Terrie's Take 793 -- Who Does Well with a Weak Yen? E-biz news from Japan

Terrie's Take terrie at mailman.japaninc.com
Sun Feb 22 23:23:31 JST 2015

* * * * * * * * TERRIE'S TAKE - BY TERRIE LLOYD * * * * * *
A weekly roundup of news & information from Terrie Lloyd, a long-term 
technology and media entrepreneur living in Japan.

General Edition Sunday, February 22, 2015, Issue No. 793

- What's New -- Who Does Well with a Weak Yen?
- News -- Delicious goats too tempting for trainees
- Upcoming Events
- Corrections/Feedback
- Travel Picks -- Light Up in Shirakawago, Samurai Mansion in Fukuoka
- News Credits

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Back in November 2012, just before Abe was elected Prime Minister, an 
analyst with the European asset management firm, Pictet, confidently 
opined that the depreciation of the yen up to that date had probably run 
its course, and that the currency would stabilize at JPY82=US$1.00. Now, 
18 months later, he no doubt regrets having made that call...!

Instead, with the US dollar now at around 119 yen, it seems that it has 
a good chance of softening even further. In the last 26 months the 
currency has depreciated a stupendous 53% from the pre-Abe high of 78 
yen. We remember the days when a 30% currency change over 2 years was 
considered dramatic and destabilizing, and yet here we are at more than 
50% and mostly we sit back and complain about how things are getting 
more expensive. Thankfully there is a global oil glut, otherwise, lives 
for ordinary Japanese could be significantly worse.

And we have to laugh when people like Finance Minister Taro Aso blithely 
say things like, "Monetary easing is aimed at pulling Japan out of 
deflation quickly. It is not accurate at all to criticize (us) for 
manipulating currencies." With a 53% devaluation in the yen but annual 
year-on-year inflation of just 2.4% (and over the last 9 months, just 
1%), either the Finance Ministry is incompetent in figuring out what 
drives inflation or the nation just got very lucky being able to halve 
the value of its currency while barely stimulating prices.

And we certainly don't think the Finance Ministry is incompetent.

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[...Article continues]

In forcing the yen down, no doubt the government was thinking to prime 
the country's export engine and rebuild company profits so as to 
increase the tax base. The problem has been that exports only amount to 
about 16% of Japan's GDP and many companies have already moved 
off-shore, so the net benefit of the cheaper yen has been muted. Those 
companies who are in the service sector or who rely on imported 
materials/products but don't export again are suffering. Sure enough, 
Teikoku Databank announced back in November last year that bankruptcies 
with liabilities of at least JPY10m were up 120% in October, and 180% in 
the first 9 months of 2014.

Darwin's law at work.

The winners at present are those companies who have a vertically 
integrated set of processes -- where, for example, black iron sand that 
arrives in ship cargo holds can be transformed into cars without having 
to send interim processes and components off-shore again. This means 
that manufacturers who have kept their vertical stacks in Japan, such as 
Toyota, are benefiting hugely. Another example is Japan Display, an 
amalgam of LCD units from Sony, Toshiba, and Hitachi, which is 
apparently in discussions with Apple to build a massive new JPY200bn 
plant in Ishikawa-ken, to keep up with booming demand for high-grade 
mobile displays.

But there are other beneficiaries of a weaker yen. An obvious one that 
we cover frequently is inbound tourism, where foreign tourists are 
apparently spending about JPY2trn (US$16bn) annually. Remember, this 
number doesn't include employment and other flow-on spending in the 
tourism sector. So, given that Japan's GDP is about JPY588trn 
(US$4.9trn), inbound tourists are spending their way to about 0.4% of 
the GDP. Once you factor in the flow-on effects, inbound travel is 
creating more like 1% of GDP -- and this number will probably double in 
the next five years.

Another big beneficiary of the lower yen is real estate -- of any kind. 
Foreign commercial real estate purchases hit JPY977.7bn in 2014, the 
highest in the last 11 years, and up 80% over the previous record 
investment year, 2007. Purchases of office buildings in downtown areas 
led the way in terms of value, but there was also strong demand for 
hotels, holiday homes, and residential real estate. As a comparison on 
office rent, for a Tokyo baseline of JPY100, an equivalent property in 
Hong Kong would cost JPY165.6 and in London JPY146. Office vacancies are 
now at a 6-year low of around 5.5%.

You don't normally think of primary produce as a big export earner for 
Japan, and until now nor has it been. However, funds are starting to 
flow within the agriculture and fishing sectors for projects that will 
help bump Japan's exports up towards the PM's goal of JPY1trn by 2020. 
In the first 9 months of 2014 exports were JPY336bn, an increase of 9% 
over the same period in 2013, so maybe things are finally starting to 
move. At first there was concern that the high cost of fuel would 
scuttle plans for fishing in particular, and there were reports of boats 
remaining tied up at shore because the cost of diesel made each foray a 
money-losing proposition. However, the recent fall in oil prices seems 
to have removed that hurdle, for now anyway.

What is especially good about fishing is that it is not limited by land 
area, and with the recent acceleration of fish farming, high-value 
inventory is starting to appear in the markets. We were amazed when we 
heard that Japan will shortly start selling farmed Amberjack in Vietnam 
-- almost a coals-to-Newcastle scenario. Farmed Tuna is another strong 
opportunity, and now that Kinki University has cracked raising farmed 
tuna from eggs of captive parents, they are already breeding and selling 
fish to restaurants in the USA. Japan has a massive 4.4m km2 of 
territorial waters, the 8th largest Exclusive Economic Zone (EEZ) in the 
world, and so they are not going to be running out of space to put those 
fish farms any time soon.

Do we believe that the yen weakening will go too far and there will be a 
confidence crisis by investors? Possibly. But it's more likely that the 
nation's employers will adjust and we will see exports and inbound 
spending leap as a result. If the general population has to suffer in 
the meantime, that is nothing new, and if any population is willing to 
suffer for the general good, it's the Japanese. We think the bigger 
threat is a currency war by Japan's neighbors. Some of these countries 
(think Korea, Indonesia, Vietnam, and Thailand -- and, of course China) 
are really starting to feel the effects of the weak yen, and they are 
likely to take aggressive and potentially destabilizing currency 
weakening actions of their own as a result. This will not only stymie 
Japanese efforts but also likely cause trade friction which could become 
nationalistic in nature.

...The information janitors/


+++ NEWS

- Free translation service translations made public
- Japan Post buys Toll Holdings
- Delicious goats too tempting for trainees
- Cool Japan does translation, subtitling
- Survey confirms gender-based wage discrimination

=> Free translation service translations made public

As The New Yorker's Peter Steiner once pointed out, one of the problems 
of the internet is that no one knows if you are a dog. 
http://bit.ly/1JxWm9M. Such was the case when a Chinese software 
developer created a free translation service that has become popular in 
Japan, and which company and government employees were using to 
translate internal documents. Unfortunately for those users, their 
translations were then stored in viewable web pages, meaning that even 
sensitive documents were available for anyone to see. As a result, the 
government's cyber security organization, NISC, will ban government 
employees from using free translation sites in the future. (Source: TT 
commentary from the-japan-news.com, Feb 20, 2015)


=> Japan Post buys Toll Holdings

Japan Post has announced that it will buy out Australian logistics 
company Toll Holdings, for around US$5.1bn. The high price is about 11 
times expected FY2014 earnings and a 49% premium over the company's 
current stock price. It does make sense, however, when you look at the 
stampede of logistics firms wanting to grab e-commerce shipments 
business. The Toll acquisition will give Japan Post access to Toll's 
global footprint of 55 countries and significantly improve the company's 
ability to compete. Coincidentally, a second Japan-focused logistics 
acquisition happened on the same day, when Kintetsu World Express bought 
out Singapore-based APL Logistics, for US$1.2bn. Clearly logistics 
companies servicing e-commerce giants are on the move. (Source: TT 
commentary from nytimes.com, Feb 18, 2015)


=> Delicious goats too tempting for trainees

It may not be front page news, but it appears that one of the downsides 
of not paying Asian "trainees" enough to work in Japan's factories is 
that they are always hungry. Not only is this inconvenient, in the case 
of two Vietnamese trainees, it was fatal for two goats eating parkland 
grass for a research project. Apparently the two young men, who are now 
in custody and who face two-year prison terms, were caught after killing 
and eating the goats for a birthday party. The two are awaiting 
sentencing now. (Source: thanhniennews.com, Feb 21, 2015)


=> Cool Japan does translation, subtitling

 From ramen shops to translation companies -- Cool Japan has an 
interesting take on its mission to spread Japanese culture through 
innovators around the world. Imagica Robot Holdings, previously a 
company related to Kodak in Japan and one of Japan's largest video 
post-production companies, has co-invested with Cool Japan and Sumitomo, 
to buy out a Los Angeles translation, subtitling, and dubbing company 
called SDI. The three partners paid a staggering US$160m for the 
privately owned company. Imagica will hold 50.1% of SDI, but it appears 
that they will leave the existing management to continue running the 
business. SDI has 1,000 employees spread across 37 countries. Clients 
include Sony, Warner, Paramount, Fox, Netflix, Hulu, and Google -- in 
other words a who's who in digital content. (Source: TT commentary from 
variety.com, Feb 19, 2015)


=> Survey confirms gender-based wage discrimination

The health ministry published its annual Basic Survey on Wage Structure 
and confirms yet again that the wage gap between men and women is 
significant and efforts to achieve parity are moving at a glacial pace. 
Female wage earners made an average JPY238,000/month, compared to 
JPY329,600 for males, putting the women on average at 72.2% of men. This 
was actually the highest wage for women since data was first compiled in 
1976. The survey also shows that while the average monthly salary 
increased 1.3% in 2014, to JPY299,600, the increase was well behind the 
2014 average inflation rate of 2.7%. ***Ed: No wonder consumers are 
keeping their purses closed.** (Source: TT commentary from wsj.com, Feb 
20, 2015)


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.



No events to announce this week.


=> No corrections or feedback this week.



=> Fairytale Winter Tour: Shirakawa-Go, Gunma
A Surreal Landscape of Shirakawa-Go Light-Up Event

Beautiful photos of the Ogimachi Village in Shirakawa-Go deep under the 
snow were included in one of the articles about Japan that went viral in 
social media. This made me very interested in the location and I did 
some research on the internet and found out it was only 5.5 hours from 
Tokyo. Based on popular reviews, Ogimachi village is best (magically) 
viewed during the Light-Up Event on selected weekend nights in the 
winter season. Without further ado, I planned my trip a month in advance.

Shirakawa-Go is based in the Shokawa Valley in Gifu Prefecture. It's 
main attraction is the Ogimachi Village, which features 59 gassho houses 
and which was declared a UNESCO World Heritage Site in 1995 along with 
the villages of Ainokura and Suganuma in Gokayama, Toyama Prefecture. 
These houses are known for their unique steep thatched roofs shaped like 
gassho or "praying hands" and interestingly, no nails were used to build 
them. Most families in these villages were involved in the cultivation 
of silkworms and produced silk until the 1970s.


=> Ohana Estate, Fukuoka
A samurai mansion in central Yanagawa

The Ohana Estate, former residence of the Tachibana family, occupies 
prime real estate in the center of the canal city of Yanagawa. The 
Tachibana family had been important supporters of Hideyoshi Toyotomi and 
were rewarded with land in present-day Yanagawa for their loyalty. 
Although they lost their position when the Tokugawa clan rose to become 
shogun, by the 1620s, they had reclaimed their place of power in 
Yanagawa and remained the lords of the region until the Meiji Restoration.

Every ruling family needs an impressive home and the Tachibana family 
was no exception. The estate was begun in 1697 on a parcel of land 
surrounded on all sides by the canals. The current Western-style 
buildings were constructed by the 14th descendant in the family in the 
early 1900s. While the original house was officially known as the 
Shukkei-tei, the house has long been called Ohana. The land itself was 
once known as hanabatake (flower field) by the locals and the nickname 
for the villa just stuck.



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

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