Terrie's Take 715 -- Foreign Card Restrictions at ATMs. E-biz news from Japan.

Terrie's Take terrie at mailman.japaninc.com
Sun Jun 23 22:58:03 JST 2013

* * * * * * * * * T E R R I E 'S T A K E * * * * * * *
A weekly roundup of news & information from Terrie Lloyd.

General Edition Sunday, June 23, 2013, Issue No. 715


- What's New -- Foreign Card Restrictions at ATMs
- News -- Transgenic organs from pigs within 5 years
- Upcoming Events
- Corrections/Feedback -- Late buses have run for years
- Travel Picks -- Ginkakuji in Kyoto, Sunrise Seto train
- News Credits

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Back in July of 2007, Seven Bank announced that its then 12,000-store
network of ATMs would start taking foreign credit and ATM cards, so that
foreign travelers could easily withdraw cash from their foreign bank
accounts while holidaying or doing business in Japan. There was a small
cheer by foreigners all over the country as a result, and another brick in
the wall of insularity disappeared. Yes, the nation's post offices already
provided an alternative, but Seven Bank's move meant that international
ATMs were now available everywhere and that you no longer had to worry
about weekend and after-hours access.

To their credit, Seven Bank went whole hog and gave cash access to the
holders of most of the biggest operators globally, including: Visa,
MasterCard, AMEX, JCB, and China's UnionPay.

Then in December 2009, Seven Bank unexpectedly announced that it would
suspend service for MasterCard, Maestro and Cirrus cards, in response to
what Seven Bank said, was "A revision in conditions by MasterCard that will
impede the Company’s [Seven Bank's] provision of ATM services.” Only a few
insiders were privy to what those conditions were, but they were obviously
severe enough that the dispute lasted 9 months and service didn't resume
until 2010.

Well it now turns out that Seven Bank has once again suspended MasterCard,
Maestro, and Cirrus cards, apparently around April 20th (we were slow in
learning this), and so if you're one of the burgeoning number of tourists
looking to withdraw cash to spend here, you'll be out of luck unless you go
to the post office, or one of the few Citibank or Shinsei ATMs.

It seems clear that Seven Bank does want to do business with foreigners,
and probably the higher-than-normal (but still cut price) margins it earns
from overseas remittances by foreign workers were partly responsible for
the bank recording a 13% rise in profit for FY2012, to JPY19.5bn. Indeed,
as recently as May, the company announced that by January of next year, its
now more than 18,000 ATMs will handle another seven languages, being
Chinese, Tagalog, Portuguese, Spanish, Vietnamese, Indonesian, and Thai, in
addition to Japanese and English. One can assume from these extra languages
that the company has now learned just which nationals have a prevalence of
sending money home. Those customers did 190,000 international money
transfers through Seven Bank last year and are expected to double that
volume in FY2013.

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[...Article continues]

We started wondering what is up with this current MasterCard suspension and
spoke to several experts in the card industry. From what we can glean, the
current dispute is over fees. The problem for both parties is that there
isn't a lot of money in Seven Bank's business model, and if fees are too
high, then when coupled with expensive new fraud protection requirements,
they could force the retail bank out of the foreign funds withdrawal
business. Strangely this only seems to be a problem for Seven Bank with
MasterCard and not Visa. Oh to be a fly on the wall of their negotiation

Technical compliance is definitely a major added cost and could have been
the straw to break the camel's back. Recently MasterCard and its
competitors started upgrading their cards for better fraud prevention and
to improve payment services. This is something known in the industry as
fraud "liability shift", whereby MasterCard set April as the deadline for
its card acquirers to process its EMV-chip card security features for
internationally issued Maestro cards or else accept becoming liable for any
card fraud that would otherwise have been prevented.

We can't imagine this new requirement went over well with Seven Bank. Doing
the sums, if the cost of upgrading an ATM to handle the EMV chips was (just
our guess), JPY100,000 per machine, then Seven Bank's 18,000 ATMs would
cost it about JPY18bn to upgrade -- an entire year's profit for the bank
(not just their ATM business). No wonder then if Seven Bank is saying that
"enough is enough", even if the overall purpose of the EMV chips is to make
credit cards safer and thus save money.

Anyway, this got us to thinking about the Japanese banking system in
general, and we asked one of Tokyo's top payments systems experts, Steve
Wiig, for an opinion. He very kindly contributed the following to this
week's Take.

[Steve's Commentary:]

Why is Japan’s payment network so disconnected from the outside world? One
clue is that at Japan's ATMs, instead of finding the brand logo of a major
payment network like Cirrus or Star, you will instead find dozens of logos
of individual banks listed. Why? The problem is that Japan's payment
networks do not enforce interoperability among connecting institutions.
This includes CAFIS, which is operated primarily by NTT Data and enjoys a
70%+ market share for credit card transactions  CAFIS is an old-fashioned
system that uses a fixed-file format to send transactions instead of
embracing the ISO standard 8583 for Financial transaction card originated

Crucially, what that means is that each of the card-acquiring banks on the
CAFIS network must negotiate with each separate issuing bank with which it
hopes to exchange messages instead of all parties simply abiding by a
common standard.

Imagine if mobile phones or Internet browsers could not interoperate and
you needed a different phone handset or Internet browser to visit certain
websites. This same issue is why many banks offer no interoperability with
other banks and why even the banks that try for domestic interoperability
give up on processing international transactions.

The status quo locks in customers to NTT Data and its ecosystem of domestic
IT vendors. Japan’s banks are awash in mainframes and stone-age IT.
 Incredibly, most ATMs in Japan are driven by actual mainframes. These
monsters require nightly batch runs, which is why there are weekend and
evening blackout periods on some ATM networks -- a rarity in most modern
countries. Conversely, complying with international standards of payment
networks such as Star and Cirrus requires a discipline of complying with
periodically updated messaging requirements based upon ISO 8583, and that
is beyond the capability of many domestic banks. Equally, domestic banks
just don’t see services to international customers as a priority, so it's a
Catch-22 situation.

But it seems to me that Japan’s disconnect from international ATMs is a
serious problem for a government which is trying to increase tourism and
host the 2020 Olympics.

Fortunately there are recent precedents for the government reforming
structural problems in Japan’s bank infrastructure. Zengin-net was
established in 2012 as the clearing agency in Japan for electronic funds
transfer, after receiving a license for the fund clearing business in
September 2010 after the "Payment Services Act"  was enacted. This reform
measure replaced outmoded methods and implemented an updated SWIFT
standard. Further, the Act On Settlement enacted in April 2010 liberalized
the market for non-banks such as Paypal, Brastel and Toppan (which prints
pre-paid cards.


[Ed: Back to our commentary.] While we're not sure that government
deregulation in the banking network overall is going to help Seven Bank in
its dispute with MasterCard, there probably is a role for the government in
subsidizing domestic banks for the costs involved in internationalizing
their operations and in particular their ATMs. Tourism has been picked as
one of the few future industries that Japan feels it can use to compete
against its low-cost neighbors, so anything that makes it easier for
foreigners to spend more money here should be viewed as a matter of
priority. Luckily, there are only a few standards to comply with and mostly
they fall under Visa, MasterCard, and country-specific issuers like

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+++ NEWS

- Transgenic organs from pigs within 5 years
- HPV vaccine no longer recommended by Health Ministry
- Kyocera-Mitsubishi-JA deal on solar
- Serial fraudster shows up at Microsoft
- Exports revenues up 10%, volumes still down

=> Transgenic organs from pigs within 5 years

New guidelines likely to be approved by the government will allow Japanese
scientists to push ahead with a plan to grow and harvest human organs in
pig donors. The scientists are planning to start with pancreases first,
then move on to other organs such as hearts and kidneys. With easily
purchasable pancreas transplants, the first wave of beneficiaries are
likely to be diabetics. ***Ed: With Japan promoting medical tourism to
Asia, one wonders what Muslim patients will think of this potential new
source of organs?** (Source: TT commentary from geek.com, Jun 21, 2013)


=> HPV vaccine no longer recommended by Health Ministry

In an interesting conflict with thinking in health circles abroad, the
Ministry of Health has stated that it is withdrawing support of the active
vaccination of teenage girls for HPV. The government is not banning the use
of HPV vaccines, but has told local governments to no longer promote their
use. The Ministry says it wants to study for itself claims that the
vaccines can cause severe side effects, including death, convulsions,
paralysis, and and GBS. ***Ed: Conversely, just a day before this
government announcement, there was a report released by the CDC in the USA
showing that in locations where the HPV vaccination was carried out, there
has been a reduction of the incidence of HPV infections in girls aged 14-19
by 56%, from 11.5% of the population to 5.1%. Tough to know whether the
vaccinations are risk-free enough to do them or not, and in the end our
family decided against them.** (Source: TT commentary from medscape.com,
Jun 20, 2013)


=> Kyocera-Mitsubishi-JA deal on solar

In a classic move by Japan Inc., Kyocera, Mitsubishi, and the National
Federation of Agriculture Cooperative Associations (Zen-Noh) have agreed to
start rolling out mini-solar facilities on barns, distribution centers, and
parking lots all over Japan. The project will start out with a 30MW target
at thousands of locations, and by the end of 2015 will expand to 200MW --
becoming one of the largest solar networks in Japan. ***Ed: What's the bet
that this is Zen-Noh's opening gambit to having the government allow farmer
members to expand and reclassify some of their under productive farm land
as solar farms instead? Anyway, seeing such a powerful lobby group get into
solar has one good outcome: it means that the subsidies for solar power are
probably here to stay.** (Source: TT commentary from sustainablebusiness.com,
Jun 21, 2013)


=> Serial fraudster shows up at Microsoft

Demonstrating how difficult it is to take action against wayward employees,
a recent news item on RocketNews reports on the case of an IBM Japan
consultant who embezzled about JPY100MM from the company between 2005 and
2009, then after being fired moved on to a similar job at Microsoft Japan
and was caught doing the same thing there. The article doesn't go into the
details, specifically as to whether IBM took legal action against the
employee, but it is clear that Microsoft at least filed a complaint.
Notably, it took a full 18 months for the police to take action and
actually arrest him. (Source: TT commentary from theregister.co.uk, Jun 20,


=> Exports revenues up 10%, volumes still down

Depending who you talk to, Japan's export sector is either doing great or
it isn't. The overall 15% devaluation of the yen against the dollar has
meant that on a revenues basis, the value of exports rose 10% in the year
through to May, compared with investor expectations of just 6.5%. On the
other hand, by volume, exports were still down 4.8% over the same period
last year. ***Ed: Smoke and mirrors?** Reassuringly, analysts are saying
that the yen devaluation overall has created more benefit than the extra
costs it has created -- pointing to the fact that while fuel for power
plants contributed to a JPY994bn trade deficit, earnings on overseas
investment income brought the current account back into the black. Exports
to the United States rose the most, by 16.3%, while those to China were up
8.3%. (Source: TT commentary from reuters.com, Jun 19, 2013)


NOTE: Broken links
Some online news sources remove their articles after just a few days of
posting them, thus breaking our links -- we apologize for the inconvenience.


------ The Robert Grondine Memorial Scholarship Fund ------

In 2011, we lost a great friend and colleague, Bob Grondine. Bob made
considerable contributions in Japan to the legal and business community as
well as important civic and charitable efforts. Not only was Bob a
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Among a number of US-Japan causes, Bob was an important supporter and chair
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Foundation, an organization established to grow global leaders through a
program providing scholarships to American college students to study in
Japan. Students designated as Grondine Scholars will be selected for their
ability to emulate Bob's intellect and spirit as well as his dedication to
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Speaker: Dr Greg Story, President, Dale Carnegie Training Japan

Title: "Igniting Workplace Enthusiasm - How to Create Engaged Employees"

Details: Complete event details at http://www.icajapan.jp/

Date: Wednesday, July 24th, 2013
Time: 6:30 Doors open, Buffet Dinner included and cash bar
Cost: 4,000 yen (members), 6,000 yen (non-members). Open to all No sign ups
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RSVP: RSVP by 5pm on Sunday, July 21st. Venue is The Foreign
Correspondents' Club of Japan




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 TT-714 we carried a news item about the Tokyo Metropolitan Government
starting trial late-night bus services between Roppongi and Shibuya. As a
reader points out, this isn't really news...

*** Our reader says: This piece is out of touch. There have been late night
buses out of Shinjuku (for those who miss the last train) for many years.
http://www.kanachu.co.jp/bus/midnightex/ They are not cheap, and don't run
24 hours, because an overnight in a manga kissa for say 1,200 yen, or a
capsule hotel from mid-night to 5 or 6 am, are much cheaper options. At a
late enough hour -- when SobudaiMae (between Sagami Ono and Ebina) becomes
the last stop for trains from Shinjuku -- it costs maybe 4,000 yen and a
long wait in line for a midnight taxi ride from SobudaiMae to Ebina or Hon
Atsugi. So late buses from Shinjuku have to be cheaper than that. Dormy Inn
in Akihabara is one example of a hotel offering a limited number of
discounted short-term stay options (on a sign outside) -- the discounts may
or may not be for short-term *daytime* stay, but Toyoko Inns (for example)
offer discounts to as low as 4,800 yen or so after 11pm if rooms are free.
Further, local bus companies in the suburbs have been offering "shinya"
late-night bus services for many years:  e.g. buses from 11:20pm, costing
around twice the normal fare.



=> The Zen & Moss Gardens of Ginkakuji, Kyoto

Built in 1482, Ginkakuji was originally built near the Eastern Mountains of
Kyoto as a retirement villa for Shogun Ashikaga Yoshimasa. The initial plan
was to make something similar to the famous Kinkakuji or Golden Pavilion,
located near Kyoto’s northern mountains, which belonged to Yoshimasa’s
grandfather, Ashikaga Yoshimitsu. Instead of covering the pavilion with
gold, Yoshimasa wanted to use silver. During its construction, the work had
to stop due to the Onin War. The initial plan to cover the pavilion with
silver was never completed before the death of Yoshimasa in 1490. It was
then decided to leave the pavilion as it was when its owner died. The
Pavilion was later transformed as a Zen temple.

Today Ginkakuji is famous not only for its main building but also for
smaller temple buildings, a moss garden and a beautiful Zen garden in which
the focus point is the sand mound representing Mount Fuji. Around this
mound are sand raked waves referring to a view from the moonlight. This
garden requires the work of many employees truly dedicated keeping it in
good condition, and you will surely see one of them when you visit the


=> Takamatsu to Tokyo by Train, Kagawa
Float by Okayama & Himeji on the Sunrise Seto

In the past, many night trains operated throughout Japan. Some trains had
sleeping cars and a dining car, while others with sitting cars only.
However, due to the development of the Shinkansen (bullet train) network
and popularisation of air travel, most of them became defunct. Today there
are only four regular night trains. These are: the limited express train
Sunrise Express (Sunrise Izumo between Tokyo and Izumo-shi and Sunrise Seto
between Tokyo and Takamatsu), the limited express train Hokutosei (meaning
the Big Dipper or the Wain) between Ueno and Sapporo, the limited express
train Akebono (meaning dawn) between Ueno and Aomori and the express train
Hamanasu (meaning rugosa rose) between Aomori and Sapporo. Luxury trains
such as the Twilight Express between Osaka and Sapporo and the Cassiopeia
between Ueno and Sapporo only operate irregularly.




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

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