Terrie's Take 751 -- Invest Tokyo Looking Under the Wrong Rock? E-biz news from Japan.
terrie at mailman.japaninc.com
Mon Apr 7 08:20:42 JST 2014
* * * * * * * * * T E R R I E 'S T A K E * * * * * * *
A weekly roundup of news & information from Terrie Lloyd.
General Edition Sunday, Apr 06, 2014, Issue No. 751
- What's New -- Invest Tokyo Looking Under the Wrong Rock?
- News -- Government-sponsored whaling to disappear
- Web Content/Tech Job Vacancies -- Sales Manager-cum-Country Manager
- Upcoming Events
- Travel Picks -- Ishinomaki rebirths, Manga Museum in Kyoto
- News Credits
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+++ WHAT'S NEW
On Friday morning we received a large envelope bearing the Tokyo
Metropolitan Government (TMG) seal. Puzzled as to what it might be, we
opened it to discover a packet of information from Accenture, the
consulting firm, covering the latest push by both parties to get the
foreign community interested in investing in Tokyo. In case you're not
aware of the Invest Tokyo program, it is TMG's attempt to restore the
population of foreign firms lost to the Lehman Shock and subsequently
the 3/11 earthquake. The program was started last year (2013) and has
been strengthened by the confirmation by the national government that
Tokyo is now a Special Zone for deregulation and economic improvement.
Tokyo's Special Zone purpose is to serve as the headquarters for
multinationals active in Asia.
The packet included equal amounts of Japanese and English-language
documentation, but surprisingly not other languages. We suppose that
most senior managers in multinationals of a meaningful size (except
possibly Japanese ones) can understand English pretty well. But still,
if you're a native of some other country, we think it is smart
marketing to put some form of address in those peoples' languages as
The Invest Tokyo value proposition essentially comes in three parts:
subsidies and tax incentives, market entry support, and some expat
lifestyle services and rule changes.
>From a foreign multinational's point of view, there are probably five
factors that most determine where they will set up their regional
office. They are, in what we think is relevant descending order:
taxes, quality of living conditions for senior management and their
families, availability of trained manpower, quality of infrastructure,
and cost of living. Of course it also helps if you are close to your
target market, but given that Asia has so many markets and generally
good transportation, it is not as important a factor as it once was --
except maybe if you're in a high-tech market, where being close means
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OK, let's start with the tax incentives. Well, these are always going
to be a challenge for equality-minded Japan, where the public (and of
course the government) believes that everyone should pay their fair
share of taxes, equally. When you have locations like HK and
Singapore, which are both livable and yet have taxes as low as 15%, it
will be extremely hard for Tokyo to compete. Invest Tokyo is going to
try, however, and is essentially eliminating the local tax portion of
your firm's income tax, and thus bringing tax costs down effectively
from around 39% to around 26.9%. While that is still above the rate in
HK, combining this with the life style component may mean that some
senior managers decide they prefer Tokyo over either of the other two
cities. There are also investment tax credits and accelerated
depreciation on offer.
We thought this tax break was pretty impressive and started wondering
if it is for real. Not like Japan to give away tax -- which seems to
be going a bit against the grain. So we decided to call the phone
number on the brochure, which was for the front office at Accenture. A
lady quickly answered and when we popped the question about how long
the tax break would last, she said she didn't know. We asked her to
find out and she put us on hold, or so we thought, because after a few
seconds we realized that she'd inadvertently hung up on us...! Uh-oh,
how much is the TMG paying Accenture for this contract? Our mailing
must be one of thousands they sent out this week, and this IS the
second year of their TMG contract -- so you'd think they have a well
oiled machine by now... But sadly, no.
Frustrated, we called the TMG's own Invest Japan office, and there we
were greeted by someone more confident-sounding. And yet, amazingly,
after putting us on hold to check the answer, she ALSO hung up on
us...! Fortunately her PBX was modern enough to show the Caller ID
number, and she quickly called back and apologized. She later told us
that the tax break would be for five years, but the investment tax
credits were only one year.
Hmmm, one year? You have to be kidding, right? So if I buy a building,
I have to turn a profit in the first year to use that credit? Is there
a company in existence that is new to Japan that can turn a profit in
its first year? We suppose that someone in the TMG back office was
thinking, "What can we offer that sounds great, but doesn't actually
cost us anything?" It's just this kind of small-minded thinking that
is hobbling Japan's transition to an open international economy.
Unfortunately for Invest Tokyo, it won't take long for companies to
find this out. OK, to be fair, the main incentive of reducing income
tax for 5 years isn't too bad (but not great, because most companies
take 3 years to turn a profit after start-up), but why not extend the
credits for the biggest initial expenditures? That sort of
snatching-back is just going to turn people off.
The other incentives are as equally uninspiring. There is an expedited
visa processing service -- which might be useful, given how slow
Immigration is in processing visa applications recently (3-4 months
instead of the 4-6 weeks that was normal for years until mid-2013,
what's up with that?). There is also an expedited patent service,
which might be useful if your R&D is deep enough to produce patents.
Then there are loans and financing available if you have a traditional
R&D center or factory, but these financing incentives have been around
for ages and are not new.
We think that TMG needs to rethink its entire value proposition for
attracting foreign companies to headquarter in Tokyo. Looking at our
earlier suggested order of priorities, certainly taxes are a top
consideration, and probably there isn't much that Tokyo can do about
this. But with a bit of creative thinking, why doesn't Tokyo just let
multinationals stay headquartered in Singapore while instead
encouraging them to have the bulk of their workforce here? Smart
multinationals don't yield that much profits tax anyway, so it's
better for TMG to focus on levels of employment and tax the employees
This could be done with long-term employment subsidies. TMG should get
serious and offer a 50% wage subsidy for up to 100 people for, say, 5
years. This would cut the effective cost of staffing in Tokyo to less
than salary levels in Singapore, and given foreign firms are faced
with so many other challenges entering the tough Japanese market, this
would be a huge selling point to their senior management. A salary
subsidy is still taxable locally, from the employees themselves, and
such a program could force up wages for that sector thus creating a
ripple effect. Five years is not that long, TMG can borrow the money
at almost zero percent, and once employees are thoroughly embedded it
would take a very determined company to turn around and fire them and
move out again.
While we're at it, the TMG needs to understand what personally
motivates the senior management of multinationals, the second item on
our proposed priority list. Many of these people have families and
it's super-expensive for the company to keep them in Asia. Why doesn't
the TMG offer a subsidy to send every newly-arrived company expat kid
to an international school effectively for free (after all,
Japanese-speaking Japanese kids go to school for free), then this
would be like a massive pay raise for those senior managers (or a cost
saving on company "scholarships"). Heck, offer them a 50% subsidy on
their expat apartments as well, and do the real estate sector a favor,
too. Coupled with the quality of life in Japan, these moves would be
huge incentives to get execs and their families to settle here for a
As mentioned previously, Invest Tokyo is being marketed by Accenture,
and this is their second one year contract. Both they and the TMG
released an announcement earlier in the year stating that Accenture
won the contract for a second time on the basis that it managed to get
10 companies to set up in Tokyo. Now, given that the program has a
goal of 50 multinationals using Tokyo as their regional headquarters,
and 500 new foreign firms overall, by 2016, this is not a particularly
auspicious start. Indeed, with incentives like the ones that are being
offered at the moment, we're guessing that these ten companies were
coming to Tokyo anyway. The press release indicates that they are
mostly software, medical, and Internet companies, and if so, they're
here not for the incentives but because Japan is their biggest market
So, come on guys, let's get real and think a bit harder about the
target market and what motivates it.
...The information janitors/
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- Government-sponsored whaling to disappear
- Novartis swaps out its senior management team
- Apple to buy Renesas?
- Plenty of cash, fewer lenders
- Rules change to permit weapons exports
=> Government-sponsored whaling to disappear
Following their loss in the International Court of Justice at the
Hague, the Japanese government has announced that it will call off
this season's whale hunt off in the Southern Ocean. This is the first
time since Japan started its "scientific whaling" strategy in 1986,
that it hasn't sent ships to Antarctica to hunt whales. The decision
to cease Antarctic whaling does not extend to Northern Pacific
whaling, however, which apparently will continue. ***Ed: Until now,
the North Pacific catch has been much smaller. One hopes the whalers
don't try a substitution approach.** (Source: TT commentary from
nytimes.com, Apr 3, 2014)
=> Novartis swaps out its senior management team
After a major scandal involving falsified and hidden adverse test data
for company drug tests conducted in Japan, Novartis headquarters has
decided to fire its top 3 managers and replace them at least
temporarily with foreigners. In what must have been a humiliating
experience, the head of the firm's global pharmaceuticals business,
David Epstein, personally came to Japan and made a formal apology at a
press conference this week. Epstein said that while he'd have
preferred to put in experienced Japanese managers there wasn't time to
recruit the right candidates, so foreign managers pulled from
elsewhere were parachuted in. (Source: TT commentary from wsj.com, Apr
=> Apple to buy Renesas?
It's not often that you see Apple step in to protect its supply chain,
preferring instead to see its suppliers duke it out and keep them
competitive. However, when your main supplier of mobile screen chips
is about to be bought by your main competitor, it's probably time to
take action. Nikkei says that Apple is looking at paying around
JPY50bn to buy a 55% controlling stake in Renesas SP Driver division.
The Japanese company has been losing money for some time, but it is
the world's largest independent supplier of screen chips. ***Ed: Who
knows, maybe Apple can show the Japanese how to make money out of
chips again...?** (Source: TT commentary from reuters.com, Apr 2,
=> Plenty of cash, fewer lenders
A Bank of Japan index indicates that the willingness of companies to
take on additional loans is at a low point, even as banks try to make
more loans. Apparently the index shows that the availability of money
to mid-sized companies in particular is at a 17-year high. The problem
is that most companies are already cashed up and don't need more debt,
although there was a 2.2% increase in lending in February compared
with the same period last year. But the rate of lending is still
significantly less than for 2007, before the Lehman Shock. Similarly,
companies listed in the Topix index are now sitting on a cash pile of
US$636bn, about 50% more than before the Lehman Shock. (Source: TT
commentary from bloomberg.com, Apr 3, 2014)
=> Rules change to permit weapons exports
In sync with China's recent aggressive moves over the Senkaku Islands
and other territorial disputes, the Japanese government has decided to
allow weapons exports this week, the first time they have done so
since WWII. Although the new rules still include "rigorous reviews",
they will allow exports if such transfers "contribute to international
peace or help strengthen Japan's security". UN embargos will still
apply. Exports are expected to mostly be seaplanes and ocean-going
vessels to Asian countries and Australia. The global arms market is
worth around JPY40trn (US$383bn), while the Japan-only market is worth
around JPY1.6trn. (Source: TT commentary from asia.nikkei.com, Apr 2,
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
+++ WEB CONTENT/TECH VACANCIES
=> Are you in web content, sales, or engineering? If so, this section
is for you.
** HIGHLIGHTED POSITION
- Web marketing/technology Sales Manager-cum-Country Manager position
If you are working in a web marketing or web technology company, and
have a strong sales record and excellent Japanese and English (this is
compulsory), we have a client looking for a person to manage their
Japan start-up operation and who on showing reasonable performance
will become the country manager of a team of professionals here.
Unlike most start-ups entering Japan, this one already has clients and
is winning recognition in the market for their technology. The
position requires a strong knowledge of who the main market players
are, and thus a strong personal network, and if not a native Japanese
speaker, then you will need to demonstrate a strong track record of
previous successful appointments. This is not a Country Manager role
right out of the box, and so a flexible, sales-oriented personality is
essential. Salary is JPY10m base and JPY3-4m on achievement of very
reasonable sales targets. Please send your resume to
info at japaninc.com.
** OTHER MEDIA POSITIONS VACANT
- Bilingual account manager for major tourism portal
(www.japantourist.jp), JPY3M - JPY5M
- Bilingual sales trainee for web media properties, JPY2.5M-JPY3M +
- Senior experienced PHP Zend software developer, 5 years experience,
JPY3.5M - JPY5M
Interested individuals may e-mail resumes to: jobs at metroworks.co.jp.
+++ UPCOMING EVENTS/ANNOUNCEMENTS
------------------ ICA Event - April 17th -----------------
Speaker: James Santagata, Founder and Managing Director of Career
OverDrive! and SiliconEdge.
Title: "Sick & Tired of Resume-Collecting Recruiters? Fire Your
Recruiter & Take Control"
Details: Complete event details at http://www.icajapan.jp/
Date: Thursday, April 17th, 2014
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 at the door!!!!!!!
RSVP: By 4pm on Friday 11th April 2014. Venue is The Foreign
Correspondents' Club of Japan.
-------- Business Start-up Seminar by Terrie Lloyd --------
Have you ever thought about setting up your own company in Japan? Or,
are you already running one and wondering how to move up to the next
Local Australian/Kiwi entrepreneur Terrie Lloyd, is running a seminar
for people who want to form their own companies, on May 10th, 2014.
Terrie has established 17 companies in Japan over the last 30 years,
and has a lot of experience to share about how to structure and run
your business when first starting up.
=> In TT-750 we discussed corruption and Japanese companies, and we
drew a number of responses, the most interesting of which comes from a
reader with first-hand knowledge of the situation in Vietnam.
*** Reader says: It's heavily rumored in the local Vietnam market that
Japanese companies paid US$500m in bribes over the last few years to
secure a pipeline of infrastructure projects which should last the
next 7 years or so... There's nothing in print about this - it's just
widespread street talk by people who are embedded there... Basically,
even for the Japanese, it's hard to hide an elephant...!
The industries involved are anything to do with the build-out of the
physical infrastructure of Vietnam - roads, bridges, electricity
generation, trains, ports, etc. The Japanese are involved in almost
every single major project. From this we can ascertain that Japan is
targeting Vietnam for development, the same way they did with Thailand
in the 1990's. On balance I think this is actually a very positive
thing for Vietnam, but this "scandal" is a source of mild amusement
for those of us who know the country well, especially since everyone
already knows the case is the just the tip of the iceberg.
+++ TRAVEL DESTINATIONS PICKS
=> A weekend in Ishinomaki, Miyagi
A town being reborn through tourism
Living in Sendai, I am only two hours or so by public transportation
to Ishinomaki City (less if I drive) in Miyagi prefecture. I heard
some rumors that Ishinomaki had some places worth checking out, but I
could not say for certain. Unfortunately, relevant or current
information in English about tourist attractions is lacking. Much of
the information often posts a disclaimer in the article saying this is
pre-March 2011 earthquake and tsunami information. The city tells me
they are working on this.
Ishinomaki City, being one of the hardest hit coastal communities, has
undoubtedly been through much suffering. But as I saw on my first trip
around the sites via chartered bus, the city is using this opportunity
to more than just rebuild, but to revitalize itself. Most (I say most
because there are new creations in planning) tourist attractions have
recovered to the point where they are open for business and welcoming
visitors from near and far. The city has food, history, pop culture,
and adventure -- even if on a smaller scale than larger cities. There
are a few places I want to go back and visit, but for now let me give
you some ideas for your next weekend in Ishinomaki.
Our first stop was at Takamasa Onagawa Honten, a factory specializing
in kamaboko. Kamaboko is a delicacy often eaten as a snack or
accompanied with tea in Miyagi prefecture. It is processed and pureed
fish cleverly molded into an attractive shape, such as a leaf. Here
you can receive a factory tour to see and learn how the food is made
then later grill your own to eat. The company store offers a wide
range of kamaboko products and flavors. Don't be shy with the free
=> Kyoto International Manga Museum, Kyoto
A library for manga devotees in an old school building
While Manga is seen by some as a modern invention, it actually began
in the 11th century by Toba Sojo with comic sketches of life as a
Buddhist monk. It later took off with Hokusai, who coined the word
manga or "playful sketches" to denote some of his more humorous
At the Kyoto International Manga Museum, manga from its incarnation in
the twentieth and twenty-first centuries can be seen, touched and read
in all its glory. While officially a museum, it is more of a library,
and visitors are encouraged to read the manga displayed, library
style, from its "wall of manga".
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+++ ABOUT US
Written by: Terrie Lloyd (terrie.lloyd at japaninc.com)
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