Terrie's Take 900 - New "Airbnb Law" is Bigger Than Just Cheap Room Shares, e-biz news from Japan

Terrie's Take terrie at mailman.japaninc.com
Mon Jun 12 00:10:20 JST 2017

* * * * * * * * 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 11, 2017, Issue No. 900

- What's New -- New "Airbnb Law" is Bigger Than Just Cheap Room Shares
- News -- JPY5bn venture fund for Nihon Unisys
- Upcoming Events
- Corrections/Feedback
- Travel Picks -- Ouchi-juku in Fukushima, Tattoos in Shibuya
- News Credits

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On Friday June 9th, the National Diet (Parliament) passed legislation 
that will legalize home-sharing, otherwise known as "Minpaku". Initially 
the main beneficiary will be Airbnb, who now becomes the first U.S. 
sharing economy company to make it big in Japan. The new law will take 
about a year to be implemented while the Ministry of Land, 
Infrastructure, and Transport (MLIT) formulates the regulations, which 
will then be overseen and enforced by the Japan Tourism Agency (JTA). 
With the passage of this new law, home-sharing will be allowed 
throughout Japan, not just in the current special zones of Osaka and 
Ohta-ku (Tokyo).

As a result of law's passage, social media boards have lit up with 
comments for and against. Proponents of home-sharing are concerned about 
how restrictive the new law's details will be and whether Japan's 
overzealous regulators may yet still shoot themselves in the foot by 
strangling the sector. For example, not only will there be an annual 
usage limit of 180 days, but Minpaku home owners will have to register 
with local authorities, follow safety and cleanliness rules, and even 
have a sign out the front of their property declaring that the location 
is a home-share.

Actually this latter requirement is a master stroke by the anti-home 
sharing hotel lobby, since many otherwise interested people will be 
reluctant to advertise to their neighbors they are subletting. Amongst 
other things, having such a sign will invite cranky and nosy neighbors 
to complain to the host every time they see "suspicious-looking" 
foreigners wheeling strollers around the neighborhood, or speaking too 
loudly in a foreign language.

The Anti-home sharing cohort on the other hand are split between those 
who wail that the world is going to end for hoteliers who are unfairly 
bound by much stricter rules while amateurs can do whatever they like, 
and those who think that the new regulations may actually suffocate or 
kill off the home-sharing movement. Indeed, this second group are rather 
satisfied that the law has been passed, since it now very much restricts 
market forces and thus profits.

However, our take is that while the home-sharing movement will indeed 
respond to market needs, it will continue to grow and after the 2020 
Olympics (before which, anyway there is a chronic accommodation 
shortage) will possibly become a threat to hotel operators. Why? Well, 
economics. Sure, currently the average room in Tokyo rents out on Airbnb 
for around JPY7,000~JPY10,000/night, which means the home sharer is 
making about JPY210,000~JPY300,000 on a room that probably costs them 
about half of this in mortgage, utilities, and other fees. Although 
reducing the rentable nights per year by half (to 180 nights) will mean 
that their profits drop to just break even, so long as an equivalent 
hotel room in the same neighborhood goes for JPY14,000~JPY20,000, there 
is plenty of scope for those Airbnb hosts to put up their prices and yet 
still be cheaper than an equivalent hotel.

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[...Article continues]

We think this Airbnb law is quite far-reaching and goes beyond simple 
economics and dealing with local vested hospitality interests. We need 
to step back from the legislation and ask ourselves a very simple but 
important question: "Why did the Abe government approve home-sharing?" 
Yes, the nominal answer is that it's because the government is concerned 
about a shortage of accommodation for the Olympics. However, the 
government could have dealt with this issue in a number of other more 
controllable ways. For example, by parking a number of massive ocean 
liners in Tokyo Bay and servicing them with 10-minute water shuttles.

No, we think that the Japanese bureaucracy, being as intelligent as it 
is, has another deeper objective in mind.

If we look at this government's more radical policy moves in the last 5 
years, we see a definite preference for easy economic wins that can be 
had on a mega-scale. As examples:
1) Diluting the value of the yen with Quantitative Easing (QE), which 
transferred the burden of financing economic pump-priming to every 
Japanese resident. This was easy policy thinking, with the most 
difficult part being that of getting buy-in from international trading 
partners. The asset the government leveraged (besides a lot of tax-payer 
yen) was the Japanese public's tolerance for fiscal abuse so long as 
they get government stability in its place.
2) The same thinking was applied when the government's biggest financial 
investment bodies (Bank of Japan - being not really an independent 
central bank, the Government Pension Investment Fund, Japan Post, and 
the Development Bank of Japan) were directed to start buying up publicly 
listed company stocks, so as to create the illusion of a healthy stock 
market. The asset leveraged in this case was the public's ignorance of 
how stocks work, and because so few Japanese actually own stocks, thus 
there is a narrow spread and a small number of people tapping the 
financial benefits.
3) In the tourism sector, easy money has been created by easing travel 
visa restrictions for China and a host of other nearby countries. 
Statistics suggest that 8 inbound tourists in just one 5-7 day visit 
have the same discretionary spending power as 1 Japanese living here for 
a whole year. If that statistic is correct, then the 26m tourists 
expected to visit Japan this year are equivalent to city the size of 
Osaka, with all the consumption and value that that city creates, but 
interestingly without virtually any of the social welfare (old age 
homes, schools, etc.) costs or any additional infrastructure costs. So 
this is easy money on a mega scale. The asset leveraged here was the 
desire of neighboring countries' lower income citizens to repeat-visit 

Now home-sharing promises to be a similar "lucrative-and-mega" policy 
domain. Firstly, with the passing of the legislation, the many Japanese 
players angling for a piece of the market are now enabled to go out and 
invest. We expect that annual investment levels will be in the trillions 
of yen and will create a building boom in small-scale domestic 
dwellings. While infrastructure and big building projects require a ton 
of expertise and capital, refurbishing or extending small domestic 
dwellings does not. This will create a mini-boom in neighborhood 
handypeople and suppliers like the Cainz DIY home improvement chain.

Secondly, and perhaps even more important, the home-sharing paradigm 
allows ordinary people to take assets they already have, time and a 
spare room, and turn them into cash with little investment. This will be 
the secret sauce that drives Minpaku, and how ordinary people benefit is 
what Airbnb and other Minpaku players need to be pounding on. Although 
Japanese are highly sensitive to what their neighbors think and how they 
might judge them for the cheap (and potentially bothersome) act of 
renting out a room to strangers, for many older singles and younger 
families the benefit of receiving an extra JPY100,000/month will be too 
tempting. The average Japanese is cash poor by first world standards and 
the high cost of housing keeps them poor. Minpaku offers the possibility 
of taking a mortgage millstone and turning it into a revenue source.

It is our belief that the government is undertaking a vast social 
experiment with the Minpaku law. If the experiment goes well, then the 
third benefit will be more legislation to loosen other sectors where 
there is a natural supply of assets that no one is using properly. 
Vehicle usage is an obvious target. Another is farmland and 
sharecropping. Another is crowdfunding of new companies, so as to bypass 
risk-averse banks.

So things could get interesting in the next few years, so long as the 
regulators don't kill the golden goose.

...The information janitors/



+++ NEWS

- JPY5bn venture fund for Nihon Unisys
- Motor maker Nidec invests US$500m in Vietnam
- Lowrider car exports to Japan are booming
- Tax take expected to fall
- Another scandal threatens Abe government

=> JPY5bn venture fund for Nihon Unisys

Although no longer related to its parent, Unisys Corporation in the USA, 
Nihon Unisys is very much alive and well, and these days has sales 
rivaling the U.S. firm. Long a conservative IT powerhouse specializing 
in fintech, Nihon Unisys is recently realizing that it needs to increase 
its pace of innovation or get left behind in challenges from Google, 
Amazon, and others. Accordingly, the company announced on Friday that it 
would establish a JPY5bn venture capital fund to invest in start-ups 
involved in IoT, robotics, and of course fintech. (Source: TT commentary 
from 4-traders.com, Jun 09, 2017)


=> Motor maker Nidec invests US$500m in Vietnam

Although you don't hear about it much these days, the China-Plus-One 
manufacturing diversification strategy is still very much at the top of 
most manufacturer's agendas. The latest big investment to hit the 
headlines is Kyoto-based precision motor maker Nidec, which is investing 
US$500m in various plants there over the next 5 years. The plants will 
employ around 15,000 staff and are projected to produce upwards of 10m 
motors for household appliances such as air conditioners and 
refrigerators. Most of the output is expected to go to exports, although 
company says that the value of the local market after the investment is 
expected to increase to around JPY300bn. (Source: TT commentary from 
asia.nikkei.com, Jun 09, 2017)


=> Lowrider car exports to Japan are booming

Interesting photo-centric article from San Diego about the popularity of 
the lowrider culture in Japan. Vehicles are typically purchased and 
customized in the USA then exported to Japan, although there are some 
shops (like the URL below) that customize in Japan. Because the whole 
point of lowriders for Japanese is to be highly visible, the market 
wants bling. Lots of chrome and big wheels fitted to vehicles like 
Chrysler's 300C Hemi, Hummer H2 and H3, Escalade, and of course older 
1960 vehicles such 1964 Chevrolet Impala SS coupe. The article is 
actually about the Mopona Car Show and Swap Meet, Japan's largest 
lowrider meet-up, held in Ibaraki late May each year. (Source: TT 
commentary from Sandiegouniontribune.com, Jun 09, 2017)

http://bit.ly/2sQi1Eq (Ibaraki lowrider meet)
http://bit.ly/2sgFWjm (reference story)
http://bit.ly/2r7zbwk (Japan's top lowrider custom shop)

=> Tax take expected to fall

For the first time since 2009, the general account tax revenue paid by 
companies and individuals to the government is expected to fall to 
JPY55.86trn or less, some hundreds of billions of yen less than 
projected. The cause of the decline is both a fall in the profits being 
made by companies - mostly due to the recent re-strengthening of the yen 
- and in individuals' income, due to weaker salary growth (and the 
transition of a large number of workers out of the workforce). ***Ed: 
While falling tax revenues is a problem, given the ever-expanding cost 
of social services, JPY55trn in incoming tax is a whole lot better than 
the recent low point of just JPY43trn - which is where Japan was just 
8-9 years ago.** (Source: TT commentary from japantimes.co.jp, Jun 10, 2017)


=> Another scandal threatens Abe government

As we reported several weeks ago, PM Shinzo Abe is caught up in another 
favors-for-mates scandal, this time over a friend's veterinary school in 
Imabari, Ehime Prefecture. Although Abe had tried to dodge the 
accusations, it seems that someone in the education ministry kept notes 
of the PM office's pressuring the ministry to facilitate assistance of 
the new school - including a large no-strings-attached subsidy - at a 
time when there is a glut of veterinary schools and few new applications 
are being approved. Copies of the notes were presented by the opposition 
in a Diet session, the government is refuting their authenticity, and 
the opposition has now successfully forced the setting up of an 
investigatory panel within the education ministry to see whether the 
evidence is real or not. (Source: TT commentary from nydailynews.com, 
Jun 09, 2017)


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 - Thursday 15th June ----------------

Speaker: Jeff Crawford, Founder and Lead Consultant of JC Digital
Title: "The Top 10 Digital Marketing Mistakes Made by Japanese Companies 
in 2017"
Details: Complete event details at http://www.icajapan.jp/
Date: Thursday 15th June, 2017, 6:30pm Doors open
Cost: 1,000 yen (members), 2,000 yen (non-members). Open to all. No sign 
ups at the door!
RSVP: By 5pm on Monday 12th June 2017
Venue: Room F, 9F, Sumitomo Fudosan Roppongi Grand Tower, 3-2-1 
Roppongi, Minato-ku, Tokyo, 106-0032


No corrections today.



=> Fukushima Top 10 Attractions

Despite the tragedies that occurred in Fukushima over five years ago, 
this northern prefecture - one of Japan's largest - is open for 
business. You won't find hordes of other travelers here, leaving you to 
enjoy the sites in serenity. What you will find are beautiful castles, 
old post towns, numerous traditional crafts and mouth-watering food. The 
top of our list of Top 10 things to do is Ouchi-juku in Shimogo. This 
old post town was once located on the road that connected parts of 
Tohoku with the shogunal mausoleums of Nikko in Tochigi Prefecture. Even 
today, the village is remarkably well preserved, making visitors feel as 
if they have stepped back into the Edo Period. The few dozen houses 
double as craft shops and small eateries, many of which serve 
miso-slathered rice dumplings or handmade soba noodles. The best view of 
the town comes from the viewpoint near the hillside shrine.


Get Inked at Studio Muscat
Modern Japanese tattoo designs in Shibuya

If you're looking to decorate your body with some unique yet distinctly 
Japanese tattoo designs, Studio Muscat might just be the right 
destination for you. Muscat is run by the effervescent Asao-san in the 
heart of Tokyo, in a quiet residential area just south of Shibuya. First 
opened in 2003, Muscat's studio interior is an impressive canvas of 
modern Japanese aesthetics, and welcomes both those looking to expand 
their collection as well as those getting their first tattoo.

Asao-san applies tattoos to her clients, alongside three fellow Japanese 
artists: Haruka, Shinya and Eiji - who collectively offer a wealth of 
experience and individual styles. Those wishing to visit Muscat will 
need to arrange a booking in advance, which involves a consultation to 
help decide what design you want. No matter what you are looking for, 
Muscat offers a wide range of designs including Japanese, artistic, 
tribal, watercolor, geometric, and dotwork styles.




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

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