J@pan Inc Newsletter<br>The 'JIN' J@pan Inc Newsletter<br>A weekly opinion piece on social, economic and political trends<br>in Japan.<br>Issue No. 473 Wednesday July 9, 2008, Tokyo<br><br>-----------------------------------------------------------<br>
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More about PBXL: <a href="http://www.pbxl.jp/aboutus2" target="_blank">http://www.pbxl.jp/aboutus2</a><br>-----------------------------------------------------------<br><br>A Crisis of Confidence<br><br>Last week, Isamu Kuroiwa was arrested for fraud after he <br>
allegedly conned investors out of roughly 10 billion yen that <br>they had invested into shrimp farms. According to the Yomiuri <br>newspaper, the firm received money from over 35,000 investors <br>to the tune of 85 billion yen – 75 billion was apparently used <br>
to pay dividends while Kuroiwa and his cronies pocketed the <br>rest. <br><br>This is just the kind of fraud it was hoped that new <br>legislation, such as J-SOX that came into force this April, <br>would prevent. However, smaller, unlisted companies still appear<br>
to be able to take advantage of consumers' trust. While this <br>particular group were caught, and are likely to be held to <br>account, there are most likely multiple similar outfits in <br>operation and the chances of the duped investors recovering <br>
their funds are minimal. Moreover, it is not just in relation <br>to their investments that the Japanese public risk being taken <br>for a ride. Even in terms of the foods that they buy, there are <br>now good grounds for extra vigilance with a string of outlets <br>
having been found to be selling out-of-date or incorrectly <br>labeled food products.<br><br>Indeed, the number of food scandals in the last year is <br>staggering, even with hyperbolic media frenzy factored in. To <br>name just a few, last autumn Mister Donut was attacked for using<br>
expired syrups in its drinks, JT Foods and Nissin were embroiled<br>in the poisonous gyoza scandal earlier this year and, most <br>recently, smart restaurant chain Senba Kitcho was forced to <br>close after a string of dodgy standards were reported - <br>
including its re-using of discarded food from diner's plates. <br>Additionally, although the focus has been on the unpaid <br>teachers, the students at the insolvent Nova language school <br>also got a bum deal last year, many of them losing out on their <br>
already paid-for lessons without recompense.<br><br>All this, combined with significant price rises across the <br>board, is having a serious impact on consumer confidence. Last <br>month, the Cabinet Offiice's consumer confidence index saw a <br>
drop from 35.2 points in April to 33.9 in May. According to Ken <br>Worsley of JapanEconomyNews.com, 'May's score was the lowest <br>seen since December 2001, when the index dipped to 33 points.' <br>Worsely also notes that, 'On the same day as these results were <br>
released, the Bank of Japan announced that it would not raise <br>interest rates from their current 0.5% level. In his statement, <br>Bank of Japan Governor Masaaki Shirakawa said that compared to <br>April, "More now recognize the downside risk that domestic <br>
demand poses for the economy as well as the risk of rising <br>prices."' Furthermore, there has also been a dramatic decrease <br>in monthly spending on services and durable goods.<br><br>[Continued below...]<br>
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<br>[...Article continues]<br><br>In order to combat this, the Fukuda cabinet has planned the <br>establishment of a central consumer affairs agency in Japan, to <br>start work in 2009. The new Consumer Agency will also deal with <br>
financial product transactions and play a role in regulating <br>commodities; in all, it will have jurisdiction over 30 consumer <br>protection laws. The result of a report by the Council for <br>Promoting Consumer Policy, the new entity is primarily a <br>
response to the criticism the government and various ministries <br>received after recent food scandals – the common theme being the<br>slowness of reaction. As well as the creation of this new body, <br>the government will also debate a 'food traceability law' to <br>
guard against mislabeling – the new law would force food <br>companies to keep better records on the origins of their <br>produce. <br><br>Will these measures work? For all the government's effort to <br>convince consumers that it has their interests, and not those <br>
of big businesses at heart, it will take a long time to restore <br>confidence and consumers will become increasingly fickle in <br>terms of where they place their trust. Compounding the problem <br>is also an apparent downturn in confidence at the business <br>
level. Bloomberg reports that the Bank of Japan's Tankan survey <br>last week 'showed confidence among the largest manufacturers <br>fell to a four-year low' – the report also singled out the <br>stagnation in wages which could be another explanatory factor <br>
for the low consumer confidence ratings. Either way, there <br>appears to be something of a vicious cycle playing out in terms <br>of confidence at both the consumer and corporate level.<br><br>It is not all doom and gloom though. The Social Insurance Agency <br>
has announced that Japanese pensioners will receive an average <br>increase of 54,000 yen this year, and, history teaches us that <br>a degree of caution during difficult times is more beneficial <br>in the long term than defiant overconfidence. Nonetheless, any <br>
government effort to persuade consumers that their food is safe <br>and their investments are not being squandered can be no bad <br>thing.<br><br>Peter Harris<br>Editor-in-Chief<br><br>++FEEDBACK<br><br>Want to comment? It is now even easier to voice your opinion<br>
than ever before! Simply post a comment below the article<br>online at <a href="http://www.japaninc.com/jin473" target="_blank">www.japaninc.com/jin473</a>.<br><br>-----------------------------------------------------------<br>
<br>J@pan Inc - Managing Editor/Entrepreneur<br>
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<br>-----------------------------------------------------------<br><br>++EVENTS<br><br>-------------------- ICA Event - July 16 -----------------<br><br>Speaker: Charles Nikiel<br>Vice President of Marketing, Salesforce.com<br>
<br>Topic: Innovation not Infrastructure:<br>A New Model for Business Success<br><br>Details: Complete event details at <a href="http://www.icajapan.jp/" target="_blank">http://www.icajapan.jp/</a><br>(RSVP Required)<br>
Date: Wednesday, July 16, 2008<br>
Time: 6:30 Doors open includes open bar and light buffet<br>Cost: 4,000 yen (members), 6,000 yen (non-members)<br><br>Open to all-venue is The Foreign Correspondents' Club of Japan<br><a href="http://www.fccj.or.jp/aboutus/map" target="_blank">http://www.fccj.or.jp/aboutus/map</a><br>
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<br>CORPORATE SPONSORS WELCOME<br><br>-----------------------------------------------------------<br><br>++END<br clear="all"> <br>