Terrie's Take 797 -- Foreigners' Role in Land Prices. E-biz news from Japan.

Mon Mar 30 00:10:24 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.
(http://www.terrielloyd.com)

General Edition Sunday, March 29, 2015, Issue No. 797

- What's New -- Foreigners' Role in Land Prices
- News -- Gumi restructuring after loss forecast
- Upcoming Events
- Corrections/Feedback
- Travel Picks -- Tofu in Saitama, Indigo Museum in Kyoto
- News Credits

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+++ WHAT'S NEW

The 2015 tourist season kicked into high gear this month (March) thanks 
to the arrival of cherry blossoms, and we are already experiencing a 
taste of things to come -- queuing crowds and shortages.

Top of the shortages list is hotel rooms, which we mentioned in TT-782 
last November as being a problem for the 2020 Olympics. In retrospect, 
we should have forecast the problem happening a lot sooner. This week we 
ran an informal survey of Booking.com hotel rooms inventory over the 
next 3 days -- given that ohanami season: is as reasonable a stress test 
for room availability as any we can think of. According to Booking.com, 
only 51 out of 588 properties in Tokyo had rooms available for members, 
saying that 91% of inventory was already reserved. In Osaka, only 46 out 
of 915 regional properties had vacancies, a 94% reservation rate. In 
comparison, Hong Kong hotels were 12% reserved and Singapore hotels 14% 
reserved.

One of the big opportunities created by the jump in hotel occupancy 
rates is the the need for more of them. On the last day of January, the 
first of a spate of high-profile hotel deals was announced, reflecting 
juicy anticipation of Tokyo's market performance over the next few 
years. Mori Trust sold its Meguro Gajoen hotel and related restaurant 
complex to LaSalle Investment Management and China's CIC for an 
estimated JPY140bn. The complex is a major development, consisting of a 
19-story office building (where Amazon Japan is located), a wedding 
facility, shopping, and of course the hotel. The sale was a quick flip 
for Mori, which paid JPY130bn for the property just a year earlier. Nice 
money if you can get it.

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[...Article continues]

Then on February 12th, one of the most active foreign funds in hotel 
real estate reappeared in the news when it announced that it was buying 
the Rihga Royal Hotel Kyoto for an undisclosed sum. Readers might 
remember that we mentioned in Terrie's Take 782 (November 24, 2014) that 
one of Fortress Investment Group's fund managers said his hotels were 
the best performing property assets in the company's portfolio. 
Interesting to see that belief being echoed in a survey (by the Urban 
Land Institute and PwC) late last year in China, where real estate 
investors and developers ranked Tokyo the top investment destination for 
2015.

On February 13th, Bain Capital announced that it was buying hotel and 
spa operator Oedo Onsen Holdings for a reputed JPY50bn. The company 
operates 23 day spas and 6 hotels around Japan and has grown about 30% 
annually since 2007. Last year it served 5m customers and had revenues 
of JPY35bn. Given that most of these customers have been Japanese so 
far, Bain no doubt thinks it can internationalize the operation (much 
the same as Fortress is doing as well) and in so doing pick up a growing 
share of higher spending foreigners. A recent British survey says that 
hotel room prices at major hotels in Tokyo rose 8% in 2014 thanks to the 
swelling ranks of foreign travelers -- expected to hit 15m people this 
fiscal year.

If Bain is cuing in on the foreign tourism boom, then their timing is 
excellent. JNTO has just released figures showing that foreigners spent 
about JPY16trn in real terms in 2014, up 31% over fiscal 2013. Foreign 
tourist consumption of hotel rooms, food, and souvenirs now makes up 
about 1.8% of export-related GDP. As we often say to our clients and 
study groups, not only is this a large and pretty much 
guaranteed-to-grow number, it's also essentially "free" money for the 
government. Apart from some additional immigration and policing costs, 
very few of these visitors place a burden on the nation's social welfare 
infrastructure, unlike regular Japanese economic activity. In case you 
were wondering, Japan's GDP was JPY570trn (US$4.92trn) last year.

Not just hotel funds, foreign individuals are also driving up real 
estate prices. They are typically starting in the big cities, but we 
predict it won't be long before the excitement moves out to the rural 
areas as well -- especially recreational areas with the potential to 
become look-alikes of Niseko and Miyakojima (two of the extremes 
possible in geographically diverse Japan).

The Nikkei this last week told a story of Taiwanese investors flocking 
to Tokyo to buy studio apartments and standalone homes. One 
semiconductor-making entrepreneur interviewed claimed to now own more 
than JPY1bn of real estate here, producing yields of up to 10%. The 
newspaper further mentioned that he has been introducing Tokyo property 
investment to his mates as well -- especially friends with assets of 
JPY5bn-JPY10bn. The paper says that the investor group focuses on 
Roppongi, Ginza and Shibuya.

Thanks to all this foreigner-stimulated action, coupled with the heating 
up of demand by Japanese large listed exporters, commercial land prices 
in Japan fell just 0.3% nationwide last year -- indicating a likely 
turning point for land prices everywhere. Of course most of the 
increases are going on in the major cities, and so there is a large gap 
versus rural areas. But what that means in an inbound tourism context is 
that there is a value gap outside of the major cities. THat represents a 
once-in-a-decade buying opportunity for those people willing to step out 
of their comfort zone and take a punt that tourists will start exploring 
the farthest depths of the countryside.

...The information janitors/

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

+++ NEWS

- Complete and trustworthy Fukushima report
- Inflation back to zero
- Can't get past the demographics
- Gumi restructuring after loss forecast

=> Complete and trustworthy Fukushima report

The Tokyo-based citizen radiation mapping organization, SAFECAST, has 
just published a complete and up-to-date report about the Fukushima 
Daiichi power plant and its effect on radiation levels, food, health, 
and the evacuees. This has been a major undertaking for the group and 
the report runs over 100 pages. It quotes copious sources for its 
findings, and appears to be one of the most trustworthy documents now in 
existence in English about Fukushima. In essence the report says that 
official (government) numbers for radiation levels are (these days) 
reasonably close to what SAFECAST's own citizen-derived data say. 
Therefore, radiation contamination over land, while still a concern, is 
far less threatening than some sensationalist sites abroad would have 
you believe. ***Ed: This said, we do believe that the radiation 
situation at the actual power plant is far from being under control and 
is still a threat to the environment.** (Source: Safecast.org 
announcement, Mar 29, 2015)

http://bit.ly/19vOCVd

=> Inflation back to zero

In what has to be a major set back to the objectives of the Bank of 
Japan (BOJ) to reintroduce Japan to inflation (target: 2%), in fact 
after taking out the costs of food and the consumption tax rise last 
year, the nation's core inflation rate actually fell back to zero, where 
it was in May 2013! Economists say that the fall in target inflation has 
mostly been due to the drop in oil prices and weak consumer demand. As a 
result, experts are expecting that the BOJ may launch another QE round 
later this year -- but probably not before waiting to see what the 
coming labor wages negotiations season yields. Unions are saying that 
they are pushing for an average increase of at least 3%. (Source: TT 
commentary from ft.com, Mar 27, 2015)

http://on.ft.com/1ypeyIk

=> Can't get past the demographics

Nice article from CNBC that neatly encapsulates why Abenomics will have 
limited success, due to companies not being willing to re-invest their 
recent windfall profits in Japan. The article points out that due to 
demographics and the inevitable decline of domestic markets, Japanese 
firms don't see any reason to be aggressively investing here at home. A 
recent survey showed that the number of companies planning new 
investments in Japan over the next 3 years actually fell 1.9% to 64.5%. 
The thinking is that after 15 years of deflation, both consumers and 
corporates will find it hard to imagine that things will change.

http://cnb.cx/1xKStcO

=> Gumi restructuring after loss forecast

Not 3 months after a spectacular IPO, the mobile game software developer 
Gumi has announced that it will undergo a restructuring in order to turn 
its business around after a shock forecast to investors that it would 
lose about JPY400m this fiscal year. The company did a JPY45bn IPO in 
December 2014, on the back of its highly profitable overseas gaming 
business, and had earlier forecast a profit of around JPY1bn. ***Ed: 
Unfortunately it seems that the company management became distracted 
with their immense IPO, one of the largest in Tokyo last year, and took 
their eye off the ball. The firm says it will fire about 100 staff and 
sell two web games. Shares are now at half the listing price -- a good 
chance to get into a fundamentally strong company.**

http://reut.rs/1HVtuqd

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.

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

+++ UPCOMING EVENTS/ANNOUNCEMENTS

------------------ ICA Event - April 16th -----------------

Speaker: Pierre Gaulis - Founder and CEO of BrandAcademy.co
Title: "Boosting Organizational Knowledge and Sales via Mobile Devices"

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

Date: Thursday, April 16th, 2015
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 5pm on Monday 13th April 2015. Venue is The Foreign 
Correspondents' Club of Japan

http://www.fccj.or.jp/about/access.html
-----------------------------------------------------------

+++ CORRECTIONS/FEEDBACK

=> Our article in TT-794 saying that JAL was worth flying again, except, 
maybe, the food, stimulated a good number of responses. Here is one of 
the more comprehensive comments.

*** Reader: Coincidentally after reading your comments about flying JAL, 
I had a chance the next day to fly them for the first time in some 
years. Likely due to the short notice and Spring break, the fares were 
relatively expensive, and I ended up booking my flight through HIS, but 
JAL definitely was less expensive than other airline options. Here's 
what I found:
* After purchasing the ticket, I tried picking my seats at the JAL site 
but it wouldn't allow me to unless I was also checking in. This, I 
thought, was different from say, ANA.
* On checking-in at Narita, both my business associate and myself were 
given upgrades to Business Class. So, I guess, I should say all good 
things about JAL!
* Surprised they had FT and WSJ but not Japan Times on the flight!
* The beverage service in business class was a bit disappointing, with 
screw-cap small bottles of mediocre champagne and wine. Dinner was okay. 
Both of us liked best the cold-tomato salad. Maybe for a 4-hour flight, 
one should not expect more?
* Not so lucky on the return leg. Economy lunch - a bland entree of 
scrambled eggs and minced meat over rice. Disappointing.
* Flight attendants on ANA, though equally young, are more 
experienced/trained and courteous, I felt.
* That said, there was one middle-aged attendant on the JAL business 
class who, I could see, was experienced in anticipating passengers' 
needs. Unfortunately that person was foreigner-shy, even though I was 
speaking to my associate in Japanese the whole time.
* On the return, I landed at Haneda. Rare for me. I had checked in my 
small wheeler -- that was a mistake as it took about 40 minutes to 
retrieve it. Have not experienced this with longer flights on bigger 
aircraft.
* For the fare, overall, not a bad deal. The problem starts if I compare 
it with the other airlines.

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

+++ TRAVEL DESTINATIONS PICKS

=> Tofu Wonderland, Saitama
Enjoy Tofubou's spread of tofu goodness

It is hard to miss Tofubou. Located along busy Highway 15, Tofubou has 
numerous banners advertising their tofu soft cream, tofu donuts, and 
tofu buffet. As I've never tasted tofu donuts or tofu ice cream before 
and curiosity led me to visit the shop.

Upon entering, I was greeted by a wide array of tofu products. The glass 
counters have ready-to-eat snacks, great for a quick lunch or as a side 
dish to supplement dinner. These include inarizushi (a pouch of fried 
tofu filled with sushi rice), tofu karaage (a deep fried dish that 
tastes as good as its chicken counterpart), okara (soy pulp with 
assorted vegetables), agedashi tofu (fried tofu served with garnish), 
kinchakuni (another kind of fried tofu pouch tied on one end, which goes 
nicely with soup), and the shop's bestseller: tofu hamburgers.

Two open refrigerators hold the various kinds of tofu. Some can be 
consumed as is, while others are used for cooking or baking. Examples 
include soy milk or soy cream, fresh tubs of tofu, fried tofu of various 
cuts and sizes, and trays of yuba (tofu skin, a delicacy in its own 
right). These are fresh-made everyday at the shop. If you ever tire of 
plain tofu, Tofubou also offers tomato tofu, yuzu tofu, edamame tofu, 
and black sesame tofu.

http://bit.ly/1Cz8uSN

=> The Little Indigo Museum, Kyoto
An alchemy of color and music

It was only two centuries ago that villages like Miyama were locked away 
from the rest of the world. People would live from the bounty of the 
land, and after a rich harvest would plant indigo, a blue flowering 
plant whose compost would nurture the soil, getting it ready for the 
following year. Also known as Indigofera tinctoria, this plant is better 
known for its blue pigment which is used to dye denim and other 
textiles. In the days of old, items like clothing were heirlooms to be 
passed to the next generation; in the same way that land or property 
would be today. It made the handmade kimonos and other traditional 
clothing all the more special.

Until the modern era, blue was the preferred color for wedding dresses. 
Blue was the symbol for purity and piety in wedding dresses, until a 
young twenty year old princess called Victoria changed this forever with 
a white wedding dress in England in the nineteenth century.

The museum was originally a village elder's house built in 1796. Its 
high pitched roof with seven saddles testifies to the importance of this 
building. The thatched roof is replaced every thirty years, a way of 
ensuring the skills of thatching are passed to the next generation.

http://bit.ly/1IHHv8t

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

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+++ ABOUT US

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

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