the American entrepreneurial spirit and, at 74 years old, his optimism only seems to be gaining steam. A native of Florida and a veteran of the U.S. Air Force, Amos served as a pioneering force in the entertainment business decades ago as an agent for the William Morris Talent Agency guiding the careers of music legends such as The Supremes, Simon & Garfunkle and Marvin Gaye. Then in 1975 Amos came up with the idea of harnessing his connections and dynamic resourcefulness into his own cookie business, a brand that is now known worldwide as Famous Amos Chocolate Chip Cookies. After years of high profile success, Amos moved on and the brand eventually joined the Kellogg Company.

A side effect of Amos’ business leadership has been his outreach work in the field of literacy, serving as the National Spokesperson for the Literacy Volunteers of America from 1979 to 2002, a role that made him a regular fixture on American public television, and a cause he continues to champion. Today, Amos heads a new venture called Chip & Cookie with retail locations in Oahu, in the Royal Hawaiian Center in Waikiki and Kailua Town, Hawaii and plans to open up shop here in Japan sometime in 2011.

01 | JOURNAL: How visible/transparent are you to your professional peers? 

Amos: My life is an open book. In face I’ve written nine books that all, in various ways, offer insight into my life. I don’t think one can ever be too transparent.

02 | JOURNAL: What was your most recent, big mistake? 

Amos: I don’t believe that mistakes are bad. A mistake means you just missed the mark. For example, a recording artist typically records hundreds of takes. Afterward everyone comes in and listens collectively. Through this process the best take is usually revealed. In life, every experience is a learning experience an each one gets you closer to the result you desire. 

03 | JOURNAL: What percentage of decisions do you base more on logic than emotion? 

Amos: I base decisions on experience and my spiritual understanding. Logic without experience and a spiritual awareness is not very valuable.

04 | JOURNAL: When you travel abroad (outside of the U.S.) what is the most frequent, yet surprising response to your work?

Amos: I just had a great experience visiting Malaysia after a long absence. There are over 60 Famous Amos stores there. I am probably more famous there than in America. Basically, I’m just amazed that people still remember me in so many different international markets. 

05 | JOURNAL: What are your top three strengths? 

Amos: Enthusiasm. Strong faith. And…I’m at at a point in my life where I know what I “don’t know,” which is humbling. I know that I don’t always know the answers, so that keeps me open to receiving answers from everywhere.

06 | JOURNAL: How do you take personal responsibility when you get things wrong?

Amos: I own up to it. I lost Famous Amos years ago and I don’t blame anyone else for it. 

07 | JOURNAL: If you were stripped of your current professional position, do you think your ideas and approach would still resonate with those you interact with?

Amos: Yes. I believe this because my ideas come from God, and my ideas are based on a spiritual understanding. 

The Royal Treatment

Royal Park Hotels offers more than the regular bed & breakfast

Toyohisa Miyauchi, President of Royal Park Hotels & Resorts, has an ambitious goal. He wants his hotels to serve the best breakfasts in Japan.

Though the Royal Park chain, currently with six hotels, may not be the first choice for foreign visitors to Japan, his corporate focus on “Best for the Guest” aims to change this state of affairs.

Traditionally, business visitors to Japan have been faced with a choice between business hotels that are cheap, but often somewhat cheerless, and tailored largely to the basic needs of Japanese business travelers; and large city hotels, which are international in style, luxurious, and correspondingly expensive.

Miyauchi’s aim is to provide a city hotel guest experience at a price which only slightly exceeds that of a business hotel, and he seems to be succeeding in this goal. The Royal Park chain, which started in 1989 with Hakozaki’s Royal Park Hotel, conveniently close to Tokyo City Air Terminal, comfortably scooped the pool in the 2009 J.D. Power Asia Pacific 2009 Japan Hotel Guest Satisfaction Survey in the 15,000 yen to 35,000 yen per night segment, as well as in 2007 and 2008. Singled out in the survey were food and beverage, hotel facilities, staff, and cost factors.

Though the group started as part of the Mitsubishi group’s real estate activities, it has broken somewhat free of these ties, and its more recent hotels use leased, rather than Mitsubishi-owned, sites. This trend is to continue with “The series” of new hotels to be opened in the near future, the first two of which will be Royal Park Hotel The Fukuoka (northern Kyushu) and Royal Park Hotel The Kyoto.

Miyauchi and the Royal Park Group have responded to the shifts in the market. In Japan as in the rest of the world, customers are starting to demand lower prices for high-quality services, and competition in the hotel business is fierce. A few years ago, there was a “mini-bubble” rush of foreign luxury hotels opening in Tokyo, but since the collapse of the financial sector in 2008, such hotels have had to cut prices dramatically in order to maintain viable occupancy levels. The new series of Royal Park hotels aims to provide a “compact city hotel experience” at an affordable price point – but without competing at the bottom sub-10,000 yen end of the market. Miyauchi’s goal is to provide accommodation in the 12,000 yen to 15,000 yen price range. In order to achieve this, he has looked at what guests actually need in such hotels, and has decided to eliminate facilities not required by those guests (for example, banquet rooms will not be a feature of the new “The series” hotels).

Illustration by Adam Fitzcharles

01 JOURNAL: How visible/transparent are you to your professional peers?
PISHEVAR: 100 percent transparent. The currency of business and investing is trust.

02 JOURNAL: What was your most recent, big mistake?
PISHEVAR: I thrive on mistakes. When you are living on the razor’s edge of innovation you have to have a thick skin. The key is how fast you iterate, adjust and pivot and how far out your tentacles are sensing the signal noise of market and consumer trends. The greatest lesson I’ve learned is about people and timing. My most recent, biggest mistake was not launching a product sooner than I should have.

03 JOURNAL: What percentage of decisions do you base more on logic than emotion?
PISHEVAR: Great entrepreneurs and angel investors are driven by a core of intuition and instincts informed by logic. So I would say 60/40. If logic was the majority this would be a boring world with cycles of innovation.

04 JOURNAL: When you travel abroad (outside of Japan) what is the most frequent, yet surprising response to your work?
PISHEVAR: Actually, the most frequent and surprising response is the absolute passion and excitement that entrepreneurship and the Silicon Valley way of thinking has inspired around the world. Silicon Valley is an idea that is spreading everywhere virally.

05 JOURNAL: What are your top three strengths?
PISHEVAR: Passion. Commitment. Honesty.

06 JOURNAL: How do you take personal responsibility when you get things wrong?
PISHEVAR: Own it. I never shy away from taking responsibility. A leader should always take the responsibility and focus on solutions rather than on blame.

07 JOURNAL: If you were stripped of your current professional position, do you think your ideas and approach would still resonate with those you interact with?
PISHEVAR: Yes. My position has very little to do with it. I believe in people and I focus on finding and inspiring and helping incredible talent achieve their dreams as entrepreneurs. I do that as human being first, not a position.

ACCJ Chubu Board of Governors at a visit to Mitsubishi Aircraft Corporation; in the foreground is a model of Mitsubishi’s passenger jet.

Keat-Chuan Yeoh, assistant managing director of the Economic Development Board of Singapore, speaking on Singapore’s role in the new global economy.

ACCJ Vice President, Jiri Mestecky, and Kansai leaders at the Spring Meishi Exchange at Ramada Osaka on May 20.

Ray LaHood, Secretary of the U.S. Department of Transportation, speaking to ACCJ members and guests at an off-the-record event at the Hotel Okura in Tokyo.

ACCJ Kansai Chapter members doing the samba at the Spring Meishi Exchange, themed FIFA World Cup 2010.

Jiri Mestecky presents a certificate of appreciation to former Vice President, Michael Bobrove, for his four years of dedicated service to the ACCJ.

Douglas Peterson, Chief Operating Officer of Citibank, outlining the current state of the global financial regulatory environment and the key developments concerning “global financial centers” at the ACCJ CEO Forum.

Dr. Gerald Curtis, Burgess Professor of Political Science at Columbia University, discussing politics and governance under the DPJ at an ACCJ talk.

ACCJ Kansai Chapter Head, Jiri Mestecky, and ACCJ Kansai leaders met with the Governor of Hyogo, Toshizo Ido, requesting support for the 2010 ACCJ Kansai Walkathon, which will be held at Kobe Meriken Park on Saturday, October 16.

Richard Jerram, Head of Asian Economics for Macquarie Capital Securities, sharing his views on the results of the recent Spring Business Confidence Survey.

Michael Alfant, ACCJ Vice President, Andrew Silberman, Chair of the ACCJ Membership Relations Committee and Jim Weisser, ACCJ Governor at the Leadership Forum.

ACCJ President Tom Whitson (right of center) presents METI Senior Vice Minister Teruhiko Mashiko with the Chamber’s APEC position paper. Also present are ACCJ leaders William Bishop, Arthur Mitchell and Bruce Ellsworth.

Michael Phillips, CEO of Pro Commerce. Photography by Hiromi Iguchi

“Individual clients don’t increase or decrease their purchases because of the loyalty card system,” said Phillips, a San Francisco-based marketing consultant, at an ACCJ speaker’s event held in The Westin Tokyo on April 23. A select group of members attended the speech entitled “Marketing To Short Term And Long Term Clients.”

Phillips’ sentiment rings especially true in Japan, where almost every retailer—from your neighborhood taiyaki stall to Nihombashi department stores—employs the membership card or points collection system in a bid to lock in clientele.

Moreover, the loyalty card system fails to reach out to who businesses really want to, or should, engage the most—the new customer.

“A better way would be to empower your sales or counter staff, who would be able to tell a new customer from a regular one, to give out random gifts to clients—either new or old ones—in an effort to reward them for shopping with you,” said Phillips, 72, who has been a business consultant for over 35 years, and counts over 1,500 businesses as clients around the world, such as consumer electronics giants Sony and NTT.
“I can appreciate that companies feel they should be rewarding their regular customers, but it doesn’t work. The person they really want to reach out to is the new client, who may feel alienated by the membership system,” said Phillips.

“You want to put more effort into rewarding the new customer, it’s like going all out to impress somebody when you meet them for the first time,” he said.

Indeed, there is a subtle but significant difference in marketing to new customers versus regular clients that warrants different marketing approaches. Phillips, who has authored 11 business books—including “Marketing Without Advertising,” now into its 6th edition—cited six key approaches catering to different categories of customers.

In the same vein as “Marketing Without Advertising,” Phillips’ marketing strategies can be implemented without an expensive advertising campaign. The basics of such an approach involve attracting new customers and building trust, encouraging customer recommendations, improving customer service and converting even dissatisfied customers into active supporters of the business, listing products and services widely, planning marketing events that will keep customers involved and using the Internet to market services and products. In a nutshell: Letting your customers advertise for you.

Throwing in the random freebie—such as a special wrapping or a bigger serving—is one strategy for winning over the newbie customer. Another is to display referral from others, known as kuchikomi (口コミ) or word of mouth in Japan.

“It’s not easy to get a new client, either in your shop or on your website, you need to show reference from other customers so that the potential client feels assured that he or she is in the right place,” said Phillips.
Moving from the front-end to the back-end, ensuring that your customers know they have a route of recourse should they be unsatisfied with the service or product—either via a superb return or refund system—is also a simple yet significant way to winning over new business.

“Letting the customer know that there is something they can do, some route of resource, if they are not happy with the product or service will help put them at ease,” said Phillips.

The next step is to engage the potential customer’s interest, and a good way to do this is via including “curious info” either on your website or storefront. “Raise your customer’s curiosity with something that involves a sense of mystery,” said Phillips, citing the case of a unique enomatic wine serving system at a French restaurant he dined at in Tokyo which served as a unique centerpiece as well as a message to customers that the restaurant could keep and serve topnotch wine by the glass.

This can be as simple as having an intriguing feature on your company’s website that draws in the reader’s curiosity. Then maintain that interest by laying out as many ways as possible to connect with your target client. This could also take the form of uploading information about your staff—such as which universities they graduated from, to what train line they take to work or anything that your client could possibly identify with.

Finally, to measure the success with which you have engaged your new client, the ultimate raincheck is whether they return. One restaurant in Akasaka has a literal raincheck system: Patrons are given a discount coupon which can be used if they come on rainy days. “Always look for ways to get people to come back, even if it’s apologizing for the bad weather,” said Phillips.

Above The Regular

Reeling in the new client is just the first step. Marketing to the regular client poses a challenge of a more complex hue. “You have to keep showing your regulars that you have what they want by generating constant up-to-date expertise (in your field),” said Phillips. Next, give your regulars reason to complain—incentives, in fact. After all, the statistics have it that one out of every 10 customers who have complaints make them, nine out of ten don’t complain, but that one person who complaints will call six people and tell them about their bad experience. “You want to be able to identify the problem quickly before it gets out of hand,” said Phillips.

Also, find a way to recognize how long your client has been with you. Phillips cited online store Amazon which gives a 10 percent bonus for every $200 purchase. “Give out longevity bonuses,” he said.

The final three strategies are: Reinforce to your client as to just why they should choose you with explanations on why your business is distinctive or better, expand your service with links to related products and expertise, and lastly, reinforce to your regulars that your business is still viewed favorably and is relevant to the market through the continued support and recommendations of others.

Phillips, who has uploaded some of his books onto the web, said he chose the company he is using to transfer the book into PDF version because the company explained and highlighted the fact that despite transferring the book into PDF files, the copy would still be machine readable and hence detectable via online search engines.

During the question and answer session, Andrew Hankinson, Managing Director of global office supplies manufacturer Esselte, asked why companies continue the system of loyalty or membership cards if they don’t contribute to higher sales.

“Companies feel they should be rewarding their customers, which is correct, but individual clients don’t increase ordinary business because of a loyalty card. If you’re going to spend some of your revenue rewarding customers, its better to empower your counter staff to use random gifts to reward new and old customers,” said Phillips.

Phillips then cited the example of a café in San Francisco where employees can give out free cups of coffee randomly to whichever customer they felt deserved the perk—be it the new customer the café wants to impress, the regular that deserves a reward or simply the client having a lucky day.

“I’d go to the café never knowing whether I’d have to pay for my coffee that day,” quipped Phillips. Asked if there was a difference between marketing a service and a product, Phillips said, “I don’t see a big difference. Often a service is required as a result of buying a product, for example, in the case of getting a photocopier, or the applications that come with an iPad or iPod. Services and products will be increasingly difficult to separate in the future.”

Commenting on the hour-long presentation, Hankinson told the Journal, “Phillips’s presentation had a lot of relevant information coupled with concrete examples retarding customer service. His presentation on marketing strategies for first time customers and loyal customers was very insightful. Some of his ideas I see working easily in the U.S. and would love to see implemented in Japan.”

Phillips, who helped start MasterCard as an executive at the Bank of California, is known as one of the first business gurus, and started a business network in the U.S. called the Briarpatch that counts over 1,000 members from its foundation in 1974 to today.

Phillips said his next book will focus on the Internet and Internet commerce. “Start a website for your business, it needn’t be expensive, but do include a menu and be sure to submit your site to search engines so people can find it, and bring something new to the blog everyday,” said Phillips. His views on business and commerce can be read on his blog called Pro Commerce at http://phillips.blogs.com/, which is updated daily.

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

Les Saisons is up the grand staircase on the hotel’s mezzanine level and a warm welcome awaits guests as they are escorted to the peaceful sanctuary. The dining room, refurbished five years ago, is spacious, and comfortable. The legendary hotel, opened in 1890, has a history of first class service and this shines through in the restaurant as well. The staff all speak English (as well as French), and they’re attentive without hovering. Les Saisons’ clientele includes Japanese executives (often in a private salon), well-coiffed ladies who lunch, couples celebrating special occasions, as well as seasoned gourmands.

The menu is filled with French classics like Filet of Beef Rossini—Japanese beef filet topped with foie gras and black truffles, and sautéed sweet langoustines garnished with French morel mushrooms. Chef Voisin’s use of local ingredients are often showcased in his offerings which include trout from the pristine waters near Mount Fuji served with yuzu, Hamanako fresh water eel that is smoked and served with foie gras on a puree of celery and a fruit vinaigrette, and a confit of Japanese oxtail with beef tongue, marrow, and mushrooms.

Les Saisons has one of the best cheese carts in the city, so remember to save room for the cheese course. The wine cellar as well is very impressive with a vast collection of wines, including older vintages. The course menus offer the best value for price. Lunch starts at 6,800 yen for three courses or 8,000 yen for four courses and dinner starts at 16,800 yen for five courses. A la carte menus are available also.

Les Saisons, The Imperial Hotel, Uchisaiwaicho 1-1-1, Chiyoda-ku
Tel: 03-3539-8087
Web: www.imperialhotel.co.jp/e/

At around the turn of the millennium, major legal reforms took place relating to takeover bids, and securities laws were amended to formalize the conditions for tender offers. Bold bids hitherto unheard of in Japan were made by foreign activist funds such as Steel Partners in the Bull-Dog Sauce case, Livedoor’s Takafumi Horie in his gambit for Nippon Broadcasting System and by 2008, the code of restraint inhibiting business strategy takeovers was breaking down, notes an article entitled “Japan’s Conversion to Investor Capitalism.” This was spectacularly demonstrated by the attempted hostile takeover of Hokuetsu Paper by another paper company, Oji Paper.

The 10 pithy essays in this book effectively cover in detail all major events in Japanese corporate history—such as those cited above—that are used as yardsticks of corporate governance today, making it an invaluable resource for newcomers to the Japanese market, or veterans seeking analysis of recent events. In a chapter entitled “Change and Continuity in Managerial Practice at Listed Companies in Japan” insights from the inside are unveiled, collected via interviews with senior managers from 20 companies—most of which were visited at least twice—from a range of manufacturing, services and financial sectors.

Other pertinent topics, all backed by surveys of latest developments in Japanese corporate governance and reference to material not often available in English, include “Foreign Investors and Corporate Governance in Japan,” “Whose Company Is It? Changing CEO Ideology in Japan” and “Takeovers and Corporate Governance: Three Years of Tensions.”

In its entirety, the book suggests that the Japanese experience shows that there are limits to the global convergence of company law systems, and that the widespread association of Anglo-American practices with the “modernization” of corporate governance has been misplaced. And according to the publishers, it seems this conclusion is unlikely to be altered—it may be reinforced—by reactions to the financial crisis.

“Corporate Governance and Managerial Reform in Japan,” published by Oxford University Press, is available at: www.oupjapan.co.jp

A Masters in Business Administration can pave the way for a host of opportunities—in finance, investment banking, corporate consulting, wealth management or even starting up your own business. But most importantly, the right preparation can give you the ability and confidence to manage your own career. The following universities and special programs can equip you with the map, compass and key on your journey to success.

The aftermath of the Lehman Shock and the tremors of the global economic crisis following it spurred many foreign-affiliated companies to press ahead with bold internal restructurings. Reflecting frustrations over sluggish Japanese operations, in stark contrast to the strong performance of Chinese corporations, many global head offices tightened their control over their Japanese units, introducing management strategies with a proven global track record.

Most companies would agree that 2010 is a watershed year for the Japanese economy—there are signs of an economic recovery, but corporate leadership will also face many hurdles. Many firms have lowered their sales targets compared to the trending lines with the determination to achieve these goals at any cost—or finally throw in the towel.

This sense of desperation is understandable given the rising attraction of China and other emerging markets as alternatives to Japan. If, despite all these attempts, the Japanese operations still fail to deliver results, their global headquarters are likely to decide to pull out from Japan’s graying market.

As part of these turnaround initiatives, some overseas head offices are now trying to transplant their global business strategies by parachuting experienced leadership teams into Japanese operations. While this approach may seem promising on paper, IWNC is afraid that this may also actually backfire.

Legendary Japanese teamwork that functions like clockwork has now become a thing of the past. This is especially true in foreign-affiliated companies where the senior leadership team typically comprises people who gathered experience in other companies prior to joining their present company. It is hard for this type of patchwork leadership to function seamlessly. From interviews with top leaders, IWNC found a common lament amongst them to be the dysfunctional state of such leadership.

In general, Japanese businesses invest substantial time in team-building. This is partly because they believe that trust within the team and the feeling of security it provides is very important. To develop a sense of security, people involved have to know each other well and be able to empathize with each other. Once this relationship of trust has been established, they can then communicate on the same wavelength. The communication among Japanese is therefore described of highly contextual. If this sharing of context does not occur and each stakeholder lives only within his sense of value, a true basis of communication cannot be developed and the team fails to perform effectively.

Hence, regardless of how great the strategy or the people, a team may not be able to deliver results. And in these critical times where there is little, or no, room for failure, a disunited team may become a burden to the organization.

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!

From left to right: ACCJ Governor Bruce Ellsworth, ACCJ President Thomas Whitson, ACCJ Governor John Kakinuki, The Honorable Senator Daniel Inouye, ACCJ Vice President Michael Alfant, ACCJ Executive Director Samuel Kidder, ACCJ Financial Services Forum Chair Christopher LaFleur, ACCJ APEC Task Force Co-Chair Thomas Clark, ACCJ Vice President William Bishop & ACCJ Associate Director for External Affairs Ryan Armstrong.

On April 28 and 29, a delegation of 13 ACCJ representatives visited Washington, D.C. as part of the Chamber’s annual D.C. Doorknock. The primary purpose of the Doorknock was to remind Administration officials and Capitol Hill representatives that Japan is still the world’s second largest economy and that a strong U.S.–Japan economic relationship is critical for the success of American and Japanese companies that operate on a global scale and employ hundreds of thousands of Americans and Japanese alike.

In the lead up to the Doorknock, Japan was in the news for a variety of reasons—product recalls, base relocation, political transition and structural changes but the adage “there’s no such thing as bad press” held true. And in the ACCJ’s Doorknock meetings with Commerce Secretary Gary Locke, Senators Inouye and Webb, representatives in the House, the Japanese Ambassador to the U.S. and key administration officials, there was a deeper interest in Japan than in years past.

From left to right: Thomas Whitson, ACCJ President with Masayuki Naoshima, Minister of Economy, Trade &Industry (Japan); Monica Hardy Whaley, National Center for APEC President with Koichi Takemasa, Senior Vice Minister for Foreign Affairs (Japan); Hng Kiang Lim, Minister of Trade and Industry (Singapore) with Ambassador Karan Bhatia, National Center for APEC Chairman; Ambassador Demetrios Marantis, Deputy U.S. Trade Representative with Gempachiro Aihara, 2010 APEC Business Advisory Council Chairman.

The ACCJ emphasized that Japan is a key to achieving President Obama’s export initiative goals and that deeper U.S. engagement and collaboration with Japan will lead to economic growth and job creation in both countries. The ACCJ’s 42 actionable recommendations for how to make the most of the Asia-Pacific Economic Cooperation (APEC) forum garnered positive attention as an area for U.S. and Japan cooperation and leadership.

Doorknocks in both Tokyo and Washington, D.C. have become signature initiatives for the ACCJ, but this year we have seen an unprecedented degree of cooperation and collaboration with other organizations and governments, particularly in the Asia-Pacific region as the nature of business becomes increasingly global.

Take the ACCJ APEC Task Force as a case in point.

The Task Force began its activities in March by gathering recommendations from ACCJ committees for submission to the Asia-Pacific Council of American Chambers of Commerce (APCAC), an organization consisting of 27 member American chambers in 21 economies. The ACCJ’s recommendations were considered by APCAC leadership and incorporated into APCAC’s own annual white paper that was released this spring (www.apcac.org). As a result of the ACCJ’s active involvement with APCAC, their white paper is closely aligned with our own recommendations as described in the ACCJ paper “APEC 2010-2011 Recommendations for Japan and U.S. Cooperation to Create New Jobs through Increased Trade and Economic Growth.”

ACCJ Vice President William Bishop, ACCJ Vice President Michael Alfant, ACCJ Special Advisor Laurence Bates and ACCJ Governor Bruce Ellsworth in front of the Capitol Building in Washington D.C.

The ACCJ further broadened its advocacy activities by taking the lead on a Business Luncheon with APEC Trade Ministers in Sapporo, Japan, on June 6. This landmark event was moderated by the Chairman of the National Center for APEC, Karan Bhatia, and featured a panel discussion with METI Minister Masayuki Naoshima, MOFA Vice Minister Koichi Takemasa, Singapore Trade Minister Hng Kiang Lim and the Deputy United States Trade Representative Demetrios Marantis.

With an audience including 21 Ministers, Vice-Ministers and Senior Officials (SOMs) from economies from around the Asia-Pacific and close to one hundred local and international business representatives, the ACCJ demonstrated its ability to bring business and government together on a global scale.

With the goal of improving the international business environment in Japan for our members, the ACCJ is taking its advocacy activities to new levels—beyond borders.

Illustration by Phil Couzens

Why do I think so? Four reasons: First of all, America remains—by far—the world’s leading innovation powerhouse. Second, America continues to attract the world’s best and brightest. Third, America has one of the most efficient tax systems, which means that the fiscal deficit woes are a cyclical, not a structural problem. And last, but not least, the U.S. dollar is unchallenged as the world’s anchor reserve currency.

Innovation Powerhouse—Part One

The facts speak for themselves: Last year, U.S. companies filed 45,790 patents according to the world intellectual property organization. That’s about one-third of the global total and a significant step-up from runner-up Japan (29,827 patents), Germany (16,736 patents), Korea (8,066 patents), or China (7,946 patents). 

While the absolute number is impressive, even more impressive is the tremendous diversity and spread. That’s where America really shines: The top 30 U.S. companies (by number of patents filed) together accounted for barely 20 percent of the total. In contrast, Japan’s top 30 companies account for almost 50 percent of the total. For Germany, 12 companies account for 40 percent, for Korea four companies claimed one-third of the total, and for China, one company alone accounted for one quarter of all of China’s patents. In contrast, the U.S. top company made up barely 3 percent. 

Clearspeak: America’s entrepreneurial capital innovation model is alive and well. There are plenty of small and medium-sized companies out there being innovative and creative, filing patents, inventing new products, business models, and designs. If ever there is a basis for future economic growth, it lies in the tremendous diversity and widespread base of innovation in America. 

Of course, this also means that it is much more difficult to read and predict where the next growth companies are going to be coming from—a “new America” is bubbling up in peoples’ garages. Unlike Japan, Germany, China or Korea, corporate America is poised to continue to re-invent itself—new players continue to enter the fray. Ten years ago, nobody had heard of Google, and in the next ten years there are bound to be at least three or four new big companies that nobody has heard of today. 

Innovation Powerhouse—Part Two

Innovation power always comes from people, and in this area America outshines every other country on earth in her ability to attract the best and brightest. The number of international students studying in America has continued to rise. It is up 30 percent over the last decade, with now about 630,000 students from all over the globe studying at an American university. There is no question that U.S. universities offer the most advanced and exciting learning prospects in the world, as well as unparalleled networking opportunities.

Following on from this powerful base in learning, U.S. corporations offer the most transparent, most equal opportunity career options for global citizens. If you are a top-class graduate from, say, MIT and you get a job offer from an American company, it is often very clear that those companies offer the best career track opportunities. America’s corporate culture is still basically a straightforward, transparent meritocracy that is, in most cases, globally best-in-class in terms of rewarding talent and hard work regardless of national background, gender, etc. The combination of excellent universities and performance-based career opportunities lays a most powerful foundation for future innovative power—and thus the power to grow the economy.

Fiscal Deficit—Cyclical, not structural

What about the U.S. fiscal deficit? Sure, the deficit has surged over the past three years, and now stands at about 85 percent of GDP. First of all, America is still very wealthy on a net basis: If all public debt had to be paid off tomorrow with U.S. household wealth, U.S. households still would have almost 60 percent of all their assets.

Yes, that’s right—U.S. households’ net financial assets are about 200 percent of GDP, while public debt is 85 percent. Net-net, America is positive.

More important than this stock-of-wealth argument is the flow of money dynamics enabled by the U.S. tax system. Much to taxpayers’ chagrin, America actually has one of the most efficient tax systems in the world. Yes, it is possible for the U.S. to grow itself out of its fiscal problem because the tax multiple is higher than 1: For every 1 percent of national income growth, tax revenues grow by about 1.2 percent.

Remember how President Clinton got lucky and found himself with a budget surplus after the U.S. economy took off in the 1990s? It came as a big surprise to most forecasters and was largely due to a very dynamic tax system at work. To be sure, the large-scale defense spending cuts did significantly compound the positive budget dynamics at the time, it was the combination of the “cold war peace dividend” plus the powerful tax system dynamics that saved the U.S. fiscal position. But the basic fact remains the same: The current U.S. fiscal deficit dynamics are largely cyclical in nature, not structural, in my view.

And a final reason for optimism on the U.S.—yes, the U.S. dollar remains unchallenged in its position as a global reserve and anchor currency. Here we have a beauty contest, where, unfortunately perhaps, the Euro has begun to discredit itself recently, with stress and strain and lack of policy coordination giving the dollar a significant credibility boost. Make no mistake—while the dollar may not always be strong, it still remains, by far, the most coordinated and consistently credible choice for a global anchor reserve currency. 

Global leader in intellectual property, global leader in attracting and retaining talent, a fiscal deficit that is cyclical, not structural, and an unchallenged global reserve currency position. What’s not
to like?

Jesper Koll is a Managing Director and Head of Research at JPMorgan Japan Securities Inc. He has been analyzing and investing in Japan since becoming a resident in 1986.

Illustration by Phil Couzens

As discussed in this column two months ago, interest from Greater China has also continued strongly. While Chinese interest in resort hotels remains strong, two of the largest recent residential deals in central Tokyo were made by Hong Kong and Taiwanese groups, supposedly at fairly low yields.

After a long, slow dry-spell, the increase in transactions is a welcome change, and while almost any incoming foreign investment is welcome, it doesn’t hide the fact that Japan remains a ticking time-bomb. While Tokyo’s population is still inching up fractionally, the nationwide population in Japan is on the decline. According to the OECD (Organization for Economic Cooperation and Development), Japan’s population is expected to fall from 127 million now to 122 million by 2020. Even a slight fall in a country’s population has enormous impact on overall economic activity and real estate in particular, but looking ahead to 2050, the situation is even more alarming, with the population falling to 95 million.

Office rents in central Tokyo are less than half of the peak in 2008 and the vacancy rate continues to rise. No longer are empty buildings unique to regional cities; central Tokyo’s back streets are also suffering from neglect and a lack of demand. If deflation and the population decline continue at the current rate, many of these buildings may never find tenants. With 25 percent fewer people, a big chunk of Japan’s concrete jungle would be superfluous.

What has been the government’s response? Several years back, a cabinet minister was added to address the low birth rate and funding for day care centers has been increased. Thanks to the Hatoyama administration, those with children can look forward to receiving a subsidy of 13,000 yen per month for each child. These are all steps in the right direction, but none is likely to have much impact on reversing the population decline. Because of deflation and the burst of the bubble economy 20 years ago, Japan is certainly much cheaper to live in than before, but 13,000 yen per month won’t even cover the cost of juku, the ubiquitous cram schools for helping to get Japanese kids into the best high schools and universities. Japan’s bleak future is beginning to have a big impact on the investment plans of domestic companies as well. With a shrinking market and prolonged deflation, Japanese consumer products companies have stepped up their overseas investment plans. Leading companies such as Suntory, Kirin and Fast Retailing (Uniqlo) have been aggressively acquiring companies outside of Japan and expanding global sales and marketing to serve overseas demand.

With one of the lowest fertility rates in the OECD, the best solution to Japan’s future is massive incentives (otherwise known as bribes) to increase the birth rate. Imagine the impact on family planning decisions if the government were to award 5 million yen for the birth of each child and an annual subsidy of 2 million yen. Sex for fun and financial reward should be a powerful aphrodisiac.

Seth Sulkin is the President and CEO of Pacifica Malls K.K., a Tokyo-based real estate asset manager specializing in commercial properties.

Illustration by Phil Couzens

Sharp, Toshiba, Panasonic, and other makers had a good run until around 2008, when Japan’s third-largest cell phone carrier, SoftBank, brought Apple’s iPhone to Japan. The American “smartphone” not only took the once impenetrable Japanese mobile market by storm, it disrupted the industry as a whole. According to estimates, Apple has managed to sell well over three million iPhones in Japan so far, now boasting an impressive 72 percent of the domestic smartphone market.

The iPhone is now the nation’s must-have personal companion, thanks to SoftBank’s marketing acumen, the quality of the device itself, and (most importantly) the year-long complacency shown by domestic carriers and phone manufacturers in a continuously expanding, high-margin market.

But growth, which began in the late 1990s and continued through the mid 2000s, has come to an end. Hit by the recession and a rapidly graying user base, domestic shipments of handsets fell 12.3 percent year on year to a 12-year low of 31 million units in fiscal 2009. Exports have been historically weak. Worldwide, only London-based Sony Ericsson (a joint venture between Sony and Sweden’s biggest telecommunications firm), commands a noteworthy market share of 5.1 percent.

The mobile sector in Japan is often referred to as the “Galapagos Islands” for its unique, practically closed mobile phone infrastructure. The most prominent explanation for the Galapagos syndrome is i-mode, a mobile web service tailor-made for handsets, which NTT DoCoMo launched in 1998. Japan’s top telecommunications firm practically kick-started the mobile Internet as a whole, but failed to export it to the U.S. and other markets. SoftBank and KDDI, Japan’s second-largest telco, never even tried to take their proprietary web technologies abroad. Another example is 1Seg, an industry-wide mobile TV standard that’s supported by most of Japan’s cell phones but has so far been adopted by just a handful countries in South America. As a result, many Japanese phones had (and still have) a number of unique features that miss the mark in other countries.

And it’s not just the hardware. The success of the iPhone has shown the Japanese mobile industry that it has to quickly catch up in terms of software and usability, too. iPhone users can download about 200,000 apps, or small software programs (games, productivity tools, e-books, etc.), many of which are Apple-exclusive. As a gaming device, the iPhone has become so popular that video game behemoth Nintendo recently said it now regards Apple as its main future rival.

The American company also has an edge in terms of user-friendliness, an area in which Japan’s handset makers haven’t been innovating for years. Whereas the iPhone is designed to be extra-easy to use and comes with just a handful of functions out of the box, most of today’s Japanese cell phones feature a plethora of gratuitous features and clunky user interfaces that have remained practically unchanged in over a decade.

Beaten at their own game, Japan’s once proud, but now dethroned cell phone makers are ready to strike back with new software, massive consolidation and aggressive internationalization. Japan’s carriers are slowly starting to embrace Android, an operating system for cell phones which was developed by Google and has two distinct advantages: It is open source (license-free) software, and it’s already being used in millions of handsets worldwide.

DoCoMo recently announced that it intends to develop (and export) its own mobile operating system. The goal of the software, which is backed by four of Japan’s top handset makers, is to reduce development costs and boost international competitiveness. Last year, NEC, Casio and Hitachi decided to merge their cell phone operations to become the nation’s second-biggest manufacturer (following Sharp). The new company, dubbed NEC Casio Mobile, has already set its sights outside Japan. Four of the twelve million cell phones it plans to ship in 2012 are expected to go to the U.S. and other foreign markets. Overall, it now seems clear the iPhone sounded a loud wake-up call for Japan’s mobile players to finally leave the coziness of their Galapagos ecosystem.

Dr. Serkan Toto is a Tokyo-based web industry consultant and writer for American online media network TechCrunch.

Illustration by Phil Couzens

While the OECD (Organization for Economic Cooperation and Development) remains cautiously optimistic about a 2010 rebound, Japan must take its future into its own hands to ensure that its economy remains competitive and attractive for foreign investment. Japan needn’t look far to find lessons regarding economic growth; neighbors such as Singapore, Hong Kong, and Malaysia continue to attract FDI due to low business start-up costs, low tax rates, and a generally business-friendly environment. However, the consistency in this FDI influx runs deeper than these surface issues.

For example, the Singapore Economic Development Board (EDB) was established by the Singapore government to encourage and assist foreign investment into Singapore. It is generally regarded as being a highly effective organization and a model that other countries could emulate. The EDB has promoted immigration regulations that facilitate the entry of talented entrepreneurs. In addition, Singapore has sophisticated programs in place that encourage multinational corporations to establish regional headquarters there. As a byproduct, new immigrants account for more of Singapore’s population growth than the birthrate. Contrast this to Japan’s declining population and the flight of many foreign companies to more attractive jurisdictions.

A 2010 report by Doing Business crowned Singapore as the easiest place in the world to do business. Establishing a business is significantly less burdensome than doing so in Japan, which ranked 91st in start-up procedures in the same report, and 123rd most favorable with regard to tax payments for medium-sized companies. Given Malaysia’s top-5 ranking in attaining credit and protection of investors, it becomes apparent Japan cannot afford to fall further behind in the Asia-Pacific region.

“For years, Japan failed to recognize the need to catalyze its economic growth by making the regulatory environment more favorable to foreign companies,” said Chris Alderson, Chief Operations Officer of Accounting Asia. “They took an isolationist approach in technology particularly, and their failure to adjust and adapt to global growth, referred to by some as a ‘Galapagos effect,’ is being reflected in the surge of rival Asian economies at such an exponential rate.”

Japan should take steps to ensure FDI remains a priority by taking steps to rationalize immigration and business registration procedures. There are signs of recovery after Japan’s economic free-fall in early 2009, but with the growth of regional competitors showing no signs of slowing down, more dynamic measures are needed to ensure a prosperous future.

Dean Page is CEO of Accounting Asia. He is qualified as both an attorney and as a CPA and was formerly a partner with Ernst & Young. Dean.Page@Accounting.Asia

Paul Petrequin is an associate at Foreya Partners and is currently completing his legal studies at the University of Miami in Florida. Paul.Petrequin@VentureCapital.Asia

Photos by Soleil Provence/Fujisawa Beach Cleaning Project

Shonan Coast, a virtual mecca for surfers, sail-boaters and sun-worshippers alike, is the region along Sagami Bay in central Japan. Centered on Enoshima, an island about 50 kilometers southwest of Tokyo, the Shonan coastline stretches from Oiso all the way to Hayama including Kamakura and Hiratsuka. This popular stretch of beach was showcased in a famous prize-winning 1955 novel, “Taiyou no Kisetsu” (Season of the Sun), written by current Tokyo Governor, Shintaro Ishihara.

Photo by Roger Francis Clarke

So then why is that we treat this revered stretch of beach so poorly? This was the same question asked by the two project coordinators, Michel and Alana Bonzi, who launched the “Fujisawa Beach Cleaning Project.”

Michel is the owner of Soleil Provence, a French language school in Fujisawa. Alana runs Remy Bonzi Group, a boutique consultancy that specializes in creating collaborative corporate/community projects. They both decided to start this project as a community initiative designed to bring foreigners and locals together to perform a good deed while having fun in a family-oriented way.

The project involves a large community beach cleanup, twice a year in the spring and in the fall. The fall beach cleanup is part of the Ocean Conservancy’s International Coastal Cleanup initiative where all debris collected is surveyed and reported in an international report on the state of the Japanese coastal ecosystems. The spring cleanup is a commemoration of Earth Day.

Why Clean Someone Else’s Beach?

The reason for this, say the Bonzis, is that “[Kugenuma Beach] is everyone’s beach” and the cleanup is about “helping people be ‘that change’ they want to see in their sphere, or circle of influence.” They believe that encouraging individuals to clean the beach raises awareness of their impact on the marine coastal system and improves the safety, health and beauty of the Shonan coast, a place where local Japanese and foreigners visit often during the peak summer months. An ancillary effect is the promoting of communication between family members so that shared values are passed down from one generation to another.

ACCJ Supports Green Initiatives

Backed by the support of the ACCJ Community Service Advisory Council (CSAC), the Spring Beach Cleanup was publicized on the ACCJ community website and advertised at various events throughout the first half of the year. Though the ACCJ did not provide a monetary donation for the event held on April 18, 2010, a small group of ACCJ volunteers headed down to Kugenuma Beach in Fujisawa to participate in the Spring Beach Cleanup. In addition, a few ACCJ corporate members participated as sponsors of the event.

On that day, the ACCJ mainly donated its people power to bring together the expat and local communities and create a network with local corporations, NPOs, academic institutions and local governments. In the end, the Spring Beach Cleanup drew around 260 who pooled their efforts to collect an amazing 130kg of debris. The next beach cleanup event, dubbed the Fujisawa Beach Cleaning Project Fall Campaign: International Coastal Cleanup in Shonan, will take place on Sunday, October 3, 2010 (Rain date: October 17, 2010). For more information on how you can participate, contact: info@soleilprovence.com.

Jeffrey Shimamoto is an ACCJ Governor and a member of the Community Service Advisory Council

Hair care and wig-making company Aderans is addressing the problem of balding in a fun way in a new round of commercials for their made-to-order wig service. The commercials bait viewers into guessing which of three male actors featured in its campaigns sporting cool hairstyles are actually wearing a wig. The high-energy campaign spurred a huge amount of attention as viewers tried to figure out the answers.

Aderans has found a lighthearted way to drive home the point that their wigs are meant to be so effective as to be unnoticeable. The company, which is well known for specifically Japanese hair care, may even be affecting perceptions of the use of a wig. The campaign proved to be so popular that Aderans subsequently ran a sequel commercial.

WESTERN TEA IN JAPAN

Asahi is pushing its new Western-style tea brand TeaO at Japanese men, a beverage in Japan usually associated with women. They are exploring a niche created by the emergence of the “Sweets Boys,” or guys who have a soft spot for pastries and other sweets. And they are using popular male idol Takuya Kimura of pop group SMAP to represent it.

A massive advertising campaign and commercial has sprung up throughout Japan. From simultaneous showings on giant Shibuya crossing screens to showings in Toho Roppongi and Tokyo movie theaters, Kimura can be seen frolicking amidst teacups and cartoons with his tea of choice as he bursts into song, “Even guys love black tea!” The commercial is decidedly cutesy, but also a strikingly bold way to get the message across.

Suntory dabbled in this segment last fall with similar commercials featuring guys drinking tea and eating sweets. But this time Asahi has Takuya Kimura’s star power for the job.

LOVE YOURSELF

Another drink owing its star power to its sponsor is Coca-Cola Japan’s LoveBody. The image character is well-known pop singer Hitomi, who is notably open about her sexuality, making herself a prime candidate for encouraging women to “Love (Their) Body” by drinking this beverage. The beverage is a non-carbonated soft drink aimed at young women.

The key is that it is functional, and all of its benefits are meant to support women from the inside out. The first flavor to be released utilizes ginger, a popular ingredient known for its warming properties. In late May, flavors Rosehip Works with polyphenols and Protein Works were launched. Its functional image is boosted by the fact that it is only found in drug stores.

Until June 30, Hitomi fans were given a chance to collaborate on her next song by actually writing and contributing lyrics on Twitter. The concept was to “write a song that will make girls happy.” LoveBody is all about good old-fashioned girl power.

SUMMER ESCAPISM

Illustration by Phil Couzens

In addition, H.I.S. is zeroing in on another target group by aiming its latest summer campaign tie-in at families. The campaign joins forces with popular animation One Piece. The popular and much-loved anime features fun-loving adventurers and pirates – the perfect theme for a summer getaway. The campaign evokes the feeling of an island adventure likened to a treasure hunt in the anime. In addition, H.I.S. is sponsoring a summer One Piece attraction at Nagasaki amusement park Huis Ten Bosch, which launches on July 15.

RECYCLE, RE-USE, REMEMBER

An event this summer called xChange is a new way to bid adieu to one’s old and unused fashion goods in exchange for something almost new. Founder Junko Niwa calls it modern-day bartering. After turning in their own item, participants have their pick of all the castaway clothes and accessories on display.

Former owners leave a note with anecdotes and memories on their items. The result is an item infused with memories for the next person to bring home. By giving goods to new owners like this they are recycling not only the clothing themselves but the value associated with the clothing. The event reinforces value in a way that is cool–because it’s eco–and fun, and because participants all get something out of it. Items that are not taken home are donated to charity. But no one is dumping anything in the Good Will sense; participants are asked to bring things someone else might want.
The event launched this spring with the latest one held from June 22 to June 25 in Tokyo and on June 27 in Shizuoka Prefecture.

Nicole Fall is co-founder of Tokyo-based innovation and trend-forecasting agency Five by Fifty and INTAPAC, an FMCG tracking service. She can be contacted at:
nicole@fivebyfifty.com

Illustrations by Phil Couzens

In a move that may improve Toyota Motor Corp’s somewhat battered image in the U.S., Japan’s largest automaker is partnering with California-based Tesla Motors to make electric cars in a joint venture that will see the reopening of a defunct auto plant and the creation of thousands of jobs.

The deal, which involves a 4.5 billion yen purchase of Tesla’s common stock, will see the companies collaborate on the development of electric vehicles, parts and production systems and engineering support, according to an official statement from Toyota.

In turn, Tesla will purchase part of the site of the California plant of New United Motor Manufacturing Inc. (NUMMI), formerly owned by Toyota and General Motors Corp. Toyota and Tesla target an initial rollout of 20,000 units of the electric cars by 2012.

The NUMMI plant was shut down in April after GM’s bankruptcy and resulted in the loss of 4,000 jobs, fueling criticism of Toyota just as the automaker was facing public criticism for a series of recalls, including its Prius hybrid cars.

While Toyota remains a global leader in green vehicles due to its Prius sales, Nissan Motor Co. has the lead in terms of electric vehicles, with plans to launch full-fledged production of electric cars in the U.S. by the middle of this year.

It is hoped the Tesla tie-up will help Toyota keep up to speed in the green car race. Tesla, established in 2003, released its Roadster model in 2008: a two-seat, lithium-ion battery powered sports car that can accelerate to 62mph in just 3.7 seconds. It has sold 1,000 units in Western markets, and began taking orders in Japan in April.

Meanwhile in Japan, Nissan and General Electric have teamed up to develop a smart-charging infrastructure system that can juice up your green vehicle through large electric grids, as well as act as a source of energy to supply homes and office buildings with electricity.

The three-year agreement will see the two automobile giants work together to identify promising projects, with most of the work to be conducted at their R&D facilities in the U.S. Nissan is expected to have about 10 engineers participate in the undertaking. The partners aim to begin field trials in the state of New York in fiscal 2011, according to the Nikkei.

Meanwhile, a U.S.-based electric car start-up, Better Place Inc., launched the first taxis based on its swappable battery technology in Tokyo late last month. Stationed in Roppongi Hills, three electric taxis are now plying Tokyo’s roads, charging the usual fares, with a $1 million station to return to for fresh batteries. The location of each taxi and the remaining battery charge are being tracked at all times and reported to the drivers via iPhones. The trial will last for three months.

Better Place has developed a system of switchable batteries, under which it will own the battery and consumers will pay for miles used. When the batteries are depleted, drivers will take their cars to a battery charging station where the old battery will be replaced in 60 seconds.

The three electric taxis used in the trial are converted Nissan Rogue crossover vehicles. The switching station is an open structure that resembles the frame of a car wash. The vehicle’s 200 kilogram battery is removed from below by an automated lift and then replaced by a fully charged one seconds later.

While Better Place’s system is based on a network of similar battery-charging stations that give the ability to drive long distances and switch batteries quickly to continue on their journeys, other automakers are offering cars in which the consumer buys both the car and the engine.

However, the high cost of battery-powered mileage may be a speed bump in its proliferation. Better Place estimates the battery price could tally $12,000 for a 24 kilowatt hour pack, which could power a car 99 miles.

Japanese Bank Joins Tablet Craze

Mizuho Bank is making the browsing of dog-eared magazines while waiting your turn in the queue a thing of the analog past with the introduction of Apple iPad units in its branches.

As of July through next spring, several Mizuho branches in Tokyo will provide iPad units on a trial basis. Customers can use the iPad to watch TV, listen to music, read magazines online, explore various applications as well as browse stock prices, foreign exchange rates and of course, Mizuho financial product advertisements.

Mizuho is banking on the popularity of Apple’s iPad to lure walk-in retail clients to its counters. Some Apple fans waited in line for over 40 hours at Apple’s Omotesando store to be the first to get their hands on the iPad’s touch screen, while some 1,200 people turned up at Apple’s Ginza store.

In terms of content, iPad-enabled Tokyoites can look forward to e-books and magazines from Softbank, which markets the device here and has tied up with 13 content providers such as Kodansha, Shogakukan, Mainichi Newspapers Co. and Nippon Television Network Corp to distribute articles and video clips from 31 sources. The subscription fee for the iPad is set at 450 yen per 30 days.

However, taking on the iPad product category challenge is an alliance of four companies—Sony Corp, KDDI Corp, Toppan Printing Co. and Asahi Shimbun Co.—that have come together to form a distribution firm for electronic books and other media content.

The firm, to be established in July, aims to enlist the support of major publishing companies, computer terminal manufacturers and other firms to start operations before the end of the year. They plan to develop a common electronic platform for designing and marketing digital content, such as books, comics, newspapers and magazines. Sony, in particular, aims to market in Japan its “Reader” digital book lines—which it has launched in the U.S. and Europe—in an attempt to squeeze iPad’s market share.

Of Red Hot Capital & New Banking Frontiers

A year and a half on after the Mitsubishi UFJ Financial Group pumped 900 billion yen to take a 20 percent stake in U.S. financial services giant Morgan Stanley, the expansion spree continues unabated. Within a span of two weeks in late April and early May, MUFG Inc’s U.S. unit announced that it has taken over two failed banks: Frontier Bank of Everett, Washington, as well as northern California-based Tamalpais Bank, according to The Wall Street Journal.

MUFG, Japan’s largest bank by market capitalization, is having difficulty generating profits as lending remains sluggish and interest rates squeezed by Japan’s near-zero interest rates, as well as a greying market.
The acquisition of Frontier Bank will give San Francisco-based Union Bank—which MUFG’s UnionBanCal Corp owns—a network of 50 branch offices in Washington and Oregon and about $2.5 billion in deposits.
Meanwhile, back in Tokyo, MUFG and Morgan Stanley announced May 6 the formation of two new companies, jointly capitalized by the capital partners.

The two financial giants aim to become Japan’s top investment banking service providers, offering advice on M&A, stock, bond and real estate investment.

Japan’s shopping spree in the U.S. continues as Orix Corp, a major Japanese leasing company, plans to take an 82 percent stake in Red Capital Group, a top commercial mortgage originator based in the American state of Ohio, according to the Nikkei.

The move marks a new dawn for Orix, which currently generates just 20 percent of its earnings from overseas businesses. The firm aims to boost this figure by launching new businesses in the U.S. and China, amongst other markets.

Orix is expected to spend around 10 billion yen to purchase Red Capital, which is among the top 20 or so delegated underwriting and serving lenders for Fannie Mae, a U.S. government-sponsored mortgage provider.

Red Capital handles loans that meet conditions set by Fannie Mae and loans guaranteed by the U.S. Federal Housing Administration, lending to property developers. Orix’s buy reflects its belief that demand for such loans will grow as the U.S. housing market gradually bottoms out and recovers.

The market for government-backed loans for U.S. multifamily and senior housing is estimated at 4 trillion yen, according to Orix. Of this, Red Capital handled roughly 200 billion yen in loans last year and earned about 12 billion yen in commissions.

Rakuten Targets U.S. E-commerce Market

Casting its web from China to the U.S., Japanese online mall operator Rakuten will acquire California-based e-commerce company Buy.com for $250 million, venturing into the U.S. market—and the home base of its global rivals Amazon and Ebay—for the first time as it embarks on a global expansion drive.

Rakuten, which had sales of $3.2 billion in 2009, made its first overseas footprint in January by setting up a China subsidiary together with popular Chinese search engine Baidu. It also began holding company meetings and board meetings in English at its headquarters as part of its internationalization efforts. The e-commerce giant is also looking at opportunities to enter European and other markets. Buy.com had revenue of $62.5 million in 2009 and has a client base of about 14 million for its online commerce operations, Rakuten said in a statement.

Rakuten also runs operations in Taiwan and Thailand, owns a stock brokerage, an online bank and a professional Japanese baseball team. Buy.com, a privately held company set up in 1997, is similar to Amazon in operating both as a retailer and a marketplace for third-party merchants, a business it launched three years ago. It also operates e-commerce sites in the UK, France, Germany, Spain, Italy and Canada. The company says its objective is to create a world of “borderless e-commerce” that will “enable consumers anywhere on the globe to buy products sold by merchants based in any country.”

Another major Japan-U.S. cross-border deal sees Sony tying up with Google’s Internet TV initiative, to be launched this autumn. The service, based on Google’s open-source Android platform, will allow viewers to use web applications. Sony will develop television sets and other devices compatible with the platform.

Canon CEO Sees Recovery In U.S. Manufacturing

Despite higher labor costs and a sentiment that U.S. manufacturing is on the decline, Canon chairman Fujio Mitarai is positive on the outlook of U.S. as a base for R&D and manufacturing.

“Still remaining at the forefront in technology, the U.S. will revive its manufacturing industry with the help of the Obama administration’s policy of boosting exports,” Mitarai told the Nikkei in a recent interview to attend the groundbreaking ceremony for Canon’s new Americas headquarters.

“As a single country, the U.S. is the world’s biggest market, and sales of products with high added value remain strong,” he said.

Canon’s new facility is charged with developing new technologies and spearheading the firm’s efforts to diversify.

“We will continue with research and development in Japan, but we want to drive our business diversification by developing new technologies in the U.S., which attracts brains from around the world,” Mitarai said in an interview.

The facility in Melville, New York, is slated for completion in 2013.

JPMorgan Chase & Co. Appoints New Japan Head

JPMorgan Chase & Co. has appointed Christopher Harvey, a 26-year veteran of the Wall Street financial services firm, to head its Japanese business, the company announced in an April 26 statement. He takes over the roles of President and CEO of JPMorgan Securities Japan Co., Tokyo Branch Manager and Representative in Japan of JPMorgan Chase Bank from Greg Guyett, who will be relocating to London to assume the role of CEO of the Global Corporate Bank.

Harvey joined JPMorgan in 1984, and has held senior positions in client coverage, foreign exchange, derivatives and emerging markets. He was most recently co-head of Capital Structure Advisory & Solutions, and chaired the Reputation Risk Committee for the Investment Bank in North America.

Harvey will report to Gaby Abdelnour, Chairman and Chief Executive Officer of JPMorgan Asia Pacific, and he will join the Asia Pacific Executive Committee and the Asia Pacific Investment Bank Management Committee.

“Chris has built a tremendous reputation for leadership during his 26 years at JPMorgan and he will give strong leadership to our long term expansion strategy in Japan,” said Abdelnour. Commenting on the appointment, Harvey said, “I am very excited by the opportunities which JPMorgan has in Japan as one of the leading financial institutions in the country. I am also looking forward to working with the leadership teams and colleagues in Japan to capitalize on our global connectivity and client focused culture.”

Turnaround Financier To Helm Japan Society

Renowned corporate turnaround investor Wilbur Ross will take on the role as board chairman of the New York-based Japan Society, the largest nonprofit organization in the U.S. promoting economic and cultural exchange and interaction between the two countries, as of June.

Ross, who is chairman and CEO of WL Ross & Co. LLC and chairman of Invesco Private Capital, has been investing in Japan since 1997, according to a statement by the society, which was founded in 1907. One of his most notable purchases was the failed Kofuku Bank in Osaka, which he restructured into the Kansai Sawayaka Bank that later merged with the Kansai affiliate of Sumitomo Mitsui Bank.

To date, Ross has assisted in restructuring more than $200 billion of corporate liabilities, encompassing a variety of complex bankruptcy proceedings in a broad range of industries.

“I have long held Japan Society’s work in high regard,” said Ross in the press statement. “I have witnessed its power to connect the people of the U.S. and Japan firsthand as a supporter of the Society, a participant in its galvanizing programming, and, in the last few years, as a member of its Board. Where mutual understanding remains our mission, I am excited to further support the Society as it seeks a broader, more continuous relationship between the people of the U.S. and Japan.”

Tom Whitson
ACCJ President
twhitson@accj.or.jp

Hokkaido was the site of the first big APEC-related business event held in connection with the APEC Trade Ministers conference June 5-6. I had not been to Sapporo in the summer and it is clear that everyone in town is absolutely nuts about flowers. From the airport train through clean air under blue skies, every house had pots and beds of brightly colored flowers in great profusion. In Sapporo itself, the Lilac Festival was in full swing and the air was filled with lilac. It recalled childhood visits to Great Aunt Evelyn who greatly favored that strong floral scent. A huge chunk of central Sapporo is occupied by the Hokkaido University Botanic Gardens. Nature seemed to be running amuck everywhere.

Freshly cut grass along the rushing Toyohira River made a morning jog a completely different experience to running along a Tokyo canal whose waters are murky with heavy metals. Sapporo is a post-Tokugawa city laid out in grid square with some charming 19th century Victorian colonial style buildings. The main fire break through the center of the city has turned into Odori Park where the famous Snow Sculpture Festival is held. Maybe Sapporo is covered with snow most of the year, but June was beautiful and there is NO rainy season in Hokkaido!

As in Singapore last year, APEC-related business organizations including the U.S. APEC Business Coalition, the Support Council for ABAC-Japan, Nippon Keidanren and the ACCJ sponsored a business luncheon for the trade ministers following their last session. Nearly 200 ministers, SOMs, officials, and businesspeople attended. The centerpiece was a panel discussion moderated by former Deputy USTR Karan Bhatia with METI Minister Naoshima, MoFA State Secretary Takemasa, Singapore Trade Minister Lim, and Deputy USTR Marantis. The discussions and Q&A were open and interesting. This group has a bias towards free trade so it was nice to hear senior government officials giving vocal support to some of ACCJ’s most strongly held positions.

One thing that most impressed me, and the other supporting organizations, was how the APEC Task Force and the ACCJ Chamber Office drove this event. It was clear that even for (relatively) remote locations, ACCJ event planning and organization capabilities are really superb. I was impressed by the way ACCJ’s “General” Maruyama marshaled the hotel’s troops and deployed them for action. Our coordination with the working level staff of METI and MoFA should pay dividends in future opportunities to work together and to get access to their senior people. At the end of the program we presented each of the panelists with a framed certificate and photo (taken only minutes earlier) which greatly surprised the minister I was escorting. Interested members should contact the APEC Task Force to contribute to and participate in other APEC events through the Yokohama leaders meeting in November.

Government Relations Committee Co-Chair Vivian Tokai has resigned from the ACCJ and changed her name to Yukiko. Actually she is running in the July Upper House election for a seat in Tokyo. We have all appreciated Vivian (Yukiko)’s keen analysis and insight into Japanese government and personalities. The ACCJ doesn’t support parties or individuals, but as a friend and former ACCJ leader, we do wish her well and look forward to hearing about her campaign at a future ACCJ event.

In other election news, the 2010 Nominations Committee Chair William Swinton and Vice Chair Carolyn Gaskins hold their first meeting in July. I am not aware of a strong Tea Party movement in the ACCJ, but elections are a great opportunity to “throw the rascals out.” If you know a member whose judgment, experience, work ethic, and commitment to the ACCJ’s goals makes him/her a good candidate, please let the NomCom know. If you think that ideal governor candidate is you, send in your own name and see if the NomCom agrees with your self assessment. The year 2011 will bring new challenges and opportunities to the ACCJ. It is not too soon to think about who should lead the Chamber into the future.

Despite the lack of cultural cache the sporting event holds in America, it nevertheless offers an amazing insight into the state of international relations as fans and players from around the globe are thrust into the spotlight, and sports chatter becomes mixed with political and cultural perspectives. Much in the same way the Olympics forces us all to be on our best behavior as global citizens, the World Cup tests our collective tolerances and sensitivities to cultures far different from our own.

As someone almost completely unfamiliar with international football, I’ve found the festivities being held in South Africa this year fascinating. From the apparently surprising success of the Japanese against Cameroon, to the much talked about draw between America and the UK, the international undercurrents resonating throughout these games almost feel like a report card on our universal state of civilized competition. Watching so many players, from so many different backgrounds and disparate political constructs fiercely compete, and then display a surprising amount of admiration and respect for one another after the final whistle is inspiring.

But while these summer games are indeed inspirational, the reality is that, from the very beginning, this kind of cultural fusion is exactly what made America the world leader that it is today. While not perfect by any stretch, with ongoing adjustments reflective of history’s shifting realities, America’s unique brand of democracy and business leadership continues to point the way toward a world in which cultural and ideological diversity in the service of innovation and improvement is celebrated, not muted. 

Thus, in this issue we take a moment to acknowledge America’s national observance of the Fourth of July, Independence Day, a day commemorating the adoption of the Declaration of Independence on July 4, 1776. For many Americans, this day represents the true beginning of “the American dream” and reminds us of the core values and principles that forged the unique history of the nation.  

Buttressing this theme, economist Jesper Koll asserts that, despite the recent economic tumult, America remains steadfastly in the lead position of business innovation (“In Praise Of America,” page 22), Ernst & Young’s Beth Brooke illuminates the benefits of paying attention to the diversity that has strengthened America’s corporate culture (“Leading The Change,” page 32), and finally John V. Roos, the United States Ambassador to Japan, graces us with a message of positive perspective as Japan plays host to the APEC summit (page 46). It is my hope that the messages of collaboration and innovation contained in the following pages inspire you all, no matter your national origin, to embrace the notion of independence through interdependence.

Adario Strange
Editor-in-Chief

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マイケル・フィリップス Pro Commerce社長
Photography by hiromi iguchi

マスターカード創設者で、ビジネスブログ「Pro Commerce」社長のマイケル・フィリップス氏（75）が4月23日、ウェスティンホテル東京で「短期顧客と長期顧客へのマーケティング手法の違い」をテーマに講演した。

まず新規顧客の開拓には、ロイヤリティカードは不向きで、無料サービスや「口コミ」などの推薦コメントが有効な定番手法だと指摘した。返品や払い戻し方法の明示も不可欠で、さらに店頭やウェブサイトで「購買意欲をそそる」情報を提供し、潜在顧客の関心を維持する。

長期顧客の囲い込みはより複雑で、自社分野の「専門性を絶えず更新し、顧客の求めるものがあることを常に示す必要がある」。苦情を言いやすい環境づくりや、アマゾンのボーナスポイントのような「ねぎらい」も重要だ。

そして①自社サービスの優位性を納得させ、②関連商品や関連部門とリンクし、③継続的なサポートや多様な推薦コメントで顧客の好感を維持する3つの戦略で締めくくった。

illustration by phil couzens

国際通貨基金（IMF）は5月、日本の債務残高は2015年までに国内総生産（GDP）の250％に達すると予測した。長引く高失業率や外国直接投資（FDI）への厳しい規制がその根拠だ。

Doing Business誌は2010年、ビジネス環境が最も整った国としてシンガポールを1位に選んだ。一方、日本は起業のしやすさにおいて91位、中小企業向け税制で123位に沈んでおり、アジアで競合するマレーシアや香港にも大きく水をあけられている。

アカウンティング・アジアのクリス・アルダーソン最高執行責任者は「経済成長に見合った外国投資への規制緩和の必要性を、日本は認識してこなかった」と指摘する。

例えばシンガポールでは、多国籍企業のアジア拠点設置を奨励しているほか、外国投資呼び込みのために新設された経済開発庁が外国起業家の移住を促進している。

アジアの競合国に経済衰退の気配はない。日本が将来の繁栄を目指すならば、より大胆で積極的な施策が必要となる。

illustration by phil couzens

日本の不動産業界に多少回復の兆しが見えているが、その原動力は業界のファンダメンタルズ（経済の基礎的条件）の向上ではなく、国内外プライベート・ファンドの活発化だ。市場の活性化と外国投資は歓迎すべきだが、日本の不動産業界が人口減少という「時限爆弾」を抱えている点は明らかだ。

予想では現在1億2700万人の人口は、2050年には9500万人まで減少するが、人口が四分の一減れば日本の不動産供給は過剰となる。現在、東京の事業用不動産の稼働率はピークだった2008年の半分以下だ。郊外はおろか都心の需要減は深刻で、デフレと人口減少が現在のペースで進めば空き室は恒常化するであろう。

鳩山政権は子ども1人につき月額1万3000円（初年度）の子ども手当てを支給した。方向性は正しいが、少子化対策の決定打になるとは思えない。出産手当てとして500万円、さらに年額200万円の補助金を支給するくらいの思い切りでもなければ、日本の家族計画、ひいては人口減少に変化は望めないだろう。

illustration by phil couzens

日本の携帯電話端末市場は国内大手が独占してきたが、2008年ソフトバンクが米アップルのiPhoneの販売を開始、日本のスマートフォン市場の72％を占める300万台を売り上げ、旋風を巻き起こした。

独自の閉鎖的なインフラを発展させてきた日本の携帯市場は「ガラパゴス諸島」と揶揄されるほどだ。ソフト面でも、複雑な機能や10年来ほとんど変化のないインターフェイスは使いづらさが目立つ。一方、iPhoneは簡単に使いこなせる手軽さが売りだ。

しかし日本メーカーも、ようやく新ソフトの導入や事業統合による国際化に乗り出した。米グーグルの携帯端末用OS、アンドロイドを採用するキャリアも現れた。NTTドコモは日本メーカー4社の支援で独自に携帯端末OSを開発し、海外にも売り込む計画だ。NEC、カシオ、日立も2009年、新合弁会社「NECカシオモバイルコミュニケーションズ」を設立して海外展開を狙い、2012年の目標出荷台数1200万台の3分の1は米国その他への輸出を掲げている。

ベス・ブルック EYグローバル副会長

大手監査法人アーンスト・アンド・ヤング（EY）は先日、グローバル時代のビジネスと「多様性」に関する3本のレポートを発表した。同社のジェームズ・S・ターレー会長兼CEOは、トップ企業や経営者が現れる地域の多様化を予測する。絶え間ないイノベーションが競争を左右する中で、多様性への適応は企業にとって正しく、また賢い戦略である。

来日したベス・ブルックEYグローバル副会長はACCJで「多様性」の担い手の一翼として女性を強調した。女性のもつ潜在性を阻む文化的バリアの中でも、最も変化が見込めるのが企業文化だ。EYの報告書「グラウンドブレーカー（改革者）」は、キャリアのスタートアップ支援によって女性が活躍の場を広げる足がかりを作ろうとしている。

ブルック副会長はまた、多様性の「臨界点」に達して初めて長期的なプラス効果が得られるとも指摘した。他者との差異を受け入れ、先進市場と新興市場の双方に明るく、競争的協力を糧とできる人材の確保と維持が、ビジネス戦略としての多様性にとって鍵となる。

世界的な経済危機の中、米経済には大勝利の可能性がある。

第1に米国は今も世界一のイノベーション大国だ。2009年の米企業の出願特許は4万5790件で、2位の日本（2万9827件）、3位の独（1万6736件）を引き離している。特許出願企業の幅も広く、上位30企業は出願数全体の20％にすぎない。日本では対照的に全体の半数を上位30企業が、独では40％を上位12企業が占める。

第2に米国は今も世界中の最も優秀な人材をひきつけている。過去10年の留学生の増加率は30％で卒業後も、能力主義を風土とする米企業が、国籍や性別に関係なく人材を採用する受け皿となっている。

第3にマネーフローのダイナミクスを生んでいる非常に効率的な税制度だ。国民所得の増加1％につき税収は1.2％増加している。

そして第4に準備通貨、連動通貨としての米ドルは、浮き沈みはあっても依然強固だ。ドルの国際的地位の不動性は何よりも、米経済に対する楽観的展望を可能にしてくれるであろう。

John V. Roos
Ambassador
United States of America

日本在住の米国人の皆さま

独立記念日は、米国人にとって最も重要な祝日のひとつです。特に家族や友人たちから遠く離れ、外国に暮らす私たちにとって、この日は一層大きな意味を持ちます。独立記念日は、私たち米国人の立場を明確にし、さらに一体化させる価値観、すなわち自由、平等、民主主義をたたえる日です。これらの理念は、建国の父たちが自分たちの命を賭して戦うに値すると考えたものであり、以来、米国社会の揺るぎない礎となっています。勇敢な彼らのたぐいまれな英知が、世界中の人々を勇気づけてきた民主主義制度の発展と安定をこれまで支えてきました。建国の父たちがそれを知れば、きっと誇らしく感じることでしょう。

オバマ大統領が先日、陸軍士官学校の卒業式で演説したように、「米国は建国以来、未来を信じてきました。たとえこれからの道が定かでない時も、過去よりも未来の方が、より良い世界だと信じてきました。この期待を実現させるために、米国民は何世代にもわたり、機会を見いだし、不正と 戦い、より完全な連邦を形成するという建国の父たちが築いた基盤をもとに前進してきました」

234年前に建国の基盤となった価値観をたたえながら、日本と米国の揺るぎないパートナーシップもたたえましょう。両国の運命は、かつてないほど密接に結び付いています。日米両国は自由と民主主義という価値観を共有する同盟国であり、両国のみならずアジア太平洋地域にとって、未来がより平和で繁栄したものとなるよう共に取り組んでいます。

今年は日本で、そして2011年には米国で、アジア太平洋経済協力会議(APEC)が開催されます。両国のパートナーシップを強化する素晴らしい機会となるでしょう。ACCJは、貿易を拡大しAPECの全参加国・地域に持続的な経済成長をもたらすために、APECを通じて日米両国が連携する方法について提言するなど、重要な役割を果たしています。

独立記念日に際し、ACCJ会員企業1000社のすべての読者の皆さまにごあいさつを差し上げるとともに、日本の皆さまの絶えることない友情とご支援に心から感謝いたします。日米両国が自由の恩恵を末永く享受できるよう願ってやみません。

Tom Whitson
ACCJ President
twhitson@accj.or.jp

ACCJ’s CSR activities have grown since we set up the Community Service Fund after the Kobe Earthquake. The activities of each ACCJ Chapter reflect well on how we act on our corporate values and contribute to the communities that make our businesses possible. On May 23rd we kicked off the “charity and health” Chubu Walkathon. Smaller walkathons will follow in Tokyo (September 12) and in Kobe (October 17). These events involve our local government contacts and are a great way to get out and show a good ACCJ face to our Japanese neighbors.

Just before Golden Week, an ACCJ delegation visited Washington D.C. for our annual D.C. Doorknock. We reworked our presentation materials to focus on issues that would resonate with: 1) elected officials with a peripheral interest in trade matters, and 2) others who have a good understanding of Japan-U.S. issues. Perhaps because of the new DPJ government, the Futenma re-assessment, and the Toyota recalls, Washingtonians seemed much more interested in Japan than they appeared to be last year. We were fortunate to meet Commerce Secretary Gary Locke, Senators Inoue and Webb, and State Department Japan Desk Joe Donovan, among others.

I wish that I felt confident that Washington was as committed as the ACCJ is to: 1) free market principles, 2) level playing fields, and 3) transparent and fair regulatory processes. We made the point that the President’s National Export Initiative was very welcome, but that we believe passing free trade agreements and active U.S. participation in emerging Asian trade architectures will do a lot to help the U.S. achieve its goal of doubling exports in 5 years. The most knowledgeable people we spoke with in Washington were unanimous in agreeing that free trade agreements would significantly benefit the U.S. economy, but no one believed that Congress would pass the Korean, Colombian or Panama FTAs any time soon. Everyone was in favor of trade, but one person went so far as to inform us that there are people in Washington who believe that exports are good, but trade is somehow not necessarily good.

Part of our key message is that the U.S.-Japan trade pattern features two sophisticated economies trading complex high value goods and services with each other. It is important to remember that the U.S. has a significant positive trade balance in services with Japan and that we have key medical and high tech product areas where U.S. companies have enviable market shares in Japan.

There is significant interest in our involvement in APEC and our issues paper. We will be following up with our D.C. contacts on our APEC activities this year and we were asked to coordinate with certain U.S. groups who will be involved with APEC in 2011. In Japan, our preparation and willingness to engage other business and government organizations to help make APEC a success has increased our profile and should result in more opportunities for our member companies to engage with other Japanese groups where our interests are aligned.

Our advocacy work this year has smoothly folded into our Diet Doorknock, our D.C. Doorknock, our APEC Task Force activities, our Growth Strategy Initiative, and our Global Financial Center project. I very much appreciate the efforts of the ACCJ committees, individuals, and companies that have supported our activities to improve the business environment in Japan for our ACCJ member companies.

One such trailblazer, sometimes labeled a bombastic huckster, but ultimately our version 1.0 of the Transparent Businessperson (albeit, with conveniently opaque spots), was Phineas Taylor Barnum, the 19th century media alchemist, show business icon, and occasional political animal. 

In his book “The Art of Money Getting” Barnum commits some of the axioms of his business life to text. Barnum wrote,“To get rich, is not always equivalent to being successful. ‘There are many rich poor men,’ while there are many others, honest and devout men and women, who have never possessed so much money as some rich persons squander in a week, but who are nevertheless really richer and happier than any man can ever be while he is a transgressor of the higher laws of his being.

“The inordinate love of money, no doubt, may be and is ‘the root of all evil,’ but money itself, when properly used, is not only a ‘handy thing to have in the house,’ but affords the gratification of blessing our race by enabling its possessor to enlarge the scope of human happiness and human influence. The desire for wealth is nearly universal, and none can say it is not laudable, provided the possessor of it accepts its responsibilities, and uses it as a friend to humanity.

“The history of money-getting, which is commerce, is a history of civilization, and wherever trade has flourished most, there, too, have art and science produced the noblest fruits. In fact, as a general thing, money-getters are the benefactors of our race. To them, in a great measure, are we indebted for our institutions of learning and of art, our academies, colleges and churches.”

This particular passage came to mind because of my experiences over the last few months with members of the ACCJ. Despite the fact that we are still mired in an economic malaise that has changed the way many of us do business, scores of ACCJ members continue to use their personal time and energy to contribute to the ACCJ business community, as well as non-business interests via a number of efforts, large and small, designed to contribute to the overall health of our global economy. 

Interacting with so many driven industry leaders who have earned their way to prosperity and remain charged with meeting the demands of their daily corporate responsibilities, yet are mindful of the importance of contributing to the overall community has been truly inspirational. I’ve long suspected that it takes a special kind of person to do business in Japan as a foreigner, and my recent experiences interacting with the ACCJ membership continues to buttress that belief. Thank you all for your continued contributions, suggestions, and above and beyond the call of duty attention to creating a healthier business environment for us all.

Please contact us.

Illustration by Phil Couzens

Japan’s main artery of commerce, trade and tourism, the Shinkansen, is undoubtedly the world’s safest and most punctual high-speed rail system, but its tragic flaw may be that it’s arriving at the international platform too late. With a sprawling 2,500km-long rail network, there is limited growth potential within Japan, and it has now dawned upon bullet train operators that keeping their technology within Japan’s borders may see the sun set on the opportunity to export the pioneering high-speed rail system to the world.

Despite building the first bullet train network 50 years ago, the Shinkansen train system now faces competition from European, North American groups and the Chinese railway industry which are all eyeing a piece of the American railway pie. The Obama administration has even set aside $8 billion for a high-speed rail system as part of its effort to stimulate the economy.

JR Central, which operates the Tokaido line—Japan’s oldest and busiest network which plies between Tokyo and Osaka—designs and runs its own trains. The Tokaido line has been running since 1964 without a single fatal accident and an average service delay of 36 seconds last year. The company is now targeting projects in Florida and Texas, as well as a proposed high-speed link across the desert from Los Angeles to Las Vegas as these regions have little existing rail infrastructure. However, JR Central will now have to pit itself against a Chinese bidder for the L.A-Nevada project.

In a trickledown effect, Japanese electrical machinery makers are also redoubling efforts to clinch railway facility construction deals in overseas projects as a new avenue for revenue. Japan’s domestic market for train carriages is leveling off at an estimated 300 billion yen a year. In contrast, train projects worth about 1 trillion yen have been planned in Western countries and emerging economies, such as Brazil and China.

However, foreign companies appear to have seized the upper hand in the competition for railway projects, due to their expertise in handling inclusive services ranging from construction planning to train car design and traffic control. Indeed, three electrical machinery giants—Bombardier Inc. of Canada, Alstom K.K. of France and Siemens AG of Germany—account for 50 percent to 60 percent of global market share.

Hitachi Ltd. aims to win more orders by providing comprehensive train services. To achieve this goal, the company will consider alliances with other firms to offer services such as train maintenance and traffic control system management. With a 70 billion yen deal, Hitachi became the first Japanese company to supply high-speed train cars for a new railway system that opened in December in Britain, the birthplace of railways. Hitachi’s train has been well received for its light body and energy-saving functions, observers say.

Other Japanese companies are also jumping on the bandwagon. Kawasaki Heavy Industries Ltd. is developing a streetcar that runs at a top speed of 90 kph for services in the United States. Meanwhile, last month, Mitsubishi Electric Corp. started operations at a factory in Mexico where electrical motors, brakes and other train equipment are manufactured.

Publishers idle on iPad content

For a country that pioneered the electronic book, squints to read books on mobile phones, and professes paper-saving eco-consciousness, content for e-readers in Japan is surprisingly scant. Sony started a new chapter in mobile technology when it introduced the first e-reader for the Japan market called LiBRIe in 2004. Since then, many companies have attempted to launch their own take on the e-reader platform.

However, sales within Japan for the Sony e-reader were poor, despite faring well against the competition in the UK and U.S., and the e-reader was taken off the shelves in 2007. Fast forward six years and Japan is about to welcome Apple’s iPad to its shores. However, response from Japan’s publishing industry remains muted.

Magazine publishers such as Starts Publishing Corp., which publishes Oz Magazine for women, is set to distribute some of its content electronically, and will price these iPad periodicals at around 70 percent of the print edition prices. But the majority of the Japanese book industry seems content to stay offline and on the brick and mortar shelves. Unlike the U.S., where digital books have become an integral part of the publishing process, Japanese publishers generally convert titles into electronic data as an afterthought, if at all.

Part of the reason is the fragmented nature of Japan’s publishing industry which consists of around 2,000 publishing companies of which around 50 are big players, unlike the U.S. which is dominated by a core group of five or six major publishers. This hinders the establishment of an industry norm for contract terms and royalties for authors and electronic data management.

To get the industry on the same page, the Communications Ministry set up a panel in March to explore digital publishing, while a group of 31 major publishers has set up an industry association of e-book publishers. The association’s main task will involve creating a viable business model for the domestic e-book market by clarifying copyright issues and unifying the various formats.

Young Japanese men are well known for a keen (and often original) sense of fashion—but what about their older counterparts? The answer is: They can be fashionable too. Especially dads.

A recent impromptu show in Osaka invited dads to take part in a makeover in promotion of fatherly fashion. Mail order company Senshukai coordinated the “Making Dads Cool Fashion Show” event, picking ten fathers in their 30s to 50s to show up on stage in their everyday garb before being whisked away for a makeover. The point was to combat the view of fathers as fashion catastrophes plagued by metabolic syndrome and baldness.

Dad fashion is also getting support from the more traditional side in the form of kimonos. The “Tsurono Takeshi x Japan Style” campaign by Marubeni Kyoto is urging dads to purchase a kimono for the “Shichigosan” tradition where children aged 3, 5 and 7 go to a temple to celebrate their birthdays. Children often receive fancy kimonos for the event, but not so for parents. This classic blend of modern with old, featuring a hip and trendy celebrity dad, is pushing for the sale of Japanese fashion to an oft-overlooked demographic.

HIP HOMEBODIES

Illustration by Phil Couzens

In the female fashion arena, young women are taking loungewear to the next level. Companies are zeroing in on the niche of people who have taken to staying at home during the recession. Usually, fewer shopping expeditions and less socializing would translate into less need for cute clothing—but the alluring idea of being fashionable at home has caught on.

Fast fashion giant Uniqlo has an established and popular loungewear brand, while top lingerie maker Amo’s Style, for example, has recently released its own line of Disney-influenced loungewear. Other companies, such as Cross Plus, are coming out with new lines targeting increased sales for the year.

A revived focus on frilly and beribboned kitchen-wear is another spinoff of this trend as well. Kitchen aprons and oven mitts can be found en masse in department stores, yet another avenue for people to find ways to enjoy being cooped up at home.

TELECOMMUTING, JAPANESE STYLE

Every Tokyo commuter dreams of ways to avoid the morning rush. Now, more and more of them are skipping the office and working as “telecommuters.”

Japan’s batch of telecommuters, however, are not spending their days in pajamas like the above-mentioned loungewear girls—they want to get out of the home. Many workers, who tend to be men in their 30s with entrepreneurial aspirations, have found a happy medium by working out of coffee shops and cafes. Places that offer Wi-Fi are on the rise, but not always for laptops; these new telecommuters stick with smart phones like an iPhone or Blackberry.

Hybrid manga cafes for entrepreneurs have also started to appear, such as Bookmarks in Sendagaya. Launched last year by an entrepreneur in his late 20s, it aims to be a ‘Third Space’ for young businesspeople. Members pay 6,820 yen a month for access to meeting spaces, a library, business education seminars, free coffee and even a massage.

TICKETS IN A DAY

Spontaneous fun may be edging its way into the ticket-buying system in Japan, as a new system for same-day tickets has sprouted up in Osaka. Today’s Ticket Center in Dotonbori, based on the New York TKTS system for same-day Broadway tickets, is the first system of its kind in Japan, offering discount tickets for same-day shows throughout the Kansai area.

Available for sale are tickets to everything from Noh and Kabuki performances to concerts and comedy acts. NPO Live Entertainment manages the initiative, with major sponsors that include the Kansai government. It is hoped that the system will be beneficial to the Kansai economy while simultaneously promoting the arts and utilizing those pesky last minute empty seats theaters contend with on a daily basis.

The system, set to launch officially in Osaka this month and later in Umeda, could also be set to change the way Japanese consumers buy tickets.

FASHION STAR TO BUSINESS GURU

Dentsu is searching for inspiration from the trend-setting “gal” subculture, rooted in vibrant and youthful Shibuya. Recently launched Dentsu Gal Labo will serve as a laboratory in order to observe the gals themselves and come up with tangible solutions and plans for client companies, specifically in relation to marketing campaigns oriented at young women.

It’s no wonder that Dentsu values their example: The gal phenomenon has been a massive trend leader throughout Japan, and not just in fashion. One of the leading gals, Shiho Fujita, began her own marketing company at the age of 19. Since last summer, she and other gals began to promote a new trend—that of local produce and agriculture—through the establishment of their own rice paddy farm in Akita Prefecture.

Nicole Fall is co-founder of Tokyo-based innovation and trend-forecasting agency Five by Fifty. She can be contacted at: nicole@fivebyfifty.com

Illustration by Phil Couzens

So far, Japan’s web users have embraced just a handful of foreign Internet brands such as Yahoo, Google, and Twitter. Social networking services such as Facebook and MySpace, mega-popular in the U.S. and elsewhere, have largely been given the cold shoulder. Facebook, a mere online yearbook just four years ago, has emerged as the web’s social networking juggernaut, now connecting well over 400 million members worldwide. The site has become so big so quickly that it seems to be just a question of time as to when it will overtake Google as the leading destination on the web.

The number of Facebook users in Japan, however, hovers at just one million, a far cry from the 20 million people who have flocked to the country’s biggest social network, Mixi, so far. Facebook has also been outpaced by Mobage-town and GREE, two social networks optimized for use with mobile phones, which count 18 million members each. The America-born site is iconic in regions as diverse as Germany, Taiwan, and Indonesia. So what makes Japan different?

Industry experts sometimes argue that the reason for Facebook’s struggle in Japan is that social networking is a winner-takes-all business, and that the American startup was simply too late to market in Japan. In fact, Facebook started offering a translated version as late as 2008, giving the homegrown competitors a head start of four years (an eternity in Internet time). Adding to its late start, Facebook never adapted its design to Japanese interface tastes, refused to spend a single yen on marketing and never bothered finding a local partner. So, the reasoning goes, how could they truly expect to win in Japan with such an approach?

Nevertheless, this is exactly how Facebook has tackled almost every foreign market in the past. Its gradual, strictly hands-off expansion strategy isn’t unusual for a web startup with limited resources, and it did pay off in most parts of the world. The main reason for Facebook’s failure in Japan so far lies deep in the country’s unique web culture. It’s not primarily about Facebook’s timing, design, or functionality. The American startup needs to trigger nothing short of a paradigm shift in how Japanese users socialize on the web, especially regarding communication, safety and privacy.

Social networks, by their very nature, need to properly reflect real-life communication patterns, but these significantly differ from country to country. Facebook’s U.S.-focused positioning as a platform for self-expression and matchmaking is diametrically opposed to Mixi’s, its direct domestic competitor. Mixi encourages members to communicate at a distance, for example by writing diaries friends can comment on, which often leads to indirect conversations. A chat function, one of Facebook’s core elements, is absent on Mixi, as is the “poking” feature that enables Facebook users to contact and flirt with strangers.

Mixi, abiding by the preference of Japanese people to generally stay anonymous online, allows members to use nicknames and fake profile pictures. And, until recently, the site required an invitation from a current user and a Japanese mobile mail address for registration, making it harder for potential evil-doers to enter one’s network. These are just a few of the many Japan-specific communication tools and security features that Facebook doesn’t offer, but are embedded within the very fabric of the digital culture of Mixi. As a result, the site is seen as a safe, hermetically closed and high-trust destination by most Japanese users. But even as Mixi adds thousands of new members each month, Facebook is far from giving up on Japan. In fact, the American Internet concern has just established a development base in Tokyo, the first of its kind outside Silicon Valley.

Japan’s social network war isn’t over yet, and two specific factors should give Facebook cause for hope. Firstly, Mixi has so far managed to penetrate just 15.7 percent of the Japanese population, putting it far behind Facebook’s performance in the U.S. (Facebook’s 116 million-strong American user base translates to roughly 37.5 percent of the population). Secondly, Facebook has yet to break into Japan’s huge mobile web, a factor that was the catalyst for the explosive growth experienced by its domestic competitors over the last years. The American startup is already working on an optimized version for Japanese mobile phones. This first dent into Facebook’s Model T approach to internationalization is a significant step, but making it easier and safer for Japanese people to socialize on the site should be the next.

Dr. Serkan Toto is a Tokyo-based web industry consultant and writer for American online media network TechCrunch.

Seth Sulkin is the President and CEO of Pacifica Malls K.K., a Tokyo-based real estate asset manager specializing in commercial properties.

On April 21, Bank of Japan Deputy Governor Miyagi Nishimura said in a speech that he sees “beams of light” pointing to the end of Japan’s severe deflation problem. If true, that would be welcome news to the real estate market, but there are many reasons to be cautious. According to press reports, the Bank of Japan’s own forecast is for a drop in consumer prices of 0.5 percent in fiscal 2010 and a further fall of 0.2 percent in fiscal 2011. Even with nominal interest rates close to zero, the real interest rate is negative, which is not good for consumer spending or real estate investment, which is generally seen as an inflation hedge.

That being said, Japanese views toward real estate are not generally as cut and dried as would be more common in the U.S., Europe or Australia. History and culture still play an important role in how Japanese individuals and companies buy, hold and sell real estate, which means that numbers alone do not determine decision-making.

Take, for example, the concept of a fixed-term lease. In the U.S., it is standard that a tenant’s right to use space is limited to the term of the lease. In a traditional Japanese lease, however, a tenant can stay in perpetuity with no mechanism for the landlord to regain control of the space. About 10 years ago, the Japanese government introduced a fixed-term lease law applying to both buildings and land. The fixed-term lease law did not replace the concept of a traditional lease. Both are now in use, although traditional leases generally remain the norm outside the Tokyo area.

Where the fixed-term law had a really huge impact, however, was for ground leases. For such a small, crowded country, Japan actually seems to have a huge amount of unused or underutilized land. Knowing that control over the land would revert after a defined amount of time encouraged individuals and companies that didn’t want to sell land for tax or sentimental reasons to lease it to tenants such as supermarkets, car showrooms and shopping centers. Many of these fixed-term ground leases were for 20 years or more, so we haven’t seen what will happen at the end of the period, but legally, landlords can force tenants to demolish buildings and restore the land to the original condition.

Illustration by Phil Couzens

In large part, because of this legacy of resistance to traditional ground leases, the concept of selling land separate from ownership of the buildings on top (generally referred to as sokochi) was not considered investment-grade. Personally, I feel more confident that my tenant will continue paying rent when his investment in my property consists of a building. If he is only renting a space in a building that I own, it is much easier to walk away.

Given that transparency in the Japanese real estate market is so low compared to other key Asian markets such as Hong Kong, Singapore and Australia, real estate professionals tend to look at the behavior of J-REITs as a proxy for what is happening, given that they must disclose certain aspects of their transactions and decision-making. Because sokochi were considered to have low liquidity and banks did not like to lend against them, J-REITs have generally stayed away from buying them. Recently, however, the Japan Retail Fund (JRF), one of the largest J-REITs, made a very rational decision to recycle its portfolio of assets to try and increase its dividend payouts.

With continued deflation and no recovery in domestic demand expected in the foreseeable future that would lead to higher rental income, JRF sold a property with high depreciation cost and bought several assets with low depreciation, including a few sokochi, which naturally have no depreciation, as the tenant owns the improvements. J-REITs can only distribute profits left after depreciation, so in this case, economic rationality overcame traditional cultural resistance to buying sokochi. This is an important step in the maturity of the market.