J@pan Inc Newsletter<br><br>The 'JIN' Japan Inc Newsletter<br>A weekly opinion piece on social, economic and political trends<br>in Japan.<br>Issue No. 432 Wednesday September 19, 2007 TOKYO<br><br>****OUT THIS WEEK:
J@PAN INC MAGAZINE'S****<br> LEGAL SPECIAL (SEPT/OCT 2007)<br>Intellectual Property-Jury System-Arbitration-ALB Awards<br>PLUS Failed Businesses in Japan & Women in the Workplace<br>____________________________________________________
<br><br>An inspector calls: financial regulation in Japan<br><br>In the midst of political crisis, business in Japan proceeds as <br>usual. New financial legislation comes out of the hands of the <br>legal bureaucracy, through one door of the Diet and out of the
<br>other. But does it make any difference? This week's newsletter <br>looks at the problems faced by foreign financial institutions <br>in Japan and questions whether the much-hyped arrival of new <br>laws to prevent the occurrence of scandals such as Livedoor and
<br>Murakami, will stand any chance of making an impact. <br><br>At the end of this month the Financial Instruments and Exchange <br>Law will be enacted which is a key piece in a series of <br>legislation most commonly referred to as Japan's Sarbanes-Oxley
<br>(J-SOX) act. When asked by the Nikkei a few weeks ago about the <br>inclusion of hedge funds under this new law, finance minister <br>Watanabe responded:<br><br>'We're not trying to use excessive rules to make Japan's markets
<br>into a body of sterile water where fish cannot survive. We must <br>make them an environment in which fish from all over the world <br>can gather. When piranhas and other such species try to creep <br>in, then we need to expel them. We just want to create a
<br>transparent and fair market that welcomes money from all corners<br>of the globe. We don't intend to make funds a whipping boy.' <br>(See <a href="http://www.nni.nikkei.co.jp/AC">http://www.nni.nikkei.co.jp/AC</a>
<br>/TNKS/Search/Nni20070831D3ZJFF02.htm)<br><br>Although it is easy to be alarmed by the figuring of funds as <br>carnivorous entities, there is little substance in such <br>statements that people working in the finance industry can take
<br>offence at. What is perhaps more worrying is that although <br>Japan's leaders make such statements about turning Japan into a <br>happy pond where fish from all over the world can play together,<br>this is apparently not backed up by the pond authorities and if
<br>you happen to be foreign, avoiding the rod of the regulator is <br>that much harder. The point is easily illustrated by a look at <br>the inspection system, when the Financial Services Authority <br>(FSA) actually decides to go in and investigate.
<br><br>Peter Godwin, partner at Herbert Smith, Tokyo, told us that <br>while it is right that the regulators, government and financial <br>industry must protect the consumer, when it comes to inspections<br>'what happened under the old rules, and I'm sure that it will
<br>continue under the new, is that junior and middle ranking <br>inspectors believe it is their job to find something wrong.' <br>Lacking good communication between the companies, banks, <br>auditors and regulatory bodies, inspectors in Japan are a law
<br>unto themselves. Inspectors, who can turn up in droves at only <br>a moment's notice, often believe that if they don't find <br>something wrong, then they haven't done their job properly. As <br>are result, Godwin continues, 'minor issues get blown out of
<br>proportion and create a world of pain for the banks that is <br>simply unnecessary.'<br><br>[Continued below...]<br>
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Immerse yourself in the traditional culture and relax<br>
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And don't forget the awamori!<br>
<br>
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<a href="http://www.hirata-group.co.jp/english/">http://www.hirata-group.co.jp/english/</a><br>
Tel: 09-8082-6711 Fax: 09-8088-6945<br>
-----------------------------------------------------------<br><br>[...Article continues]<br><br>Dominic Roughton, also a partner at Herbert Smith gave us the <br>example of a group of inspectors who came across a formula for
<br>an interest rate where the denominator was a zero. The equation <br>thus working out to an infinite number was quite naturally over <br>the maximum limit allowed by the FSA, 'but the formula was <br>entirely theoretical, nobody was paying this rate, but the
<br>investigators had to check with a lawyer—appointed by the FSA—<br>and a business improvement order was issued.' Such practices are<br>widespread and it appears that foreign banks are much more <br>likely to be hit. Last year the FSA openly announced on its
<br>website that it was going to focus on foreign institutions <br>leading to a wave of protests from the European Business Council<br>(EBC) and the American Chamber of Commerce in Japan (ACCJ). This<br>year, although there has been an absence of such blatantly
<br>anti-foreign statements, investigations have been carried out <br>with their normal 'ruthless inefficiency' that both Godwin and <br>Roughton believe to be seriously holding Japan back from <br>becoming an international financial centre along the lines of
<br>Hong Kong or Singapore. <br><br>That said, the J-SOX legislation will force both Japanese and <br>foreign corporations to be more transparent and, although it <br>will take a long time to implement, and for staff to be
<br>properly trained as to its requirements, it should help prevent <br>the corrupt practices that it is was designed to deal with. An <br>executive at one of the major accountants told us that 'J-SOX <br>will help prevent misleading financial data and insider
<br>trading.' He added, that the recruitment process will be the <br>largest challenge and that auditors 'have to work with the FSA <br>and understand that we have the same objectives.' However, <br>Godwin and Roughton claim that this cooperation is not yet
<br>taking place and that auditors, as well as heads of compliance <br>at the banks are effectively subordinates to the wills and <br>whims of the FSA. Without more communication, the J-SOX could <br>provide more reasons for inspectors to investigate foreign banks
<br>and companies and could thus ultimately cause more headaches <br>than it cures. <br><br>One of the fora where dialogue and collaboration can slowly be <br>achieved is through the International Bankers Association (IBA)
<br>of Japan. Committed to making Japan a global financial center, <br>but sensitive to the concerns and process of the bureaucracy, <br>the IBA has gone some way to bridging the gap between the banks,<br>corporations and the regulator. In their 'Recommendations to
<br>Promote Tokyo as a Global Financial Center' published earlier <br>this year (accessible at <a href="http://www.ibajapan.org/">http://www.ibajapan.org/</a>), the IBA <br>makes a number of recommendations in the hope of making Tokyo
<br>a friendly home for international trade and investment. <br>Addressing the concerns of many concerning the J-SOX and <br>targeting of foreign firms, it recommends that the authorities <br>'ensure to ease the so-called 'J-SOX' requirements as applied
<br>to foreign firms which have already filed equivalent reports <br>in other major markets so that any additional burden for them <br>to meet the requirement shall in fact be minimized.' This aims <br>to address the fear within the industry that the FSA or the
<br>government may, as they have done in the past, demand that <br>compliance procedures be re-made specially for Japan even if <br>they already meet international standards.<br><br>[Continued below...]<br>
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<p>Advanced IT Training in English Comes to Tokyo<br>
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<p>InnoSoft Japan K.K<br>
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<p>-----------------------------------------------------------</p><p>[...Article continues]</p>
A number of IT firms view the J-SOX as an opportunity. Having <br>created software elsewhere that takes care of compliant auditing<br>procedures, some IT companies such as Dell and Protiviti are <br>trying to sell their compliance software in Japan as they have
<br>already had experience with US SOX. Agreeing that there are only<br>about a dozen Japanese tax lawyers well-equipped to deal with <br>the new legislation Simon Dealy, Chairman of Control Solutions—<br>also a SOX specialist IT firm—told us that IT software is one
<br>of the ways in which Japan can adjust to the 'globalization of <br>the legislation landscape.' Control Solutions have adapted IT <br>systems for the Japanese version of SOX legislation that will <br>enable companies to meet internal auditing standards and
<br>facilitate such requirements as quarterly reporting. Dealy <br>explains that, like it or not, the only way to deal with the <br>new legislation is to comply or be liable to severe penalties. <br>He argues that the best way to prepare is for the people at the
<br>top to take the initiative, make sure they have IT support in <br>place and be well versed in the details of the requirements. <br><br>If the accounting, IT and recruitment difficulties can be <br>overcome on the side of the banks and corporations, then it
<br>is down to the FSA and organizations such as the IBA to ensure <br>that the legislation is implemented fairly and efficiently, <br>which at the moment, is seemingly far from the reality. <br>Long-term, there is the potential for the new regulations to be
<br>a real positive, particularly with the emphasis on transparency <br>and accountability, but in the meantime, life in the pond looks <br>as unpredictable as ever. <br><br>By Peter Harris<br>Chief Editor<br><br>Want to comment? It is now even easier to voice your opinion
<br>than ever before! Simply visit <a href="http://www.japaninc.com/jin432">www.japaninc.com/jin432</a> and<br>post a comment below the article. Alternatively, you can email<br>it directly to the author at <a href="mailto:peter.harris@japaninc.com">
peter.harris@japaninc.com</a><br><br>-----------------------------------------------------------<br><br>- J@pan Inc Magazine IT Feature-November/December 2007 issue -<br><br>Are you in the IT Business?<br>Then you should be in the
J@pan Inc IT Directory.<br>...it's free!<br><br>J@pan Inc Magazine is distributed to:<br><br>* The Financial Times subscribers<br>* Wall Street Journal Asia Subscribers<br>* The Japan Times Subscribers (selective Tokyo city subscribers)
<br>* Asahi International Tribune Subscribers<br>(selective Tokyo city subscribers)<br>* Mailing list members of the ACCJ and all BCCJ members<br>* Oakwood Residence (in each room in Kanto area)<br>* REGUS Offices<br>* Hilton Hotel Shinjuku (each executive room)
<br>* Business Lounges of major hotels throughout Japan<br>* In flight magazine for United Airlines (First Class cabin)<br>Singapore Airlines, Lufthansa, Virgin Atlantic, British Airways.<br>* 233 Great Bookstores throughout Japan
<br>* Online at <a href="http://www.japaninc.com">www.japaninc.com</a><br><br>Email <a href="mailto:info@japaninc.com">info@japaninc.com</a> or call us on 03-3499-2099<br><br>-----------------------------------------------------------
<br><br>++CORRECTION<br>Last week's article on Jews in Japan (<a href="http://www.japaninc.com/jin431">www.japaninc.com/jin431</a>)<br>stated that the Russo-Japanese war of 1904-5 concerned the <br>struggle for influence between Japan and Russia in Southern
<br>China. More accurately the war was fought over the fight for<br>dominance over Korea, Manchuria and Northeasten China. JIN<br>thanks Sachiko Tado Iwao for bringing this to our attention.<br><br>++Events<br>-----------------------------------------------------------
<br><br>RidgeRunner Niseko<br>International Cricket Competition 15-17 September 2007<br><br>This is your invitation to three days of fun at an<br>international cricket tournament in Niseko being held to<br>the benefit of the Tyler Foundation for Childhood Cancer.
<br><br>Cricketing legend Dennis Lillee will be attending the event<br>which is being co-hosted by the Higashiyama Prince Hotel and<br>includes two days of cricket, a golf match and charity<br>dinner dance and auction.<br>
For more information, and the chance to win a<br>dinner with Dennis,<br><br>please visit <a href="http://www.ridgerunner.jp/cricket">www.ridgerunner.jp/cricket</a><br>or contact Simon Jackson<br>(<a href="mailto:simon@rad-development.com">
simon@rad-development.com</a>, 011-876-3704)<br><br>------------------- ICA Event-Sept 20 -------------------<br><br>SPECIAL JOINT EVENT with the AUSTRALIAN NEW ZEALAND CHAMBER<br><br>Speaker: Tim Williams, Founder and Director of Value Commerce
<br>Topic: Japan Success Stories - Value Commerce<br><br>Details: Complete event details at <a href="http://www.icajapan.jp/">http://www.icajapan.jp/</a><br>(RSVP Required)<br>Date: Thursday, September 20, 2007<br>Time: 6:30 Doors open
<br>(Light buffet, beer, wine, soft drinks included)<br>Cost: 3,500 yen (members), 5,500 yen (non-members)<br><br>Open to all-location is Australian Embassy B2<br><a href="http://www.australia.or.jp/english/seifu/embassy/map.html">
http://www.australia.or.jp/english/seifu/embassy/map.html</a><br><p>-----------------------------------------------------------</p>
<p>YMCA Foreign Community Support Committee (FCSC) Charity Ball<br>
on September 28th at Hilton Shinjuku. Donation of 25,000yen<br>
person. Table of 10 = 10% discount. </p>
<p>Champagne, wine, dinner, live band and dancing, raffle draw,<br>
and auction featuring authentic signed items:<br>
Guitars by Eric Clapton and Keith Richards, David Beckham's<br>
jersey, Michael Schumacher's F1 Glove, baseball bat by Ichiro,<br>
photo Johnny Depp, Brad Pitt, Valentino Rossi, and much more! </p>
<p>Bid on these rare items from Aug 23rd at<br>
<a href="http://www1.ymcajapan.org/content/01_home" title="http://www1.ymcajapan.org/content/01_home">http://www1.ymcajapan.org/content/01_home</a><br>
All proceeds to benefit YMCA's Challenged Children Project.<br>
Please contact: 03-5367-6640 <a href="mailto:fcsc@ymcajapan.org">fcsc@ymcajapan.org</a></p>
<p>-----------------------------------------------------------</p>Start a Company in Japan<br><br>Entrepreneur's Handbook Seminar 6th of October, 2007<br><br>If you have been considering setting up your own company,<br>
find out what it takes to make it successful.<br>Terrie Lloyd, founder of over 13 start-up companies in Japan,<br>will be giving an English-language seminar and Q and A on<br>starting up a company in Japan.<br>This is an ideal opportunity to find out what is involved,
<br>and to ask specific questions that are not normally answered<br>in business books.<br>All materials are in English and are Japan-focused.<br><br>For more details: <a href="http://japaninc.com/terrie_lloyd/">http://japaninc.com/terrie_lloyd/
</a><br>-----------------------------------------------------------<br><br>-----------------------------------------------------------<br><br>Japan's First Family Social Network is here! <a href="http://www.piqniq.jp">
www.piqniq.jp</a><br><br>Are you raising a family in Japan? Do you speak English?<br>Would you like to meet other English speaking families in<br>your area? Piqniq is a Social Network Service tailored<br>specifically for you!
<br>Our concept is "Families helping Families" and we invite<br>anyone that wants to meet other families, help other families,<br>or discuss family-related issues pertinent to life in Japan<br>to come and join the Piqniq today!
<br><br>For more information: <a href="http://www.piqniq.jp">www.piqniq.jp</a><br>-----------------------------------------------------------<br clear="all"><br><br>