Terrie's Take 852 -- API Software Wave About to Hit Japan, ebiz news in Japan

Terrie's Take terrie at mailman.japaninc.com
Sun Jun 5 22:53:25 JST 2016

* * * * * * * * 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, June 05, 2016, Issue No. 852

- What's New -- API Software Wave About to Hit Japan
- News -- So, which nation's ship will be the first through the new 
Panama Canal?
- Upcoming Events
- Corrections/Feedback
- Travel Picks -- Kamo River in Kyoto, JPY2,300/night hostel in Minami-Senju
- News Credits

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For the last six months our sister company Japan Inc. Holdings (JIH), a 
small consultancy specializing in market research and business 
development for foreign high-tech firms, has been working for a U.S. 
software company with a significant stake in the collaborative economy. 
Specifically they develop API management software. What are Application 
Programming Interfaces - "APIs"? Basically they are standardized 
software interfaces that provide data communication between different 
server-side databases and programs, and web/mobile applications.

For example, a company with inventory to sell will prepare an API and 
look for partners wanting to sell that inventory online. The seller will 
have an onboarding process, starting with some investigation of the 
reseller, contracting, then sharing of API interconnection rules, and 
finally live connectivity and the start of business. A sector with high 
API usage is travel, where instead of painstakingly developing their own 
database hotel by hotel, travel agents these days link through an API to 
Booking.com and/or Expedia. In doing so, they get access to hundreds of 
thousands of hotels and can pull that data into their own travel 
management software so that they can use it to quote and re-sell to 

The idea of a world connected by APIs is most powerful when it is 
coupled with changes in how you do business - i.e., the collaborative 
economy. Take almost any second tier wholeseller in Japan. In this 
deflationary environment, these companies are slowly getting squeezed 
out of business and their slow-moving inventory sits unused. In the 
collaborative business paradigm they would open their inventory to 
real-time orders via APIs, taking orders from anyone willing to connect 
to their API. Then as their business recovers, they can expand their SKU 
list, but not their inventory, by connecting via APIs to their upstream 
suppliers or direct to the manufacturers. After doing this they can now 
give real-time pricing and availability on products that are not even in 
the country yet.

The keys to success for online sales are speed, detailed stock and 
status data, efficiency of volume, and reducing manpower by piggybacking 
on other companies for sales and supply.

------------ Japan Travel Group Tour Services -------------

Japan Travel KK is pleased to announce the formal launch of our travel 
agency business, beginning with inbound services for overseas tour 
groups. We are one of Japan's few foreign-owned inbound DMCs to look 
after groups of 10-30, and we have already assisted school, business, 
special interest, and extended family groups. We specialize in creating 
unique experiences by crafting a blend of memorable destinations, 
dining, activities, guide, and transport options.

What does your group want to do? Drive private cars in a convoy around 
Hokkaido for a week while visiting remote onsen? Board buses and 
experience a series of mountain-side sake breweries and whiskey 
distilleries? Cycle for 5 days around the rustic shoreline of Noto 
Peninsula in Ishikawa-ken? Take a simple Tokyo-Kyoto tour but with only 
vegan or halal dining? We can arrange any of these tours, combining them 
with our signature 24x7 multilingual support center, SIM cards, and 
multilingual guides.

If you have a group needing assistance, we invite them to contact us at: 
tours at japantravel.com.
Or visit our pages at: http://japantravel.co.jp/en/about/travel-agency/

[...Article continues]

The API business sector internationally is centered in North America, 
although it is rapidly expanding out to Europe and now South Asia. The 
sector got started in California in 2006 and has really exploded in the 
last 3 years. We think this is partly because the whole concept of 
piggybacking at low cost on someone else's resources really started to 
gain traction when Amazon's AWS webhosting service started taking off - 
around that time. Nowadays in the U.S., if you're a company trying to 
sell something over the web, you are not going to be taken seriously by 
resellers unless you have an operational API. This new reality is on its 
way to Japan.

How big is the API market? (Actual software market, not the value of 
transactions over APIs.) In the USA, the consensus seems to be that 
sales in 2015 of API software and management platforms was about 
US$500m, with another US$500m for the rest of the world - mostly 
centered on the EU. These numbers are up from almost zero in 2013. The 
API revolution hasn't hit Japan yet, but a number of the big players are 
already here.

What do we see as happening in the API marketplace in Japan and what 
will the trends be over the next 5 years?

1. Reluctance to share
Japanese companies were historically run by a single family, and the 
idea of a "one-man" company (where the founder runs the place with an 
iron first) is still very popular. For these firms, the idea of sharing 
internal information with another firm, even an ally, via APIs is an 
alien concept. Generally Japanese firms don't like to bring in outsiders 
until the get so large that they can impose their system requirements on 
to the collaborating firm, which is expected to kowtow to those 
requirements in return for being able to receive crumbs from the 
superior firm. That said, there are enough start-ups today with 
cash-starved founders, that alliancing through APIs may be seen as a 
natural growth move. Given that Japan is a group-oriented country, in 
the end we think that the API-connected collaborative economy is well 
matched to Japanese values.

2. Disconnection of business managers from IT innovators
In JIH's presentations to more than 25 Japanese technology firms, 
end-user candidates, and private equity firms, the team was surprised 
how few companies, maybe 5 or so, actually understood what an API is and 
how it could help them or their customers' businesses. So if this is the 
situation among the IT/SI specialists, clearly there is even more 
education required among the end users themselves. Probably driving the 
market forward by education is going to be too slow, and just as in the 
U.S. the Japanese market will respond to success stories as small 
challengers sector by sector suddenly appear and start overwhelming 
incumbents. This is already starting to happen in the travel sector due 
to the high ratio of foreign firms already operating in Japan. We 
believe that consumer finance, entertainment, and eCommerce are next.

3. Lack of API software/business development skills
While writing to APIs is not difficult for a trained engineer, creating 
the API in the first place requires not only software knowledge but also 
a good understanding of the system it is to access and the business 
rules needed to make functions available to a business partner. In 
IT-challenged Japan, there will also be many cases where a connecting 
system is not yet automated and thus not able to support the real-time 
interaction that APIs normally give. Since most Japanese companies are 
still only just learning about APIs, probably it will be at least 2-3 
years before API development skills become commonplace - a good 
opportunity for some enterprising company.

4. Early stage of Japan's collaborative economy
While one would expect that the Japanese API business would arise from 
internet players who already sell online and who are used to automated 
sales, because these companies are used to working inside the walled 
gardens of Rakuten and A8, they are unlikely to move unless the rewards 
are easily within reach. Therefore, collaboration on an open basis will 
be impeded for a while - much like Japan's domestic PC and mobile 
products impeded forward movement in those sectors (the so-called 
Galapagos syndrome). Instead, the first API wave will probably come from 
Japanese firms dealing with foreign ones abroad, who are demanding API 
interaction or nothing at all. Once these firms have figured out what 
APIs can do for them, then they will start applying that knowledge 
within Japan as well.

So we can see from the above that the API collaborating economy will 
probably grow initially through the B2C sectors, where Japanese 
consumers are already buying significant volumes of products and 
services, and thus if API connectivity leads to better service, the 
customers will naturally buy the offerings. From what we can see, this 
means travel, apparel, food, consumer finance, online gaming, 
crowdsourcing and crowdfunding communities, and a never-ending list of 
sports-cultural-activities communities needing to organize and move people.

If you're an importer, your opportunity is to make your inventory 
available by API to domestic online resellers, who can give you reach to 
tens of thousands more people than you can reach at the moment. If 
you're a marketing firm, APIs can give you access to the inventories of 
manufacturers overseas, and instead of keeping substantial stock here in 
Japan you'll be able to quote for supply directly out of an 
international warehouse. This is something Dell and other PC firms have 
been doing for years.

The existing players who will be most impacted once the API wave hits 
will be larger software companies who are not ready for the wave and who 
will be outmaneuvered by first-mover start-ups. Not all software 
companies are unprepared, though. For example, we note that Fujitsu is 
about to launch its K5 cloud stack and they have APIgee embedded in there.

Online affiliate marketing and conventional marketing/sales companies 
will also be hurt. Companies such as ValueCommerce, Amway, A8, and many 
others will find that sellers and publishers will start connecting 
directly with each other by registering on API directory sites (which 
are coming). eCommerce giants such as Rakuten and their 
bricks-and-mortar competitors are also likely to be hurt, because the 
supplier-seller relationship will change and they will become more 
logistics fulfilment agents.

...The information janitors/



+++ NEWS

- Uber's future in Japan is small towns?
- Injunction to forestall anti-Korean protest
- Tourist "gaiatsu" to reduce taxi fares
- Trucking firms collaborate with "relay" system to overcome driver shortage
- So, which nation's ship will be the first through the new Panama Canal?

=> Uber's future in Japan is small towns?

When you have billions in the bank and a mission to take on the whole 
world, you can afford to have the occasional diversion. In Uber's case, 
being shut down by the Japanese authorities in the major cities, the 
company has decided to make itself socially useful in the back blocks of 
Japan. Uber's first permitted service will be in a small 5,500-person 
village called Tango, in Kyoto Prefecture, where the 40% of the 
population is 65 or over and where the local taxi company stopped 
providing service back in 2008. ***Ed: Hard to see how Uber will make 
money out of this. The sole local taxi driver was complaining that even 
he didn't get enough customers. Uber's first driver is 68 and only wants 
to drive when it's raining and he can't go hiking. Oh, and Uber is 
having to supply 50 iPads and training to the old folks, so they can 
hail the drivers in the first place.** (Source: TT commentary from 
fortune.com, Jun 03, 2016)


=> Injunction to forestall anti-Korean protest

Since the passing of a hate speech law several years ago, anti-Korean 
activists have been placed on notice by civic groups wanting to stop 
them. Now, for the first time, the Kanagawa district court has issued an 
injunction to stop an anti-Korean protest planned against a Korean 
residents organization called Seikyusha. The injunction was taken out 
against the leader of an anti-Korean activist group also based in 
Kanagawa-ken. ***Ed: Proponents of free speech decry hate-speech laws, 
just like they decry Google gagging by the EU. But the fact is that 
unless we allow victims absolute freedom to deal with their trolls - 
like getting rid of them (something we certainly don't endorse) - then 
appropriate laws are the only way to set limits on such people. This is 
nothing new and it's why we have libel laws.** (Source: TT commentary 
from japantimes.co.jp, Jun 03, 2016)


=> Tourist "gaiatsu" to reduce taxi fares

Remember we said that inbound tourism would be used as pressure on the 
bureaucrats ("gaiatsu") to change laws? A perfect example of this is 
taxi companies who are dominated by the Ministry of Transport. Now, the 
ministry has agreed to allow taxi companies in metropolitan Tokyo to 
drop their minimum pickup tariff so as to increase the number of 
tourists hopping short-distance rides. The current minimum fare of 730 
yen for the first two kilometers would fall to JPY410 for the first 
1.059km and 80 yen for each extra 237m. The new fares could kick in by 
the end of this year. ***Ed: It's beyond us why the Ministry even feels 
the need to regulate taxi pricing. Surely open competition is fairer to 
the consumer, and would allow innovation of the sector - for example 
ride sharing (in taxis or Uber).** (Source: TT commentary from 
mainichi.jp, Jun 04, 2016)


=> Trucking firms collaborate with "relay" system to overcome driver 

There is a very interesting experiment going on in the long-distance 
trucking industry, where the trucking subsidiaries of two major Japanese 
retail brands are collaborating to overcome a chronic driver shortage. 
The two companies, supermarket operator Aeon and cosmetics maker Kao, 
have decided to start a relay system to move products between distant 
distribution centers. Under the system, trucks from Kao will meet up 
with trucks from Aeon mid-way between centers, swap 20-ton trailers, and 
return to their home base. In doing this, product can be moved further 
without having to pay driver's overnight accommodation and overtime. 
***Ed: Actually, this problem is even more pronounced in the 
long-distance bus business, where to drive passengers further than 500km 
or 10 hours you need to have two drivers (2014 law change). So swapping 
passengers at a switch point could have a huge pay-off for the bus 
companies. This practice is not widespread yet, but once relaying takes 
hold in the long-distance trucking industry we believe it will soon 
spread to the long-distance bus industry as well.** (Source: TT 
commentary from nikkei.com, Jun 04, 2016)


=> So, which nation's ship will be the first through the new Panama Canal?

At the end of April, France's Agence France-Presse ran an article 
stating that the prestigious right of being the first vessel to transit 
through the newly expanded Panama Canal, a US$7bn widening effort to 
triple the number of vessels using the canal, would go to China Cosco 
Shipping Corporation (COSCOCS) after the company won a lottery to select 
the pole position. HOWEVER, just this last week, the Nikkei ran an 
article stating that now the first ship through would be a Nippon Yusen 
LPG tanker, and that Nippon Yusen is one of the canal's biggest users. 
***Ed: So more intrigue. What's going on? Did the Japanese government 
pay for Nippon Yusen to have the honor of being first through? Or did 
the Panamanian government step in and slap China on the face because 
China is reportedly secretly backing an alternative canal through 
Nicaragua?** (Sources: TT commentary from nikkei, Jun 03, 2016 and 
industryweek.com, Apr 29, 2016)

* http://bit.ly/1UkOEQb
* Nikkei comments on the same topic

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.



------------------ ICA Event - June 22nd------------------

Speaker: Paul Chapman - CEO, Moneytree K.K.
Title: "Moneytree in Japan: Bringing banks to technology, not technology 
to banks"

Details: Complete event details at http://www.icajapan.jp/
Date: Thursday June 22nd, 2016
Time: 6:30pm 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 1pm on Friday 17th June 2016. Venue is The Foreign 
Correspondents' Club of Japan.




=> A Walk Along Kamo River, Kyoto
Culture on the banks of the Kamogawa

To cap off my Kyoto trip, I opted to walk through the lovely Kamogawa 
River district during the afternoon. It was the perfect place for people 
and bird watching - an area to get away from the crowd - as I had tried 
and failed to wait until sunset.

The Kamogawa, which translates to "Duck River", runs throughout Kyoto 
Prefecture. It is a long stretch of water running from the Kyoto Basin 
down south to the Yodo River. The walkway caters to locals mostly who 
are going out and about their daily lives. Tourists also seek this spot 
to enjoy the sound of the river flowing and for a breath of fresh air, 
relaxing away from the massive crowd of Kyoto. During the summer, 
restaurants open their balconies looking out onto the river. This is 
called "Noryo Yuka" where people enjoy outdoor dining to enjoy the cool 
breeze of the evening with their food.

The Kamogawa is best to be visited during dusk, or just when the sun is 
about to set. Afterwards, you can walk through the winding alleys of 
Gion, beautifully lit up by street lights and traditional lamps.


=> Aizuya Inn, Tokyo
A nice, laid back and friendly budget hostel

The Aizuya Inn is a fifteen minute walk from Minami-senju Station on the 
JR and Hibiya lines. One can rent a private room at Aizuya Inn starting 
at just ¥3,400 per night, or a shared room from just ¥2,350 per night. 
The Manager, Raoul, welcomed me in a very friendly way and instantly 
made me feel at home. Aizuya Inn is able to assist its guests in 
English, Japanese, French, German, and Italian. This was definitely a 
breath of fresh air after staying at many places where only Japanese was 
spoken. Raoul was helpful and willing to share his knowledge of Japan. 
He gave me a brochure of Tokyo and a railway map to make sure I could 
navigate the area easily.

The private, Japanese-style room was quite small and consisted of a 
traditional futon. There was a flat screen television and a pinboard 
with some of the many services the hostel offers. The room was clean, 
the sheets smelled fresh and there was a big sliding window overlooking 
the street. Aizuya Inn had a very nice, laid back and friendly vibe. 
Other guests are friendly and easily engage in conversations while 
hanging out in the living area.




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

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