Terrie's Take 500 -- Predictions for 2009, ebiz news from Japan
terrie at mailman.japaninc.com
terrie at mailman.japaninc.com
Mon Jan 12 09:58:11 JST 2009
* * * * * * * * * T E R R I E 'S T A K E * * * * * * *
A weekly roundup of news & information from Terrie Lloyd.
(http://www.terrie.com)
General Edition Sunday, January 11, 2009 Issue No. 500
+++ INDEX
- What's new
- News
- Candidate roundup/Vacancies
- Upcoming events
- Corrections/Feedback
- News credits
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+++ WHAT'S NEW
Welcome
=======
Welcome to this first issue of Terrie's Take for 2009.
Although the economy is in bad shape, this issue represents
an auspicious start to the year for us, since it is our
500th issue! That number represents 48 issues a year for
just under 10 and a half years. In fact, we weren't quite
monthly at the beginning, and started publishing way back
in 1997, before there were blogs, or even many electronic
newsletters. No wonder we're considered stubborn and well
suited to Japan.
Anyway, we'd like to thank all our subscribers for staying
with us this long, and wish you all a Happy New Year.
Review of 2008 Predictions
==========================
Without trying to take our crystal ball gazing efforts too
seriously, we were mildly surprised to find that of the 10
predictions last year, 8 of them were largely on the mark.
Remember that at the beginning of 2008, Australia had just
voted in a new Prime Minister, Hillary Clinton was the New
York Times pick for Democrat nominee, people were just
coming to grips with the issues causing a new economic
problem called "subprime", and George Bush went on the
record to say he didn't think the U.S. was heading for a
recession! Huge M&As and leveraged investments were still
going on. The U.S. dollar was worth 112 yen, its lowest for
the previous year. The Nikkei stock market was at 14,500
after bobbing between an enthusiastic 15,000 and 18,200 for
the previous 12 months.
My, what a difference a year can make!
Our score wasn't so bad, and of the two we got wrong, what
happened to PM Fukuda was even more surprising than our
prediction -- showing what a sorry state the ruling LDP
party and the nation's political system is in at present.
We need an Obama in Japan -- the name fits, but there is no
one to fill his shoes, yet, unfortunately.
=> Predictions We Got Right
1. Japan in Recession
2. Japanese Stocks Stay Down
3. Increase in Bankruptcies
5. Japanese M&A of Foreign Firms Increases
6. Yen goes to JPY100 to the Dollar
8. Birth Rate Drops Further
9. Electric Car Hype Increases
10. More Cancer and Genetics Breakthroughs
=> Predictions We Got Wrong
4. Backing the Post Office
7. Fukuda Calls Snap Election Late in the Year
Now for our 2009 predictions.
[Continued below...]
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[...Article continues]
2009 Predictions
==========================
1. Dead Cat Bounce
Financial conditions don't come much uglier than the last
quarter of 2008, and here at Terrie's Take we see the
general global malaise staying with us until at least
mid-2010. Right now the finance ministries of governments
around the world have coordinated efforts to flood their
economies with credit/cash, to ease the credit squeeze and
get companies and their banks taking risks again. However,
while low interest rates and Western government bail-outs
of key industries are having some effect, and indeed the
stock markets are presently rising again, we don't think
this improvement will last.
Neither do the stock markets in general. They are as
jittery as can be, and we are seeing record volatility that
indicates investors don't believe the improvement is
anything but a chance to make some short-term gains.
The improvement of the markets after a sudden crash, then
only to fall again, is called a "dead cat bounce" -- a
charmingly evocative phrase. We think that once Obama has
settled into office in the U.S., reality will once again
start to bite, and investors and businesspeople will lose
confidence for a second and longer period -- which will
represent the real recession tsunami, versus the small
tidal surge we're having currently. For more on how this
stuff works, we like reading the www.dailyreckoning.com.
2. Election
Rumor has it that PM Taro Aso is thinking to call an
election in May or June this year. He must be hoping that
somehow he can persuade the local government bodies (Ward
and City offices) take the fiscal stimulus money targeted
for March and get it out into the economy without any major
mishaps before the election. This is classic pork barrel
stuff. Too bad that the ward and city offices are already
short-staffed and don't have any real incentive to get with
the program. Therefore, it is our guess is that the money
distribution will get messed up and become controversial.
Further, rather than spending, consumers will be inclined
to save for a rainy day. Thus, JPY10trn (US$111bn) gets
sucked out of circulation without having the intended
results. Based on this fiasco, the Aso government will be
under huge pressure come June and the conditions will
probably never be more favorable for the Democratic Party
of Japan (DPJ) opposition party to seize power.
Unfortunately the DPJ leader, Ichiro Ozawa, has a terrible
media image, coming across as a grumpy egoist. We think he
turns fence-sitting voters off more than Aso's failing
policies do. Therefore, unless Ozawa has a health crisis
just before the election, which is quite possible, then
we think Aso's regime will just squeak through and stay in
power. If that happens, look forward to a massive
consumption tax increase in 2011.
3. Electric Cars
We've made this prediction before, but we'll make it again
-- Japan is destined to become a net energy exporter -- by
virtue of its stored energy technologies such as batteries,
fuel cells, and nuclear power plants. In terms of autos,
oil may be cheap right now, but you can't change the
inevitable: i) the dwindling supply (peak oil), ii) the
production balance moving to countries negatively inclined
to the West (Iran, Russia, Venezuela, etc.), iii) the need
by the Arab countries to keep prop their economies up
amidst the global downturn (i.e., turn off the taps and put
up prices), and iv) the high likelihood of a Middle East
blow-up as Israel fights off the proxy armies of its real
enemies.
Top management at Japanese major auto firms, and most
likely the government agencies who regulate them, are
certain that Li-ion vehicles are the direction of
the future and are making multi-billion dollar bets. We
think they're right. You can't beat the economics of
running a vehicle fuel-wise for 1.5 yen per kilometer,
compared to 5-8 yen for gasoline.
Then ask yourself: who else in the world can collectively
spend JPY100bn on lithium and rare earth mining rights,
JPY400bn on battery R&D and production facilities, and
JPY600bn on electric car factories to take the output from
the other two investments? Only the four biggest Japanese
trading/manufacturing conglomerates, that's who. And they
still have the cash to do it. Everyone has to cope with
producing solutions in small slices, with product traded
between financially weak and uncertain firms.
4. Unemployment
It is an unspoken obligation of Japanese companies to soak
up the nation's unemployed and treat them like family. No
matter how menial the job, workers have traditionally been
given something to do and kept off the streets. The first
major departure from this sacred compact came in the late
1990's when bedrock electronics companies like Matsushita
and NEC announced that they were doing huge rounds of
redundancies. The government of the day kept
uncharacteristically quiet and other companies sensed the
tacit approval. They soon followed suit with their own
firings and took the opportunity to cut the drag of all
those extra people on their balance sheets.
A rubicon of sorts was crossed, and since then those let go
have been re-employed in the temporary workforce. This
group of newly "flexible workers" is unprotected and now
comprises more than 1/3 of the overall workforce. Companies
are bolder today about their economic survival and we
predict that through 2009 they will continue to cut these
temporary staff before turning on their full-time
resources. Officially unemployment may rise to 6%,
however, if you include those whose unemployment benefits
have ended and have become so demoralized they don't want
to register for job searches any more, then real national
figure will probably hit 10%.
5. M&A Window
Although the 2008 surge of Japanese M&As by Japanese firms
of large foreign ones has temporarily subsided, there are
nonetheless many Japanese firms sitting on large piles of
cash. The Nikkei reckoned as recently as November 2008 that
as many as 1,000 listed companies had up to JPY40trn
(US$440bn) of surplus cash available. Our guess is that
they will bide their time, trying to time the bottom of the
market. This will create a window between the point whereby
the current credit crisis has squeezed Western firms to
their limit and the point at which the weak firms have gone
and the industry leaders start to recover -- most likely in
mid-2010. Japanese firms taking advantage of this window
will secure some great bargains -- so long as they do
things in small bites and use experienced teams to effect
the buy-outs.
6. Law Changes for Foreigners
There is a dual nationality discussion going on within the
ruling LDP political party. At the moment it is a very
tentative trial balloon, and no substantial outcome is in
sight. But it is obvious to everyone with a connection to
Japan, except the old hard-heads on the right, that there
is something very wrong with the psychological and physical
health of young Japanese couples, and the country is on a
one-way ticket to financial and political irrelevance.
Only yesterday in the Nikkei newspaper there was an article
stating that there are just two segments of the population
enjoying birthrate increases: "half" children (the
off-spring of Japanese and foreign parents) and test-tube
(IVF) babies. Apparently 5% of all births in Japan are from
one of these two categories. And this doesn't take into
account the fact that there are possibly as many Japanese
citizen-candidate children being born outside Japan. Thus
the real number of half kids who will qualify as Japanese
(at least until they have to choose a single nationality at
the age of 20) could be as many as 8%-10% of all children.
This is a dynamic that the government cannot ignore,
because SOMEONE has to work and pay for the pensions of the
nation's future old people. A quick way to get things
moving would be to make dual nationality legal in Japan.
Even the U.S. now allows it.
7. U.S. Dollar Surges then Collapses
As we intimated in our first prediction, we think there
will be a temporary recovery of the U.S. economy as people
start to believe that the fiscal stimulus programs, coupled
with Obama-euphoria, will help make the current recession a
short-lived one. While this would be nice, our guess is
that the ongoing lack of business confidence and therefore
a rapidly rising number of unemployed will in fact swamp
the current Keynesian efforts, and the failure of these
fiscal stimulus programs will create a shock to the
financial system which could take some time to overcome.
Yes, we're being overly pessimistic, but at least if we're
right, you'll have had warning to spread your currency
holdings amongst a number of currencies and be ready for
Credit Crunch version 2.0. We predict that the dollar will
rise to around JPY105 then eventually fall back to the low
JPY90's or less. If it happens, it will be in 6-9 months
time.
8. More Strategic, Small-sized M&A
This isn't a hard prediction to make, but it is an
important one for foreign businesses, because it offers a
rare opportunity to ratchet up your presence in Japan.
Organic growth can be a slow business, especially when
you're trying to recruit quality people in a market that
offers very few unattached quality candidates. It goes
without saying that the best buying opportunities will
be in real estate and other credit-affected industries, as
well as people-intensive businesses such as retail,
nursing, logistics, manufacturing, etc. Recently we have
seen an increase in Systems Integration companies for sale
-- thanks to the increasing number of founders who are now
in their 60's and 70's and who are unable to cope with
the new realities of no credit.
9. Earthquake Hits Tokyo
When our preceding parent, LINC Computer, started
publishing the Computing Japan magazine back in June of
1994, the editors interviewed a number of Todai and Tsukuba
University experts who told them that Tokyo was overdue for
the "Big One". They named several cycles of trigger
mechanisms that are thought to cause major earthquakes in
Tokyo. Now, 15 years later, we are more than 20% overdue
for one particular trigger which occurs in Shizuoka, and
thus the risk of the Big One striking increases. Although
this is one prediction we hope will never come true, at
least your company and family should be practicing risk
management by ensuring that you are housed in a safely
constructed building, that everyone knows what to do when
the chaos of a major earthquake hits, and that there is a
continuity plan.
10. Issue 548 of Terrie's Take
This is one prediction we'll keep up our sleeve as
insurance, just in case we get it badly wrong about the
others. Failing a medical problem or the loss of Tokyo's
communications infrastructure, we'll be coming to you every
week for 48 weeks this year. Our mission is to help readers
make sense of Japan and come to terms with it so as to
engage with the Japanese and Japanese companies -- for the
mutual benefit of all concerned.
**********
Our sincere thanks to the 10 people who have found it in
their hearts last Christmas to help out The Japan
Helpline. Our target is to help Ken Joseph of JHELP recruit
100 monthly donors for an amount of JPY3,000 each month,
to help the JHELP team help foreigners who are lost, hurt,
hungry, unemployed, or imprisoned in Japan, or who die here
and need their remains repatriated.
24 hours assistance means JHELP is a form of insurance
policy that we should all be supporting. For help with any
problem, any time, go to www.jhelp.com and click `help`.
To donate:
https://www.lincmedia.co.jp/jhelp/index.html?lang=en
Your support keeps The Japan Helpline going.
...The information janitors/
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+++ NEWS
- Bureaucrats ban homeless meals
- Discount brokerage to set up in Japan
- Shrine visits a record in recession
- Aeon slips into red for first time in 7 years
- Uniqlo enjoys 44% profit surge
-> Bureaucrats ban homeless meals
There's nothing like kicking someone when they're down and
out. It seems that neighbors in the Sumida River area have
objected to the Tokyo Metropolitan Government about
vagrants being fed by Sanyukai, a foreign-run NPO that has
been providing the homeless with free meals in the area for
the last 3 years. The Metropolitan officials have decided
that since it's illegal for people to live next to the
river, it may as well ban Sanyukai from offering them
meals. Too bad that the homeless residents in that area
will go hungry and it's the middle of winter. ***Ed: You
really have to wonder at the hypocrisy of the bureaucrats
allowing one high profile volunteer group to "house" (i.e.,
the tent town that sprang up over the Christmas/New Year
period) and feed the homeless in Hibiya Park, while kicking
them out at a more grungy location. Our understanding is
that typically Japan's homeless don't chose to be so, and
are often victims of an uncaring society that they have
fallen through the cracks of. Maybe a starvation death or
two by the Sumida river will change attitudes...?**
(Source: TT commentary from japantimes.co.jp, Jan 10, 2009)
http://search.japantimes.co.jp/mail/nn20090110a2.html
-> Discount brokerage to set up in Japan
First it was Foreign Exchange trading, and now stock
broking -- the foreign discounters are coming. Apparently
leading U.S. discount broker Interactive Brokers Group,
will be setting up in Japan shortly. The company already
provides real-time trades to customers trading on 70+
global stock exchanges. The company has said that it will
start with B-2-B trades first, working with other brokers,
then open up a retail channel later. The company is the
largest U.S. securities broker in terms of net assets.
(Source: TT commentary from nikkei.co.jp, Jan 10, 2009)
http://www.nni.nikkei.co.jp/AC/TNKS/Nni20090109D09JFF01.htm
-> Shrine visits a record in recession
When the going gets tough, the tough get going to their
nearest Shrine for New Year's observance -- otherwise known
as "Hatsumode". During the first 3 days of this year, 99m
people (about 80% of Japan's population), visited a shrine
somewhere in the country. The attendance was the highest on
record, about 20,000 people more than last year. ***Ed: How
on earth this statistic is figured out, we'll never know.
Did we get counted for making our way to Meiji Jingu at
01:30am on January 1st, only to give up at the pile of sake
containers just before the second Tori, because of the vast
crowds?** (Source: TT commentary from msnbc.msn.com, Jan 9,
2009)
http://www.msnbc.msn.com/id/28574461/
-> Aeon slips into red for first time in 7 years
Would-be Walmart competitor and Japan's second-largest
retailer, the Aeon retailing group, warned that it has been
hard hit by a slow-down in customer spending. The company
says that its full-year net profit numbers might slip into
the red for the first time in seven years. The company is
saying that the loss could be as much as JPY2.5bn (US$27m),
versus a forecast profit of up to JPY15bn (US$16.6m). Aeon
says that most of the losses were caused by reduced
consumer spending on clothes, household goods, and
electronics. Food sales remained strong. (Source: TT
commentary from ft.com, Jan 8, 2009)
http://tinyurl.com/8gv4wd
-> Uniqlo enjoys 44% profit surge
Uniqlo may not like to be told by analysts that they're
successful because they're cheap, but a recent visit by us
to a Uniqlo store confirms it: the range of clothes is
limited but good and cheap, and stores are jammed with
recession-hit bargain hunters. As a result, the clothing
chain is enjoying a massive surge in profits. Its net
profit was up 43.6% year-on-year in the three months
through to November 2008, and the operating profit was up
a blistering 45.6%, to JPY22.17bn (US$246.3m). (Source: TT
commentary from google.com, Jan 9, 2009)
http://tinyurl.com/6whwrm
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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***------------------------****-------------------------***
+++ CANDIDATE ROUND UP/VACANCIES
=> LINC Japan Ltd., an affiliate of the LINC Media group,
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employers of bilinguals.
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Remuneration is JPY5m – JPY7m, based on your experience.
** POSITIONS VACANT
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+++ UPCOMING EVENTS/ANNOUNCEMENTS
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Speaking at MIDEM / MidemNet 2009
* David Eun, VP Content Partnerships, Google Inc
* Jay Marciano, Pres., Madison Square Garden Entertainment
* J.Y. Park, Founder and President, JYP Entertainment
* Jim Balsillie, co-CEO, RIM/Blackberry
* Amit Kapur, COO, MySpace
* Dr Tero Ojanpera, EVP, Entertainment & Communities, Nokia
MidemNet: 17 - 18 January 2009 View MidemNet Programme
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Date: Thursday, Jan 15, 2009
Time: 6:30 Doors open, Buffet Dinner & Open Bar Included
Cost: 6,000 yen (members), 7,000 yen (non-members)
Open to all - venue is The Monsoon Cafe, Azabu Juban
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-----------------------------------------------------------
______________________________________________________
Events announcements are priced at JPY50,000 per week.
For more information, contact sales at japaninc.com
***------------------------****-------------------------***
+++ CORRECTIONS/FEEDBACK
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.
*** To our TT499 piece concerning car-sharing and an
increased interest in the concept amongst early adopters in
Japan, a reader writes:
"I really enjoyed your story on car sharing in Japan (I'm
in the U.S.). While I still have my own gasoline-powered
car, I agree with you on the desirability, from a user's
perspective, to share electric cars in order to avoid the
initial purchase price shock."
"But I'm not convinced that it is practical from an
operator's point of view. The argument in favor of an
(individually owned) electric car is that the average
commute (in the US) is shorter than the still-limited
battery range, so that most commute duty could be handled
by these electric cars. In the case of an individually
owned car, said car can always be recharged overnight
(assuming owner has a garage), and possibly even while
parked at the office during the day. This seems much
harder to do with a shared car. In order for the car to
earn money for the car sharing company, it has to be in
use. But while in use, it cannot be charging. And even
while not in use, opportunities for charging are limited
as the car - at least in my experience - won't be parked
near an electrical outlet."
"So an electric, shared car presents the company with the
challenges of higher initial purchase price, and severely
limited availability of 'billable hours' due to long
charging times, and the fact that charging is more
difficult than gassing up with today's infrastructure. Have
you seen any plans by car sharing companies that would
address these difficulties?"
*** To which we respond:
This is a good comment, the answers to which are in the
article and several other earlier ones. In terms of how
many users are needed to make a shared car profitable, it
seems that 10 concurrent users is a good ratio for Japan.
Remember that members pay a monthly fee regardless of
whether they use a car or not, so one can assume that
there will be enough non-usage that some of the owners will
be subsidizing the others. This is the same concept as any
pre-paid service, where the vendor is hoping customers
won't use all the credit they have purchased.
Re the recharging, already Mitsubishi is saying that its
vehicles can be recharged in 7 hours at 200volts, and that
the final version batteries can be quick-charged to 70%
power in 20 minutes. Therefore, although the
charge-discharge cycle may not be ideal, since Li-ion
batteries don't suffer from memory effect, this type of
irregular usage shouldn't cause any major reduction of
their lifetimes.
Re availability of charging, the shared vehicles have to be
returned to specific parking lots. In many cases, the
parking lots are owned by or tied up in some way to the
vehicle-sharing companies, and thus laying in some power
infrastructure to these properties is not a major hurdle.
Couple these parking stations with the recharging
facilities which will be offered in a few months time by
Aeon and other supermarket and department store chains, and
keeping your vehicle charge topped up may not be so
difficult after all.
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+++ ABOUT US
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Written by: Terrie Lloyd (terrie.lloyd at japaninc.com)
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