Terrie's Take 441 -- How rich is rich? Ebiz news from Japan
terrie at mailman.japaninc.com
terrie at mailman.japaninc.com
Mon Oct 15 00:17:03 JST 2007
* * * * * * * * * T E R R I E 'S T A K E * * * * * * *
A weekly roundup of news & information from Terrie Lloyd.
General Edition Sunday, October 14, 2007 Issue No. 441
- What's new
- Candidate roundup/Vacancies
- Upcoming events
- News credits
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+++ WHAT'S NEW
With the completion of the takeover of Nikko Cordial by
Citigroup earlier this month (October), the media has been
full of how the newly joined management teams might take
advantage of the synergies. Nikko Cordial is Japan's
third-largest brokerage and has a wide range of clients and
an excellent national network. Citi on the other hand
offers access to global networks and expertise, and huge
amounts of credit.
Possibly one of the most interesting opportunities for the
two companies is to renew their pursuit of the savings of
Japan's most wealthy 10% of citizens. But they'd better
move fast, because it seems that every major banking player
here has suddenly woken up to the fact that 4 continuous
years of block-buster corporate profits and growth have
meant the emergence of a swathe of newly rich -- directors,
shareholders, traders, bankers, and professionals
supplying high-end services to profitable companies.
According to statistics, in 2006 there were about 1.47m
households holding more than JPY100m in financial assets.
Now, this represents only 2% of all households, but the
interesting thing is that the percentage of those who are
newly rich, i.e., first generation wealth, makes up about
40% of the top rank of asset holders. This means that not
only is the economy helping to make people wealthy, but
also that the Japanese system of eliminating generational
wealth is alive and well. You can still make some yen, but
you're supposed to earn it yourself, not inherit it.
This all got us to wondering, just what constitutes a
wealthy person in Japan, and how do Japan's rich compare to
other economies? Especially the USA...
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According to the Wall Street Journal, the share of national
income by the richest 1% of Americans has hit a postwar
record of 21.2%. In contrast, the poorest 50% of the
population saw their collective income drop to just 12.8%
of the national pie.
This income disparity between the rich and poor is often
measured with the so-called Gini Coefficient, and in the
USA, the coefficient is around 0.44 (the closer to 1.0, the
greater the disparity). In Japan, surprisingly, the Gini
coefficient last year stood at a high of .5253 --
concerning everyone at the time that maybe Japan's
socialist-capitalist system was failing. Then someone in
government realized that with so many people retiring,
there are a much larger number of households than normal
that currently have no income at all, although they do
have savings and social welfare, and these have distorted
the numbers. For a more balanced view of wealth
distribution here, it's worth noting that historically
Japan's Gini number has been around 0.3.
US statistics for wealth are easy to find, and Wikipedia
has an excellent page about extreme affluence. Here's the
top end of the wealth pyramid is like:
* The top 400 taxpayers had gross annual household incomes
of at least US$87m each!
* The top 0.01% of households, all 11,000 of them, had
annual incomes of at least US$5.5m each
* The top 0.1% of households, around 146,00 families, had
annual incomes of at least US$1.5m each
* The top 1.5% of households had annual incomes of at least
Wikipedia says that the definition of "rich" used to be a
net worth of at least US$1m, but because of inflating
property prices, a better definition is those people in the
top 1% of income earners -- i.e., those making more than
US$250K per year. Yes, we'll look at what rich is in Japan
in a minute.
We find it interesting that in the USA, the yearly earning
potential is a definition of wealth whereas here it's
assets held. Our guess is that this is because in Japan,
with the exception of a few founder/CEOs, most wealth is
derived from capital gains and retirement benefits rather
than salaries. Further, serious wealth is usually
"firewalled" in a company controlled by the family and in
such cases, the "wealth" factor of the individuals involved
may not even show up in the statistics. Sumitomo-Mitsui
(SMFG) says that about 70% of Japan's wealthy are owners of
small- to medium-sized companies.
No doubt the bias in how money is made in Japan is due to
the government's policy of trying to redistribute family
wealth with high taxes, death duties, and such like. There
comes a point where most wealthy people no doubt ask
themselves if there is any benefit in simply accumulating
assets in one's own name -- seeing as how most of it goes
straight to government coffers. Instead, they either take
their extra income as lifestyle perks (company house,
travel, staff, schooling, etc.) or look to other ways to
provide a vehicle for their proceeds.
The most obvious of these is a company. Tax-wise, holding
family assets in a company works much better than holding
it individually and having your family pay out half in
death duties when you die. Family companies don't have to
die, ever, and can provide income for generations if
properly planned. This is why if you look at the
shareholder registers of some very major Japanese firms,
you'll find strange little unknown Yugen Kaisha companies
controlling the voting stock.
So what is "rich" in Japan? According to SMFG, their
pre-2006 definition of adequate wealth for private banking
was if you had assets of at least JPY2bn (US$17.39m). In
the USA, this would map onto the Very High Net Worth rank.
The bank says that it has more than 1,000 customers in
this category. Next step down, are the High Net Worth
families who have assets of JPY500m to JPY1.5bn. Nomura
Research reckons that there are about 52,000 households in
Japan that meet this definition of wealth.
Then for Nomura Securities, until last year the cut-off for
private banking was JPY200m (US$1.7m). We presume that
these people can be regarded as rich but not necessarily
wealthy. We say this because it is highly likely that many
of them have their wealth tied up in their homes. A recent
Nikkei report drawn from Yahoo! Real Estate data found that
more than 1,000 private properties were for sale in Tokyo
in August at a price of more than JPY100m. Our guess is
that somewhere between JPY100m and JPY200m in assets is a
natural upper end of normal savings and retirement.
Further down the totem pole is the rest of us. The "Mass
Affluent" who, according to private banking specialist HSBC
Holdings, have at least JPY10m (US$87,000) in financial
assets. HSBC reckons there are about 6.3m people in Tokyo
and Osaka alone who fit this profile, and this is the
demographic segment that most Japanese and foreign banks
are trying to target with their "special banking"
The Japanese politicians and media are continually wringing
their hands about increasing income disparity. However, we
think that the problem isn't as bad as it could be. For
example, a recent UN study found that while the average net
worth of Americans and Japanese wasn't too different, at
US$143,727 and US$124,858 respectively (the billionaires
amongst us bring the average up considerably), it happens
that wealth in Japan is spread much more evenly.
Apparently the top 10% of asset-holders in Japan own only
39.3% of the nation's wealth, while in the USA the top 10%
owns a massive 69.8%. Further, on a global level, only 6.8%
of Japan's poorest fall into the lower 90% of the global
population's wealth holders, while for the USA, a
surprising 28% of the nation's poorest do.
So while we bemoan the tax and social welfare systems here,
it seems that the system is indeed better for the average
man in the street. Those who want to keep more of their
wealth intact know that they should either incorporate or
move somewhere else.
...The information janitors/
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- Australian embassy to help stranded teachers
- Robot production jumps
- Pop culture tourists
- Proofreading system cleans up bad prose
- Businesses get online tax filing software
-> Australian embassy to help stranded teachers
In the face of a pending melt-down of Japan's largest
English school, Nova, the Australian embassy has said that
it will offer assistance to the 1,300 Australians employed
as English teachers there and who might get stranded in
Japan without a job. Nova's overall payroll consists of
7,000 people, about 5,000 of whom are foreigners and most
are teachers. ***Ed: We think it is a bit premature to
say that Nova is going out of business, although clearly
there is a lot of concern. Just last week, the company
announced that it would be issuing warrants from several
foreign funds. The resulting inflow of cash is reported to
be substantial -- about JPY320m per month over 20 months
-- for a total of JPY6.4bn. This may give Nova the respite
it needs to fix its problems.** (Source: TT commentary from
theage.com.au, Oct 12, 2007)
-> Robot production jumps
The Japan Robot Association has announced that the country
sold US$6.5bn of robots this last year, about 35% up from
2006. 95% of the shipments were for industrial robots --
mostly for the auto and IC manufacturing industries. Sales
are expected to keep rising, to around US$8.5bn, by 2010.
Nomura Research says that there are about 1m industrial
robots in use worldwide, distributed: 40% in Japan, 32% in
Europe, 15% in North America, and 12% elsewhere in Asia.
(Source: TT commentary from vnunet.com, Oct 12, 2007)
-> Pop culture tourists
A company called Pop Japan Travel is offering two
interesting new tours in April next year. The first is
called the Fujoshi Paradise Yaoi Tour, which targets fans
of gay-themed yaoi, comic books created mostly by women but
about gay men. The tourists will visit yaoi manga stores,
yaoi-themed cafes, and meet Makoto Tateno, a prominent yaoi
artist. The second tour is called the Tokyo Darkside
Goth-Loli Tour, and focuses on the Goth fashion trend.
Visitors will travel to Harajuku and eat at the Goth-themed
Christon Cafe. The tours sell for US$2,198, including
accommodation and transport to/from Los Angeles. (Source: TT
commentary from nytimes.com, Oct 14, 2007)
-> Proofreading system cleans up bad prose
In what could be a godsend for translators of Japanese
original texts into other languages, a Toshiba subsidiary
has developed a proofreading software application that can
analyze the grammar and construction of poorly written
Japanese documents and provide the writer with suggestions
on how to improve. The software was developed by Chinese
researchers wanting to improve the quality of raw texts to
be translated into Chinese. ***Ed: Years ago it became
common practice in big Japanese firms to send their
low-performing employees to the manuals publications
department. Garbage-in, Garbage-out has been the bane of
foreign translators ever since.** (Source: TT commentary
from nni.nikkei.co.jp, Oct 12, 2007)
-> Businesses get online tax filing software
NTT Data has said that it will next February launch an
online tax filing service that will allow business owners
to more easily file their tax returns electronically with
the Tax Office, rather than manually by paper. Although
businesses can already file electronically, the NTT Data
system is apparently much more user-friendly, and only
costs JPY2,000 to purchase. Although about 27m national tax
returns are filed yearly, only 3% were filed electronically
last year (2006). (Source: TT commentary from
nni.nikkei.co.jp, Oct 12, 2007)
NOTE: Broken links
Many online news sources remove their articles after just a
few days of posting them, thus breaking our links -- we
apologize for the inconvenience.
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+++ UPCOMING EVENTS/ANNOUNCEMENTS
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Date: Thursday, October 18, 2007
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Open to all-venue is The Foreign Correspondents' Club of Japan
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For more information, contact sales at japaninc.com
In this section we run comments and corrections submitted
by readers. We encourage you to spot our mistakes and
amplify our points, by email, to editors at terrie.com.
-> In TT440, we carried a news item about the Immigration
Bureau's plan to fingerprint and eye-scan every foreigner
arriving in Japan, including permanent residents, and that
furthermore, ALL would have to go to the foreigners line
-- drastically increasing the delays.
* Our reader says: In response to your recent item
regarding new fingerprinting procedures to take place in
November, I would note that, while specifics have yet to be
finalized, word is that a "priority lane" will be
established at NARITA only, using special gate equipment to
screen foreign arrivals who have pre-registered their
fingerprints and photos. No information has been made
available as yet regarding how to go about such
pre-registration, but at least one source notes that there
are currently no plans (i.e., no money budgeted) for
establishing similar facilities in Nagoya, Osaka, Kobe, or
any of the other major points of entry.
I'm sure there are hundreds, perhaps thousands, of
Japan-based foreign business people who, like myself,
travel in and out of the country at least monthly, if not
more frequently, so it really makes no sense at all that
this available technology (whatever it is—that's not clear
either) was not planned for wider implementation.
* We respond: Yes, we've heard about a mythical "Automatic
Gate" for re-entrants at Narita. No doubt we'll have to
wait for more news -- but it would be great if the
Immigration authorities could at least tell us how to
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+++ ABOUT US
Written by: Terrie Lloyd (terrie.lloyd at japaninc.com)
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