Posts Tagged ‘japan’


Where is the global market heading?

Monday 17 November, 2014

Nouriel Roubini, a professor @ the NYU Stern School of Business presided over Keiko Tashiro, the Chairperson/CEO of Daiwa Capital Markets America Holdings, Inc. to discuss this topic @ the Japan Society in New York.

It’s been an anemic recovery, & the only change has been the decelerating growth in the emerging markets.  The question is how strong & resilient will they be?  The recovery has been so anemic because the crisis was brought on by extreme leverage.  The fiscal stimulus that was implemented to combat it has led to an accumulation of debt that will take 5-10 years to de-leverage.  Emerging markets need robust growth of 5% , not 1-2 1/2 % less their debt.

To get 1-2% stronger growth in the industrialized countries, we need:

  • fiscal consolidation, except in Japan
  • advance de-leveraging to create better balance sheets with lower debt ratios
  • lower risk probabilities by keeping the Euro together, not falling off any fiscal cliffs, avoiding conflicts, etc.
  • keep low inflation, as the velocity of money has collapsed as stocks are in search of markets.  There is still slack in the employment market, so there is no wage inflation.  Central banks can be less conventional.  The Fed won’t start tapering until 3-4 years from now.
  • Japan needs to create a virtuous cycle with structural reforms, which should be a gradual process.  There is a risk with monetary easing in asset inflation creating a bubble.  The central bank has been able to keep bubbles @ bay by keeping inflation & interest rates low for now.

Emerging markets are devaluing their currencies to spur growth.  Internally, macroeconomic policies are granting excessive credit.  State capitalism causes them to move away from free markets.  The most fragile are China, India, South Africa, & Turkey.  With elections, growth falls.  Now the risks are much lower because of less currency mismatches, debt ratios are better, & Argentina, Venezuela, & Ukraine are now the problems.  China’s hard or soft landing is fragile.  Fixed investment is too low as is consumption.  Banks have made too many bad loans.  They’re lowering risks, but it’s open to question as to whether they can implement changes quickly enough.  Growth is decelerating from 7% to 6 %.


US-China-Japan trilateral relations

Friday 4 April, 2014

I attended this event organized by the Japan Society;  The US-Japan-China triangle: building a path to trilateral cooperation which featured a panel discussion with Gerald Curtis of Columbia U., Jia Qingguo of Peking U., Alan Romberg of the Henry L. Stimson Center, & Yoshihide Soeya of the Woodrow Wilson International Center for Scholars & Keio U.  The panel was moderated by Donald Zagoria of the National Committee on American Foreign Policy.  I arrived late & missed Jia’s talk.

Soeya put today’s situation in historical context.  In 1971-2, China asserted itself while Japan avoided the issue.  During the 1980’s, Japan invested in China to modernize the country.  Deng Xiaoping then made courageous reforms.  Recently Japan’s Abe made an exception in visiting the Yaksun Islands.  In an interview in the  June-July issue of Foreign Affairs, he said it was not a big deal & that they were entitled to a right of self-defense, exerting a nationalistic tendency.  But he can’t carry out this policy with his current agenda.

Romberg called trilateral cooperation wildly unrealistic, & perhaps impossible.  There is no resolve to manage the dynamics.  China & the US have positive & negative effects which offset each other.  Their external behavior is erratic;  while they seek peace, they will also respond if challenged.  Aggression is in the eye of the beholder.  Japan is skeptical of China’s methods.  The US-China relationship is broader & deeper.  Their national interests differ.  For example, China sees the US & Japan as limiting the opportunities to bring China’s poor out of poverty.  There are no prospects for peace if these problems can’t be resolved.  Talks should lie ahead, but won’t.  Abe won’t visit the shrine again as PM.  The US seeks to lower the heat, but won’t mediate.  US/Japan alliances are alive & well.

Curtis addressed 4 issues:

  1. The islands are a dominant issue in Chinese/Japanese relations.  No 1 wants to go to war, but accidents do happen.  Japan must recognize the dispute & be willing to talk.  The Chinese must withdraw during such talks.  There seems to be no resolution because neither side expresses a willingness to compromise.
  2. China is conducting a nonsensical propaganda campaign against Abe, but that may be backfiring.  Both sides need to back off.
  3. Yaksuni is a sensitive issue.  Abe’s visit was not in the national interest.  Visiting the shrine resulted in sending a political message.  The hope is Abe will get this over with & foster better relations.
  4. After America’s pivot to Asia, we are stronger, but relatively smaller.  Obama is weak & doesn’t support Japan-the republicans do.  The world & the US have changed & we can’t go back to the way the world existed before.

Panel Q&A

If Japan acknowledges the Sekuka Isles, they can at least start negotiations.  Japan wants China to reduce it’s patrols in the area.  The solution could be the transfer of property rights by both of them.  The fishery agreement between the 2 is a recognized issue & related.  China will continue to assert itself until stopped.

Open Q&A

Japan is different from Germany after World War II in that the Japanese never apologized for the atrocities they inflicted on others, while the Germans did.

There is a poisoned atmosphere between China & Japan, which isn’t surprising.  They need to solve these problems to build trust.

Transferring property rights to the UN is not an option because that would be viewed as surrender, which is unacceptable.


cool japan strategy

Monday 24 March, 2014

I attended this event @ the Japan Society, “The ‘Cool Japan’ strategy:  sharing the unique culture of Japan with the world” featuring Tomoni Inada, the minister in charge of the strategy.  “Cool Japan” is a phrase used to describe Japanese commodities, contents, & cultural products that are considered “cool” by non-Japanese people.  It features films & TV programs, characters like Hello Kitty, video games, & fashion items.  The Japanese contents market is flat or shrinking.  A low % (3%) of Japanese contents revenue comes from overseas.  Japan seeks to increase the # of visitors to Japan from 10M in 2013 to 30M in 2030.

Until now, cooperation has been insufficient.  It is vital to work together to convey the appeal of Japan’s outstanding culture & products to the world & turn these into an engine of economic growth.  Inada was appointed a cabinet level ministerial position to implement this strategy & head up the Cool Japan Promotion Council.  The council has 7 private sector members, such as a lyricist, critic, & designer.  A subcommittee was formed to more effectively convey Japan’s culture from young people’s perspective.

An action plan has been created to move this forward with these action items:

  • promote cooperation among food, fashion, manufacturing, & contents sectors
  • utilize the Cool Japan fund of $485M public sector funds & $97M private funds
  • promotion by prime minister
  • encourage broad participation of Japanese people

In June, 2013 the strategy was rebranded @ the highest levels of government as a national strategy called the “Japan Revitalization strategy:  Japan is back.”  It includes food, sake, fashion, manufacturing, contents, & traditional culture.  The 1st event where this was implemented was @ the Tokyo International conference on African development (TICAD), which was attended by African heads of state.  It was also introduced @ the Tokyo Crazy Kawaii in Paris in September, 2013.  There is also a regional approach to promote boxed-lunch (Bento) culture & traditional textile art (nishijin-ori).

Design is being highlighted in porcelain, lacquer, digital signage, fashion, castles, & sky trees.

my $02:  Japan needs to start promoting this strategy online.  When I searched for it, very little relevant information showed up.


financial markets in Japan

Friday 11 March, 2011

It’s not without huge irony that’s not lost on me that it’s today that I post this on the day of 1 of Japan’s worst natural disasters.  I submit this today simply to inform people about a country which I think gets far too little press as 1 of the largest economies in the world.  Anyway, here’s my report on an event I attended a couple of weeks ago WHERE TO INVEST IN JAPAN IN 2011 which was sponsored by the Japan America Society featuring Dave Baeckelandt of  Segall Bryant & Hamil, Drew Edwards of Advisory Research Inc., & Nick Ronalds of FIA Asia. Here’s what they presented:  Where_to_Invest_in_Japan_2011 & Dave Baeckelandt expanded upon his presentation a bit here Baeckelandt_Invest Japan Talk 2011 Feb 24 . Ken G Kabira moderated the panel, which reconvened most of the principals I wrote about a couple of years ago here .

You can check out the presentations for most of what was said.  I’ll focus on Q&A here that’s not included in the presentations.

  • what are value stocks that become growth stocks changes quarterly
  • if you believe in leveraging emerging market’s growth, Japan gains access to them at better valuations, i.e. Japan is the largest trading partner with China, Malaysia, Indonesia, etc.  Japan’s margins are only 2.9% on domestic businesses, but 5.6% in Asia vs. 4.8% in the US.  Japan also leads the US, Germany, & the world in investment in R&D/GDP with a positive patent income balance since 2003.  It’s not losing it’s competitive advantage vs. these competitors because only 28% compete directly against products from these countries.
  • if the number of pages of information is any indication, there is more disclosure in Japan than in the US.  Starbucks IPO generated 50 pages of legalese in the US & 80 pages of a more detailed prospectus in Japan, including the names & addresses of shareholders.  This was helpful in evaluating a gambling machine opportunity which didn’t look as good after perusing some shady investors involved.  Comparing risk factors is still difficult despite tons of information available from industry associations.
  • private equity has been organized in Japan since the 1700’s when family organizations lent to help cash flow.  Collective investors serve as investor groups that invest in everything.  Conglomerates provide seed capital for some companies.  Keep an eye on Nomura & Carl Kay for more info.
  • Shinsei Bank provided the biggest private equity story of a distressed company that was acquired by foreign investors which created a backlash when it was flipped for a profit.  The next 10 years will be different from the last 10, exampled by Nippon Steel’s merger with Sumitomo, which will squeeze redundancies in a Japanese way.  Now that we’re in the 3rd generation of succession after World War II, we could see a wave of mergers.
  • Toyota is in it’s own interplanetary galaxy & has a corporate culture different from that of Honda.  Accidents happen even @ Toyota & they did get some bad PR advice, but their ability to learn is a positive.  Sony had a similar problem in growing so big so quickly, but was different when they failed to combine their content with technology when combating Apple & Samsung, which now outsells all Japanese electronics companies combined.
  • Acquiring innovation (& R&D) is important in M&A, but you have to question it’s ROI.
  • The CFO from Molex chimed in that while Japan’s value is now in hard assets & not as much in it’s brands, the market values on Chinese companies are based more than anything on their future prospects.
  • It’s possible to bump up valuations by listing on other exchanges, but governments are taking a look @ this.

owit & jetro on business in Japan

Tuesday 25 January, 2011

The Chicago chapter of the Organization of Women in Trade (OWIT) organized this event @ JETRO’s offices DOING BUSINESS IN JAPAN.  The Chief Executive Director of JETRO in Chicago, Tatsuhiro Shindo, who relocated from New York, welcomed us.

Next Kevin Kalb of the local JETRO office gave a tutorial on doing business in Japan:  jetro presentation – owit 1-19-11 kk Japan is about the size of California, but with little arable land.  Its population is declining so much that by 2030, 1/3 of the population will be 65 or older, which will put a burden on the health care system & workforce.  There is little immigration into Japan, but it is surmised that will have to change.  1/4 of all Japanese joint ventures & foreign direct investment in the US is in the midwest.  The Japanese are fascinated with robots & are even developing them to perform services these days.  However their services sectors are less developed, as is technology transfer, than in the U.S.  Japan is another land of engineers & their customer focus is very strong.  Japan was hit hard by the financial crisis, upping unemployment to 5% from it’s normal 3%.  Again re: the workforce, men boast an 80% employment rate, but women only a 60% employment rate because 2/3 of women leave the workforce after having their 1st child, which is double the rate in the US (1/3).    It’s important to establish trust & loyalty in long-term business relationships, which can take 7-8 years to get going.  It took 1 company 20 years to open a Japanese office.

Mark Mohr, EVP of DMG/Mori Sieki USA, the American subsidiary of a German/Japanese machine tool manufacturer, discussed cultural aspects of doing business in Japan.  Here’s his presentation:  Mohr – Culture of Doing Bus w Japan Mori Seiki came to the US in the 1980’s because at the time, US suppliers couldn’t deliver-some customers were expected to wait a year for delivery & customers didn’t accept that.  Now those US icons are gone.  Some Japanese companies have brought daily morning exercise to their subsidiaries in the US.  An advantage of the Japanese way of doing things is that people take responsibility for their actions & all workers are respcted. The Japanese “Never say die” attitude helps them “walk through walls.”  Don’t worry if you hear a lot of pregnant pauses when speaking with the Japanese-they’re just considering their response.

Tiffany Jespers, General Counsel of DMG/Mori Sieki USA, compared legal aspects of exporting from the U.S. & Japan.  Here’s her presentation:  Jaspers – Export Comparisons Additionally, METI has representatives in JETRO offices.  Internal controls are simply operating procedures, such as financial requirements, screening customers, acquiring customer information, & installing GPS to track locations of installed units as specified by METI for general licenses to export.  Sometimes rather then give a rejection, METI will just let an export license application hang in limbo & never be approved.


differences between the Japanese & the Germans:

  • in a meeting, the Japanese will listen, then meet & decide later while the Germans will expect a decision
  • both are perfectionists, but achieve perfectionism differently:  the Germans will tell you what’s perfect, while the Japanese will ask
  • the Germans are aggressive & expect their way to happen;  the Japanese will listen how to get to the same end & get buy-in.
  • Both always see what can be improved, but differ in format.  The Japanese require an approval process for all $100+ purchases from the company president.

japanese high speed rail

Monday 28 June, 2010

I attended this event sponsored by the Japan International Transport Institute High Speed Rail Seminar in Chicago for 400 attendees (& they turned away 100+) @ the Union League Club.  They will make the presentations made available on the website soon, so I won’t rehash what’s contained in them.  Here’s what they had to say otherwise:

Ambassador Ichiro Fujisaki explained that Japanese excels in the 6 e’s of high speed rail:  experienced, exact, economically efficient, environmentally friendly, enjoyment creator, & earthquake prohibitive.  Sathoshi Seino of the Council for Global Promotion of Railway informed us that Japan completed its admittedly shorter transcontinental 3 years after the U.S. completed theirs.  Jiro Hanyu of Institution for Transport Policy Studies let us know that the US has 1 of the most extensive rail systems in the world, twice as big as Russia’s.  China will have only 63K miles when they’re finished.  Japan has only 18K miles & is the only country with privately owned rail systems.  The US is ranked only #17 in high speed rail.

Representative Dan Lipinski led off before he flew back to DC to vote & informed us of all the money he’s won to support high speed rail for the Midwest & Chicago.  He’s earned 100’s of $M’s for his CREATE program to upgrade crossings, etc.  so that existing freight lines can be used for high speed rail.   Some of this money was matched by the railroads, & some was allocated to high speed rail.  Sec. Gary Hannig of the IL DOT let us know of the $1.23B grant that the state of IL won for Union Pacific to build the 110 mph high speed rail line from Chicago to Springfield & on to St. Louis.  This was also novel in getting 4 states to act as 1 region to apply for 4 grants, instigated by IL Gov Pat Quinn’s Midwest Rail Steering Group.  Bobby Ware, Commissioner of CDOT, let on that Chicago’s Union Station hopes to be the centerpiece of the proposed midwestern hub of this burgeoning high speed rail network.    State Rep. (& Michigan law school grad) Elaine Nekritz of IL 57th district related that when the state doubled the rail subsidy, ridership skyrocketed.  She also intimated the challenges:  federal & state funding, political will, candidates who don’t support high speed rail, & the need for more cohesiveness among its proponents.  Richard Harnish, Exec Dir of the Midwest High Speed Rail Assn. set 2 goals for high speed rail in the midwest:   get planning & design for the network underway this year, & get if financed by the end of next year.

my $.02:  The purpose of this seminar was to highlight the capabilities of Japanese high speed rail manufacturers & I’m sure they’re all very well-qualified.  Let me be the 1st to say I am a staunch advocate for public transportation generally & rail specifically, high speed or otherwise.  The implication of this conference is if you build it, they will come, but it’s far from that simple.  Americans are culturally ingrained to avoid taking trains.  America’s automotive manufacturers have brainwashed Americans on the virtues of the freedom inherited by car ownership.  The supporters of high speed rail will need to create a massive educational public relations campaign to convince the American public of the virtues of rail transportation.  High speed rail is simply a bigger & better Amtrak, so unfortunately any new rail system will suffer with Amtrak’s current lowly reputation.  Finally, typically public transportation is supported by government, either at the local or federal level elsewhere in the world.  For this to be affordable in the U.S., some subsidies will be necessary, but congress is reticent to hand these out & will demand that this program pay its own way.  I doubt whether this is possible.  The best thing to happen for this project to succeed is for the price of gasoline to rise to $4+/gallon. Then it might stand a fighting chance.


japanese health care

Friday 28 May, 2010

The Japan America Society of Chicago sponsored this event SOME ADVICE ON HEALTH REFORM FROM THE WORLD’S HEALTHIEST PEOPLE – THE JAPANESE featuring Prof. Greg Kasza of Indiana University.  Greg talked about 3 facets of health care in Japan:

features of the health care system

  • it’s a universal & mandatory public health insurance system out of which you may not opt-out
  • it covers a full range of services;  hospital, surgery, dental, maternity, for an unlimited duration of treatment
  • health care providers can be chosen without restriction, but there you may have to wait for the most popular ones
  • a government commission sets all prices which are revised every 2 years
  • all patients get the same treatment @ the same cost
  • doctors (60% private/40% public) are paid only for services provided
  • health care is financed by social insurance which is paid 50%/50% by employers/employees (up to 8% of income with a cap while the poor pay 0)
  • patients co-pay 30% (of lower level prices) capped at $350/month for low income earners & $1100/month for high earners
  • insurance premiums cover 50% of health care costs, employee copayments cover 15%, & the government covers the remaining 35% of health care costs
  • the system is segmented into 8 sub-segments which cross subsidize 1 another, for example, large enterprises do their own paperwork & subsidize SME’s for whom the government does the paperwork

politics & history of Japan’s health care system

  • the political left has never pushed this health care system-it is not a point of political contention
  • by 1944 80% of the population had health insurance;  by the late 1950’s 100% had coverage

why is Japan’s health care system more economical?

  • Japanese administrative costs are 1/2 of what Americans pay per capita
  • American insurance companies each have their own policies & fee schedules which must be negotiated which creates complex paperwork, while Japan has 1 with no negotiation with simple paperwork
  • Japan’s fixed prices (or lack of price competition) forces competition based strictly on quality & early detection/prevention, which increases the number of doctor visits, but results in healthier people
  • Japan’s administrators adjust the fee schedules to make certain services more profitable, such as MRI’s
  • Japanese earn 4X the average local income while American doctors earn 5.4X their average local income, but American also have to pay malpractice insurance, so that difference is less than it appears
  • the Japanese government is a non-profit health insurance provider
  • 48 children are born to every 1000 US mothers 15-19 years old: the same age Japanese women bear 4 children/1000


  • public expenditure on health as % of total spending is higher in a few countries, such as Sweden, but not many
  • encouragement of innovation is difficult to resolve-in some cases the Japanese simply buy new technologies from other countries, i.e. MRI’s.  The US does more cutting edge research, but much of that is on Viagra-like more profitable products & not curing cancer, so more & better research does not necessarily result in healthier people
  • Japanese insurance doesn’t cover some transplants to protect the transplantors-these are OK for the rich in the US, but the poor do not have the same access
  • emerging economies seem to be gravitating more towards a European-like system, for example, Malaysia & Singapore use provident funds
  • differences in culture explain why America can’t replicate Japan’s system.  American insurance companies determine the market in negotiation with doctors.  It’s difficult to compare the 2 systems because they are so different.  US doctors can’t subsidize other segments like the Japanese can.

my take-a government directed health insurance system is essentially a monopoly, which Americans loathe.  Lacking the competitive mechanism to supposedly rein in costs prevents this in the US.  The fact is many state markets are effective monopolies, so we have them, despite railing against them.  At a very basic level, there are huge differences between government bureaucrats from country to country who work in these areas.  They are not respected or paid well comparatively in the US, so the US government doesn’t get the best people.  In many other countries, Japan included, government workers are more respected & better paid relatively, so they get better people to oversee these types of systems, which results in better systems.