Filter – March 2013Japan Adds to Defense Budget to Boost Security, Economy
In January, Japan’s Ministry of Defense announced plans to add an additional ¥180.5 billion to this year’s defense budget to buy missiles, fighter jets, and helicopters. The allocation, partly aimed at improving air surveillance capabilities, is an addition to the previously published defense budget for 2012-2013 that one government official described as an “emergency economic measure.” The government is aiming to spend 70-80 percent of the money on contracts with domestic firms.
A Ministry of Defense spokesman said the funds were needed “to prepare for the changing security environment surrounding Japan.” Among the security concerns facing Japan are island disputes with China and South Korea, and North Korean satellite launches and missile tests.
Prime Minister Pressures Bank of Japan in Stimulus Package Announcement
On January 11, the Japanese cabinet approved a new stimulus package of more than ¥20 trillion, which it hopes will boost the economy by two percent and create 600,000 new jobs. The announced stimulus focuses heavily on infrastructure development, as well as investment in reconstruction projects in earthquake- and tsunami-affected northeastern Japan.
Since Prime Minister Shinzo Abe took office in late December, the LDP-led government has made economic growth a top priority. In addition to jobs creation, the government has pledged to weaken the yen, a move that would provide a boost to exporters, and to tackle deflation, which has been an obstacle to economic growth for many years.
Critics observed that Japan has rolled out a number of stimulus packages over the years without achieving much, and that in any event, more significant reform will be required to effect long-term change.
Prime Minister Abe has said he expects the Bank of Japan to support government efforts to create jobs by implementing “a bold monetary policy”. Abe noted that the U.S. Federal Reserve has pledged to keep interest rates low until the U.S. unemployment rate falls to around 6.5 percent. “We would like the BoJ to take responsibility for the real economy,” Abe told the Nikkei newspaper. “I think that means jobs. I would like the BoJ to think about maximizing jobs.”
Cerberus To Reduce Stake in Aozora Bank
Cerberus Capital Management L.P. plans to raise $1.7 billion by selling most of its stake in Aozora Bank Ltd. in a global offering. Cerberus has been the controlling shareholder in the mid-sized Aozora Bank for nearly a decade, but says it wants to reduce its stake to about seven percent. Cerberus is in the process of reducing exposure to Japan due to increasingly fewer distressed investment opportunities for foreign funds.
To lower its stake, Cerberus plans to sell 275 million shares in Japan and another 275 million shares overseas. It said it also may sell an additional 41.25 million shares if demand is high. The investment company plans to sell its holdings for ¥231 per share. Citigroup Inc., Morgan Stanley MUFG Securities, and Mitsubishi UFJ Financial Group will act as coordinators for the sale.
Cerberus purchased a minority stake in Aozora in 2000, and became the majority shareholder in 2003 when Softbank sold its 49 percent stake in the bank.Fukushima Cleanup Slow As Foreign Firms Continue to be Sidelined
In December, officials from Japan’s Ministry of the Environment (MoE) announced that two of the companies contracted to help with the decontamination efforts in Fukushima had allowed radioactive water to run into storm drains.
Taisei Corp. and Maeda Corp. were working with the government on a joint venture to wash radioactive substances off of buildings, but both companies allowed water runoff to flow into storm drains in the village of Iitate and the town of Naraha.
An MoE task force ordered the contractors to reexamine their practices for disposing of contaminated water. Work continued in some parts of Fukushima, but was temporarily stopped in others because of a lack storage space for tainted runoff.
In mid-December, news agency Reuters reported that of the 21 contracts awarded to develop technologies that will facilitate the decommissioning of the damaged Fukushima nuclear reactors, none went to non-Japanese firms. Some foreign firms acquired experience in the cleanup efforts that followed the Three Mile Island and Chernobyl nuclear reactor accidents, and many more have participated in nuclear reactor decommissioning in the United States and Europe.
In the Reuters report, Jeffrey Merrifield, senior vice president of U.S. nuclear engineering firm Shaw Group Inc.’s power division, said, “There seems to be a real desire to rely on Japanese contractors to do this work. You can try and do it all yourself, which takes a lot more time without benefit of prior experience, making a lot of mistakes along the way.”
The report also quoted an executive with a Japanese nuclear energy firm citing reasons for awarding the contracts to domestic companies: “Foreign firms simply sell their product without providing back-up services or maintenance,” said the executive. “We can’t sign a contract with a company that we can’t get in touch with immediately and one that will rush to deal with any problems right away.”
Mitsui Buys New York Luxury Apparel Retailer Paul Stuart
On December 28, Mitsui & Co. Ltd. announced its acquisition of luxury apparel and accessory retailer Paul Stuart. Mitsui was able to reach an agreement with the founding families and purchase all shares to become the 100 percent owner of the company.
Paul Stuart got its start in New York City in 1938 on Madison Avenue, and Mitsui began importing the company’s products to Japan in 1975, becoming the brand’s exclusive licensee for the Japanese market in 1991. Last year, Japanese sales of Paul Stuart products were a reported $133 million, and Mitsui says it expects to increase Japan revenue to $231 million within two years.
There are two Paul Stuart stores in Tokyo, and about one hundred nationwide, as well as online shopping outlets.
World’s Biggest Curry Chain is … Japanese
Ichibanya Co., the owner of the CoCo Ichibanya, was recognized in January by Guinness World Records as the world’s largest curry chain. Based in Kazunomiya, Aichi Prefecture, CoCo Ichi opened its first shop in Aichi in 1978 and has grown to more than 1,300 franchises, including 100 restaurants overseas. By the mid-90s, CoCo Ichi achieved its goal of having one restaurant in every prefecture in Japan, as well as one overseas – in Hawaii.Softbank Joins Rakuten in English Language Push with TOEIC Bonus Offer
Following its recent purchase of a 70 percent stake in US mobile phone carrier Sprint Nextel, Japan’s SoftBank is offering employees a ¥1 million bonus if they can score at least 900 points on the international Test of English for International Communication (TOEIC), which has a maximum score of 990 points. Employees who score between 800-899 points will earn bonuses of ¥300,000, and those scoring lower will be offered language training support.
SoftBank reports that around 800 of its Japanese employees have already recorded TOIEC scores in excess of 800, but says it hopes at least 3,000 will achieve the mark by the end of 2015, when the bonus scheme is set to expire.
SoftBank’s move follows the widely reported announcement in 2010 by Rakuten founder and CEO Hiroshi Mikitani that English would become the official language of his online commerce company. Last year, Mikitani admitted progress had not come as easily as he would have liked, in large part because the company had not offered as much language learning support to employees as it might have. Since then, the company instituted free English language classes, and offers time off for English language study.
In April of last year, Rakuten said 79 percent of documents, meetings and internal communications were conducted in English, an increase from 65 percent a year earlier. And in July, the company went a step further, requiring employees to use English in all internal presentations, documents and memos.
Japan to Finally Sign Child Abduction Treaty … but When?
In late January, Japanese Foreign Minister Fumio Kishida announced that Japan would sign the 1980 Hague Convention on the Civil Aspects of International Child Abduction, which requires the return of children to their country of origin if they are wrongfully taken overseas by one of their parents. The announcement extended a commitment to signing the treaty that had been made by the previous Democratic Party of Japan-led government.
Japanese courts almost never award custody of children to foreign parents, and Japanese law does not make provision for the award of joint custody and visitation. Japan is the only G7 country not to have signed the Hague Convention on Child Abduction, which requires signatory governments to return children to their “habitual residence” when children are illegally removed or retained from that residence in violation of another party’s, generally the other parent’s, custodial rights.
At the moment, however, Japanese law is not in alignment with Hague Convention requirements, and new legislation will have to be enacted. US Secretary of State Hillary Clinton said, in a news conference with Kishida, that she hoped the Diet would pass the necessary legislation during its next ordinary session.
But while Chief Cabinet Secretary Yoshihide Suga has backed the prime minister’s commitment, saying Japan should sign the treaty “at an early stage”, Justice Minister Sadakazu Tanigaki has taken the opposite view, saying the Diet has more important issues to consider and that the proposed legislation will have to be reviewed.