Terrie's Take 683 -- Record Low Bankruptcies -- Calm Before the Storm? Ebiz news from Japan.

Mon Oct 22 08:49:21 JST 2012

* * * * * * * * * 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 21, 2012, Issue No. 683

+++ INDEX

- What's New -- Record Low Bankruptcies -- Calm Before the
Storm?
- News -- Tanaka resigns over Yakuza ties
- Upcoming Events
- Corrections/Feedback
- Travel Picks -- Sagami-ko Illumination, Tokyo Shitamachi
- News Credits

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+++ WHAT'S NEW

A strange thing is happening in the Japanese business
world. Even as small- and medium-sized enterprises (SMEs)
are under increasing pressure from a shrinking economy to
downsize and to globalize, or otherwise go under, in actual
fact the number of bankruptcies is now at a 19-year low.
Indeed, over the last 3 months, the trend of fewer
bankruptcies is gathering momentum and under normal
circumstances one might might be forgiven for thinking that
the economy is recovering.

For example, for the month of September, 931 companies with
debts of JPY10m or more went under, according to Tokyo
Shoko Research. In August the number was 957, the lowest
number for an August since 1992. So at this rate, about
12,000 companies will go out of business with total debts
of JPY1.8trn. To help you with your math, that is an
average of JPY1.5bn per company -- although the reality is
that most of the losses would have been incurred by the top
5% of failures.

So what gives? Well, we don't think the numbers are
anything to be sanguine about. Rather, our take is that the
banks are putting through the last round of payment
deferment agreements before closing off the spigot next
year and sending the bad loans on to the government. Come
next April, the numbers of companies going under will start
to rise again, beginning with those who don't just need
deferred loan repayments but need fresh debt as well.

You'll recall that in 2009, the then banking and postal
services minister, Shizuka Kamei, ram-rodded through
legislation that provided a bank loan repayments moratorium
to SMEs for 3 years. Then in 2011, the moratorium was
extended until March 2013. At this stage there doesn't seem
to be an intention to further extend it.

No one seems to have up-to-date numbers on how many
companies have successfully applied for these loan repayment
deferments, but the original budget limit was JPY30trn
(US$340 billion) and 2009 news reports say that the
government had burned through 50% of that in the first
month. Since then, we have seen various blogged numbers of
up to 500,000 firms applying for deferments, 90% of which
were approved, and if those number are right, then probably
the government budget has already been exceeded. On the
current numbers, though, each of those 450,000 ailing
companies has JPY30m in unpaid loans that will go into
default next March.

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[...Article continues]

Not only is JPY30trn a lot of cash to take from an already
stressed public purse, but more importantly the program is
such that the moving parts are loosely coupled. By this we
mean that the Japanese government is offering to guarantee
the deferred loans, but it's been up to the banks to
actually assess and approve the deferments. Thus, the
government appears to be giving blanket coverage of those
450,000 firms -- making the whole arrangement very
vulnerable to manipulation. Indeed, erstwhile political
reporter Jake Adelstein says in one of his stories
(http://www.worldpolicy.org/blog/last-yakuza) that up to
1/3 of the companies applying for small business loans are
Yakuza front firms and they have no intention of ever
repaying those loans. If he's right, then in the moratorium
program alone, the Japanese government may have just given
away US$100m.

Perhaps we shouldn't be surprised at this outcome, since
Adelstein also reports that the politician who dreamed up
the moratorium scheme, Kamei, has a long association with
the Yakuza and could well be messing with the consumer
loans and banking sectors to keep his pals happy. What's
also interesting is that Kamei is very close to the other
"too-slick Willy" of Japanese politics, Tokyo governor
Shintaro Ishihara. Ishihara is notable for his ability to
lose Tokyo tax payers about JPY100bn on a municipally
owned bank that he personally endorsed, only to dodge
responsibility for the whole fiasco. Rumors are rife that
the bank was brought to its knees by large numbers of
loan defaults by Yakuza front companies taking
minimally-vetted loans.

As far as we can see, birds of a feather flock together.

The backstop for the bad loans on the Kamei moratorium, as
the banks start cutting off SMEs next April, is the
government and its various guarantee corporations. We are
told that these organizations are likely to act tough but
will settle for the owners of defaulting companies making
token loan/interest repayments so that the loans can be
kept on the books. As a result, we don't expect the rise in
bankruptcies to be sudden, but it will be steady. Further,
a loan repayment deferment automatically means no fresh
loans, so, many of these 450,000 firms that have been
limping along for the last 3-4 years are likely to increase
their lay-offs of employees. This means that an increase in
the unemployment rate may be a more reliable indicator of
what is going on than the bankruptcy rate.

...The information janitors/

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+++ NEWS

- Tanaka resigns over Yakuza ties
- Sony to chop 10,000 employees
- Recruit starting web-based prep school
- Stem cell fraud
- New fossils find

=> Tanaka resigns over Yakuza ties

Very good report out from Jake Adelstein about what is
really going on behind the scenes with the resignation of
the new Minister of Justice because of his ties with the
Yakuza. Although Minister Tanaka only admitted attending a
wedding for a yakuza friend about 30 years ago, Adelstein
says that it was common knowledge that Tanaka has
fraternized with the Yakuza much more recently than that,
and that part of his involvement was with a Yakuza
confidant covering up a tawdry love affair that Tanaka was
having. ***Ed: In other words, he is one bad apple who
should never have been allowed to sit in the Justice
Minister's chair. The mind boggles to think that the Yakuza
have such high-placed friends even today.** (Source: TT
commentary from thedailybeast.com, Oct 18, 2012)

http://bit.ly/WyISBd

=> Sony to chop 10,000 employees

It always amazes us that Japanese companies are happy to
employ so many people, and so perhaps the era is coming
to an end. Sony has announced that it plans to cut 10,000
people, or about 20% of its workforce by March next year,
as well as shutting a camera lens factory in Gifu. ***Ed:
The new CEO, Hirai, is quite a dynamo -- bad luck for many
employees but important for the survival of the business
overall.** (Source: TT commentary from reuters.com, Oct 19,
2012)

http://reut.rs/VhaENw

=> Recruit starting web-based prep school

A Recruit subsidiary has started an online prep school for
university candidates, which offers videos of popular
teachers giving online lectures. The lessons will cost
about JPY5,000 for a package of 10 videos, just 25% of the
cost of in-person classes. The videos are accessible an
unlimited number of times by both PC and cell phone. ***Ed:
Given how boring and mono-directional Japanese lectures
are, it's a wonder prep schools just don't drop the
in-person format all together. At least that would save
them class room rental fees...** (Source: TT commentary
from e.nikkei.com, Oct 16, 2012)

http://e.nikkei.com/e/ac/TNKS/Nni20121015D1510N01.htm?NS-query=recruit

=> Stem cell fraud

Lots of embarrassment to go around last week at Todai, when
it was revealed that the claims of stem cell breakthrough
experiments by one of its researchers were a bunch of
hokum. The researcher, Hisashi Moriguchi, claimed that his
team had treated heart disease patients in a trial with a
US university, only to have that claim denied by the
university in question. While Moriguchi may in fact have
done some useful research at Todai, probably we'll never
get to hear what it was as he has now been sacked. (Source:
TT commentary from e.nikkei.com, Oct 19, 2012)

http://e.nikkei.com/e/ac/tnks/Nni20121019D19JF487.htm

=> New fossils find

Just in case you thought all Japan's newest fossil finds
are politicians in the Tokyo Metropolitan Government,
fossils of a more interesting variety have been found in a
cave in Okinawa. Researchers found human and animal bones
and tools from 12,000 years ago. This latest find is not
the oldest remains, that honor goes to another dig site in
Okinawa (32,000 years), but apparently the items found were
in good condition and will yield valuable clues as to the
lifestyle of the dwellers at that time. ***Ed: Apparently
the richest source of Japan's stone age remnants is
Okinawa.**  (Source: TT commentary from japantimes.co.jp,
Oct 20, 2012)

http://www.japantimes.co.jp/text/nn20121020b3.html

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

=> No events this week.

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

+++ 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 comments or corrections this week

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

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=> The Old and Trashy Tateishi
In Search of the Real Tokyo #2

My ongoing search of the real Tokyo led me to Tateishi, in
the capital’s far east. Spankybruno had warned me when
describing his favorite place in Tokyo, "It's Shitamachi –
dirty, old, trashy, and friendly". And indeed, located on
the edge of the metropolis, separated from the center by
two wide rivers, Tateishi seems to have been forgotten by
the capital’s expansion.

Passing the Shin-Yotsugi Bridge, I felt I was leaving Tokyo
behind: on the other side of the Arakawa (Ara River), low
houses and plastic shelters were hiding in a solvent smell.
Thirty minutes later, I reached Keisei-Tateishi station and
its ringing railway crossings. Far from the center and huge
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There, stands and stalls are squeezed next to one another,
selling cheap vegetables, grilled yakitori and 100-yen
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central Tokyo.

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

***********************************************************
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+++ ABOUT US

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

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