Terrie's Take 538 -- Why the FSA is Worried About CSK, ebiz news from Japan

[terrie at mailman.japaninc.com]

* * * * * * * * * 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, October 18, 2009 Issue No. 538

+++ INDEX

- What's new
- News
- Candidate roundup/Vacancies
- Upcoming events
- Corrections/Feedback
- News credits

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+++ WHAT'S NEW

The Nikkei had a news item this weekend about the Financial
Services Agency's (FSA: Japan's financial industry
watchdog) intention to increase its oversight of stock
brokerages by including their parent companies in
supervisory activity. This will be a wide-reaching action,
because many of Japan's larger conglomerates as well as a
number of up-and-coming entrepreneur-led groups, are
actively developing financial services companies -- ranging
from small just-licenced online brokerages through to
full-blown operations. The FSA already subjects companies
holding more than 20% of banks and insurance companies to
oversight and compliance checks, but until now, not
brokerages.

The reason for the clampdown is fairly clear -- the
travails of Tokyo-based systems integration company, CSK,
and what its problems might do to wholly owned
subsidiaries Cosmo Securities and Quo Card. CSK has some
massive financial problems, caused by imprudent investments
in real estate several years ago, and the company went
limit-down some weeks ago after its appeals for investment
and/or a bail-out loan went unheeded by potential
investors. The FSA has noted with concern that CSK has only
put aside reserves for half of the JPY60bn of cash needs and
liabilities created by the 30m Quo card holders, should
there be a chain-reaction bankruptcy.

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[...Article continues]

The CSK meltdown has been spectacular. In October 2007, the
CSK group was on top of the world, thanks to an aggressive
strategy of divestment of close but not necessarily
profitable subsidiaries (such as Sega, Ascii, and Bell
Systems 24) built up through acquisitions by the former
founder. The company reinvested the proceeds into financial
businesses such as Cosmo Securities and into actual
securities and land. The architect of this strategy shift
was Masahiro Aozono, who succeeded founder and owner Isao
Okawa after Okawa died of heart failure in 2001. Aozono
came from a finance background with Nomura, and wasn't
overly interested in the original IT business. However, it
created enough cash and credibility that he kept it and
instead focused on shedding just about everything else.

In October 2007, the company stock sold for JPY5,000 per
share, and it had a market cap of somewhere around
JPY300bn. Now, just two years later, Aozono left the
company in February 2009 in disgrace, followed by CEO
Fukuyama last month, and the company's share price on
Friday was just JPY402 -- representing a market cap for
the 10,000+ person company of a mere JPY32bn (US$355m)
-- a snip for someone, but only if CSK can get rid of
those huge liabilities.

Rumors are that the company will be bought out by a
Sumitomo-related company, on the basis that one of
Sumisho's financial units, investment firm ACA, is part of
the bank syndicate that is providing CSK with a JPY30bn
rescue package. But the company is a lot less attractive
than it was even a year ago, as the desperate search for
cash to keep it afloat has meant that scores of previously
loyal employees were subject to heavy salary and
overtime cuts and thus have been forced by economic
circumstances to leave. Since the engineer base has
been THE main asset of CSK, this is not a good thing.

This is a sad outcome for a company that embodied the
high-energy ambitions of Okawa and a generation of
like-minded entrepreneurs that rose in Japan in the 70's
and 80's (as contrasted to the current crop of
entrepreneurs who rose in the 90's and 00's). Other similar
entrepreneurs of that era would be Recruit's Ezoe, Ascii's
Nishi, and Culture Convenience Club's Masuda. Obviously not
all of them made it through in one piece.

CSK's new CEO is 52-year old Takeshi Nakanishi, a very
conservative manager who came up through the IT business
and is thus an internal appointment. His election as
president is no doubt reflective of the desire by the
surviving managers of the main business of the CSK Group,
the IT business, to get back to basics and drop all
pretense of being anything more than a hard-grind
outsourcer of infrastructure and software engineers.

In one respect, having Nakanishi in the driver's seat is a
good thing because it will allow the company to maintain
its focus and resources on rebuilding the brand and the
workforce. But his presence probably also means that the
company will actively avoid any major IT innovation and
associated risk -- both hallmarks of a very successful
founder and basic ingredients in today's IT world. In that
respect, we predict that CSK will continue on as a shadow
of its former self, and will probably eventually be
subsumed into whomever buys it, for not much more than
the additional revenue and earnings, and a depleted
engineering base.

Lastly, and on a more positive note, have you got your
tickets for Metropolis' Halloween Glitterball yet? If not, you
should do it now. This year there is a limit of 1,500 guests
and yet there will be loads of great entertainment, food,
music, and drinks to make this a night to
remember. Special prizes for for best fancy dress.

http://archive.metropolis.co.jp/glitterball_h09/

**************

For over 20 years we have watched the good works of The
Japan Helpline, run by Ken Joseph. Always there 24 hours a
day, 365 days a year, they have been there for the
International Community with help ranging from emergency
assistance to help with day to day problems.

Ken regularly copies us on the many appeals they get from
foreigners all over the country, having personal crises and
begging for help. Ken selflessly responds to each person
and works through their problems -- seeing the police,
talking to immigration, landlords, and embassies, arranging
repatriation of coffins and belongings, and much more
besides.

It's a thankless task, and recently with the financial
crisis the donations to The Japan Helpline have fallen
dramatically. In times like these when things are tough, we
need The Japan Helpline even more. But they rely 100% on
private donations to keep going.

So we appeal to our readers to join us in being one of
their "One Hundred Club" members. If just 100 people sign
up to give 3,000 yen per month to Ken's team, they will be
able to cover their costs.

To donate:
https://www.lincmedia.co.jp/jhelp?lang=en
Your support keeps The Japan Helpline going.

...The information janitors/

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+++ NEWS

- Pill usage in Japan still low
- Major company fresh hires to fall 28%
- U.S. dollar to fall to 50 yen in 2001
- High net worth individuals' assets shrink 31%



-> Pill usage in Japan still low

A Health Ministry report says that just 3% of women aged 16
to 49 years old are taking the pill for birth control, far
below 53% in Germany, 26% in the U.K., and 18% in the USA.
Nonetheless, the number is almost double the 1.8% taking
the pill in 2006. Apparently 54% of Japanese women surveyed
by the Ministry were concerned about side effects, such as
high blood pressure, breast cancer, and other illnesses.
Others were put off by the JPY3,000 monthly cost, since
oral contraceptives are not covered by health insurance.
***Ed: Unfortunately, one side effect Japanese women still
don't seem to be taking into consideration is the 250,000
abortions that took place in 2007.** (Source: TT commentary
from istockanalyst.com, Oct10, 2009)

http://www.istockanalyst.com/article/viewiStockNews/articleid/3543300

-> Major company fresh hires to fall 28%

There are going to be a lot of disappointed university
graduates next spring, according to a survey done by the
Nikkei. The 1,001-company survey found that major companies
plan to hire about 74,000 new university graduates, 28.6%
less than last year, and the lowest number since 2005. The
biggest reductions of hiring offers were by financial
institutions, which are making cuts of 40% over last year's
numbers. (Source: TT commentary from nikkei.co.jp, Oct 18,
2009)

http://www.nni.nikkei.co.jp/e/ac/tnks/Nni20091017D17JFF02.htm

-> U.S. dollar to fall to 50 yen in 2001

Highly respected economist Daisuke Uno of Sumitomo Mitsui
has said that he expects the U.S. economy to enter into a
double dip recession in 2001, and that record government
borrowings plus low interest rates will cause the value of
the U.S. dollar to collapse, possibly to as low as 50 yen.
***Ed: Uno, who makes use of historical charting data, has
a track record of making accurate forecasts, having
predicted the dollar's current lows, as well as the extent
of the recession after the Lehman collapse.** (Source: TT
commentary from bloomberg.com, Oct 15, 2009)

http://www.bloomberg.com/apps/news?pid=20601109&sid=a_A5nqmw9Dq8

-> High net worth individuals' assets shrink 31%

A study done by the Nomura Research Institute (NRI) of high
net worth individuals with financial assets of between
JPY100m and JPY500m, found that on average those peoples'
asset value fell 31% over the period of September 2008
through February 2009. Apparently much of the losses were
recorded in stock holdings and other non-cash assets.
***Ed: Could be one reason why luxury brand sales are under
pressure here in Japan.** (Source: TT commentary from
nikkei.co.jp, Oct 16, 2009)

http://www.nni.nikkei.co.jp/e/ac/tnks/Nni20091015D15JFN02.htm



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

=> BiOS, a Division of the LINC Media group, is actively
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or expanding in Japan, as well as other employers of
bilinguals.

** HIGHLIGHTED POSITION(S)

BiOS is currently looking for skilled helpdesk staff to
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As this is a predominantly customer-facing role you will
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Remuneration is JPY3m – JPY5m, depending on your experience
and technical level.

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- Sales Manager, intnl sw co., JPY7m - JPY8m + incentives
- Service Delivery Mgr, user support, JPY13m – JPY15m
- IT Support Analyst, Tokyo Law Firm, JPY3.5m – JPY5m
- FileNet Architect, European Insurance, JPY6m – JPY7.5m
- Helpdesk Engr, American investment bank, JPY3m – JPY3.5m

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***------------------------****-------------------------***

+++ 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.

*** No feedback this week.

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+++ ABOUT US

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Written by: Terrie Lloyd (terrie.lloyd at japaninc.com)

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