Terrie's Take 928 - Five Predictions for 2018, e-Biz News From Japan
terrie at mailman.japaninc.com
Mon Jan 22 10:18:35 JST 2018
* * * * * * * * 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, Jan 21, 2018, Issue No. 928
- What's New -- Five Predictions for 2018
- News -- Interesting history of Japanese slave made good
- Upcoming Events
- Travel Picks -- Acres of Daffodils in Awajishima, Art Deco in Shirokanedai
- News Credits
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+++ WHAT'S NEW
Five Predictions for 2018
Continuing our foolish tradition of making predictions that will affect
the business sector in Japan, here are our top 5 picks for this year.
How did we do with our 2017 picks? We got one right (Trump and a
business pickup in his first year), two wrong (Inbound tourism is still
pumping, and Toyota is not doing anything notable in Electric Vehicles
yet), and two others that are still developing. So, hey, while this
isn't the year of the monkey and we don't have a dartboard, we do have a
dog that can bark out the answers.
1. Tokyo earthquake
Yep, we've made this prediction before, and probably will again. The
fact is that Tokyo has been blessed with an absence of major earthquakes
over the last 90 years, but if viewed through the lens of history, this
period of stability isn't normal. The fact is that just south of the
capital is the confluence of three very active tectonic plates: the
Eurasian, Philippine, and North American plates, with a fourth one, the
Pacific plate hemming in on the North American one about 100km to the
east of Chiba. As we have reported in the past, major earthquakes strike
Tokyo on a reasonably regular basis - about once every 150 years, give
or take. For the nerds among us, there are slip deficit areas running
the length of the Nankai trough (ending up in Shizuoka and Saitama) that
act as triggers for the larger earthquakes, and it is these that the
Japanese government monitors most closely because they indicate the
amount of tension building up.
About 20 years ago, a number of prominent scientists predicated that
Tokyo faces a 70% chance of strong earthquake within 30 years - and that
was 20 years ago... So...
The worst-case scenario is that the quake hits Tokyo in the evening in
the winter (when people are using gas heating), which experts have
estimated will kill 23,000 people or more, and destroy 610,000
buildings. Why 610,000 and not 600,000 we don't know - Japanese penchant
for accurate-sounding numbers maybe. Anyway, the economic damage would
be in the region of JPY95trn. Chances are, though, that rather than a
quake hitting Tokyo directly, depending on which plate is most active
the most severe damage will either be in Saitama, where the Philippine
plate rises closest to the surface, or Izu/Shizuoka, where the plates
most actually collide.
How does one factor an earthquake into your business planning? Firstly,
of course, there is the safety of your loved ones, meaning that you
should try living in a structure built after 1985 (when the building
rules became more stringent), between 1-5 stories high, and located on
relatively high ground west of Shinjuku. Or if you live on the
waterfront, then be sure to be in a new building with deep piles and
more than 3 stories up (in case of tsunami).
Secondly, make sure your business information is in the cloud, with a
firm that has servers abroad.
Thirdly, try to be in a business that you can run out of a secondary
city while Tokyo is recovering. For example, for those of us in Travel,
we are doing our best to expand the business right across the country,
thus allowing us to operate even when the main office is down. Japan has
tremendous fiscal reserves and so we don't doubt that the rebuilding
effort will be full-fledged, in fact leading to a major building boom,
but the recovery period will be at least a couple of years, not to
mention the foreign business customers/partners who will be scared away
by the disaster. So prepare for this.
There is a very good graph of the four tectonic plates and where they
intersect on page 3 of this PDF. http://bit.ly/2rryN05
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2. Stock market hit
With the stock markets moving to new highs, the Topix index hit its
highest point in the last 26 years (i.e., just coming off the peak of
1991) last week, there is a lot of local unease about whether the bull
run can continue. Economists from foreign banks here in Japan are
publicly saying that they expect gains in 2018 to be modest or even
reverse compared to last year. One reason for this is that shares are
comparatively expensive here compared with other markets, and so while
many companies are reporting record profits nonetheless their earnings
as a ratio of revenues is still generally much lower than their foreign
Then on top of overpricing is the uncomfortable awareness that much of
Japan's stock surge is "manufactured", puppeteered if you like, from
behind the scenes, as government entities such as the Government Pension
Investment Fund, and supposedly independent entities like the Bank of
Japan, buy shares directly or through ETF funds. Japan has a lot of
critical thinkers among the public, thanks to a decent-enough education
system, and they can see that the government is effectively
nationalizing the stock market through its Quantitative Easing and share
buying operations. This is clearly not a natural economic mechanism and
contributes to the debt burden and weakened buying power of ordinary
Japanese citizens. In other words, we are all likely to be poorer
because of this.
In addition, there is the fact is that public share ownership in Japan
is extremely low because: a) people have long memories of how they got
suckered into overpriced stock during the 1990s, b) the lack of savings
and disposable income restricts many young peoples' ability to buy
stocks anyway, and c) there is a general distrust of Japanese firms'
willingness to look after shareholder interests. So with most of the
public not involved, there are few "animal spirits" to be awoken by the
current rally. This means low liquidity despite the high prices and
vulnerability to external shocks, especially now that a lot of trading
is either programmed or leveraged by trading on margin.
Stock pundits in the USA (Seeking Alpha, etc.) are saying that they
expect a market correction, even as the bull market of 2009 continues.
While this may be a temporary setback for the US, where there is a lot
of trading volume and a diverse set of share traders, the correction
will probably have a much deeper impact here in Japan.
3. Japan-China run-in hurts tourism
In our predictions for 2017, we said that we expected the Japan-China
relationship would deteriorate, most likely over the Senkaku islands
dispute, and that inbound tourism would be impacted as a result. It
looks like this prediction was a year too early, and instead, we're
doubling down for 2018. Why? Simply because of the muscle flexing that
the Chinese began several years ago right across the Western Pacific and
South China Sea, and which already this year has intensified.
For example, in the last 2 weeks alone China has sent a submarine, a
frigate, four coast guard ships, and trawlers, near to or inside
Japanese territorial waters around the Senkaku islands. Japan has
protested the vessels' intrusions but knows full well that this is a
waste of energy. We think it's only a matter of time before Tokyo
decides to build a naval base on the Senkakus to strengthen national
defense, and the announcement of this move will infuriate the Chinese.
The last time something like this happened, when the Japanese government
announced it was buying the privately held Senkaku's so as to keep them
out of the clutches of Tokyo governor and right winger Ishihara in 2012,
violent demonstrations were organized by persons unknown (but most
likely the Chinese government, since demonstrators were bussed in)
around China. Rocks were thrown, fires lit, Japanese cars trashed, and
Japanese stores and factories were shunned or attacked across the
nation. Needless to say, tourism suffered at the same time.
4. Japanese back off Bitcoin
2017 was the year that the Japanese government surprised the world and
legitimized BitCoin and other cryptocurrencies. While Russia and Estonia
are also hot beds for cryptocurrencies, Japan is by far the most
influential market in the world to not only allow Bitcoins but to
regulate them and thus allow them to exist legally and without grey
zones. They did this by allowing 11 cryptocurrency exchanges to register
with the Financial Services Agency. Thus, not only is Bitcoin legal
tender, but trading of it is now permitted and encouraged. This is
clearly very different to the attitudes of two active regional
neighbors, China and South Korea, where the respective governments allow
Bitcoin but persecute financial entities trading or assisting the
trading of Bitcoin and other cryptocurrencies.
In 2018 we expect Japan to continue its upwards momentum as the world's
leading Bitcoin market. We suspect that Japan decided to accept Bitcoin
because it was seen as an expedient way of returning Tokyo's status as a
financial hub, something it lost after the Lehman Shock and the 3/11
earthquake. Tokyo well knows that it is unable to attract foreign
financial firms on a normal basis, due to high taxes and cost of
operations compared to other regional centers such as Hong Kong and
Singapore. So we believe that some bright boffin in the Ministry of
Finance recognized the opportunity in Bitcoin, especially as Chinese
money flooded in to Japanese exchanges. Today about 75% of global trade
in Bitcoin is done in yen, mostly by the two biggest Japanese exchanges.
BUT, Japan's trading partners are not about to let Japan usurp the
national fiat currencies that are the core of the international trading
mechanism - particularly the dollar. So if Bitcoin activity gets too
successful, we expect the US monetary authorities and certainly the EU
ones (who see crypto currencies as a threat to the Euro) to tell Japan
to cool it. A lot depends on whether Chinese and S. Korean consumers
find their way to Japanese exchanges or not, and in what numbers.
Certainly Bitcoin is a great way to move money now that China has
tightened its financial controls, and so we see nothing but pure upside
in this business once Japan figures out how to deal with the fraud
aspect. The great thing for Japan is that people are much more likely to
trust a Japanese exchange than a Russian or Estonian one.
What do we predict about the Bitcoin market itself? Well, it's a
crap-shoot, and the currency will go through more gyrations before it
starts to settle down. We imagine that if enough Japanese retail
investors are hurt in one of the many Bitcoin value collapses to come,
the government will eventually step in and introduce some form of
stabilizing mechanism. For example, they might offer an endorsed version
of Bitcoin that is backed by a national fund of Bitcoins (sort of like
hedging) to counter these market extremes.
5. Softbank skating on thin ice
Masayoshi Son is an amazing businessperson and has really shown the rest
of Japan what it means to be an entrepreneur. We think his top
achievements to date have been to have single-handedly forced the
Japanese incumbent telco's to follow Softbank into the Internet
broadband era (remember the Yahoo Japan parasol sales of broadband
routers?, back in the late 1990's, and translating a US$20m investment
into Alibaba of China into a US$70bn investment today. Since 2015, Son's
company has done around US$44bn in investments or acquisitions,
including the US$30bn acquisition of British chip firm ARM Holdings.
But at the same time, Mr. Son is not infallible, and the troubled
US$22bn acquisition of Sprint, the fourth largest telco in the USA, has
been dragging overall group financial results down, especially since a
failed tie-up deal with T-Mobile in the USA means that Softbank has to
plow another US$6bn annually into upgrading/improving Sprint's
infrastructure so that it can stay competitive. This on top of the fact
that Sprint is probably only worth half of what Son paid for it - so the
balance sheet is highly impaired (although not properly recognized,
yet). As a result, this difficult deal plus other financing costs have
loaded down Softbank with an incredible US$130bn of debt - some say,
about 25% of ALL debt of ALL Japanese companies.
We think that if interest rates rise significantly over the next 12
months, something that is quite possible, along with at least one market
correction, it could be that Mr. Son will be overwhelmed at a point when
his position is not that strong, and Japanese and foreign banks will
start calling in their loans. Mr. Son is basically betting that the
current bull stock market will run at least another couple of years, and
in this way, give him time to consolidate his investments in his core
company, while allowing any new investment risk to fall on to the
US$93bn fund he set up with the Saudis. He does also, of course, have
huge stakes in desirable companies such as Alibaba, but frankly, if
there is a repeat of the Lehman Shock in late 2018, the China market
will be heavily affected, and that attractiveness will quickly degenerate.
...The information janitors/
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- Search engine held responsible in landmark defamation case
- Interesting history of Japanese slave made good
- Japan - country of the lonely
- Bike sharing challenges for Mobike in Japan
- 20% of Japan is unclaimed land, and unusable
=> Search engine held responsible in landmark defamation case
In a first for Japan, the Tokyo High Court has found that Yahoo Japan
was responsible for the 11 search results that defamed the claimant, and
the company has been ordered to remove them. The search results
associated the man with gangsters and other allegations. What's
significant about this case is that although search engines (Google in
particular) have removed search results after similar defamation cases,
the removals are usually of their own volition. In this particular
instance Yahoo Japan wanted to use the case to set a precedent that they
(as a search engine) are not responsible for the results returned.
Otherwise, they probably fear that their administration costs will go up
significantly as they deal with increasing defamation cases. ***Ed:
Well, hey, we can't really feel sorry for an industry that lives by
stealing other people's content, makes huge profits, and dodges all the
usual fact-checking responsibilities of a publishing firm (which they
are, in our opinion). The EU has set the course, and now Japan looks set
to follow.** (Source: TT commentary from japantimes.co.jp, Jan 20, 2018)
=> Interesting history of Japanese slave made good
Nice article in the Yomiuri about a Japanese man in the 16th century who
was sold to the Spanish as a slave, traveled to India, the Middle East,
and Europe with his master, outlived the master, received a huge
inheritance, then traveled back to Macau and set up a foundation to help
Japanese Christians there who had fled persecution by the Shogunate. The
slave's romanized name was Damian de Lima, the same surname as his
master, and his existence was discovered through a will dated October
25th, 1642 which was discovered in museum archives in Madrid. ***Ed: Not
news, but fascinating to discover that a colony of Japanese Christians
was sheltering in Macau in the early 1600's.** (Source: TT commentary
from the-japan-news.com, Jan 20, 2018)
=> Japan - country of the lonely
Probably the most depressing news of the New Year is that Japan is well
on the way to becoming the country of the lonely. An excellent New York
Times article last month (http://nyti.ms/2mUFdzq) highlighted this fact
only too well, documenting a danchi to the west of Tokyo where the
single inhabitants die (alone) with sad regularity. The National
Institute of Population and Social Security Research has just issued
figures showing that the number of one-person households in Japan will
rise from the current 34.5% to 39.3% in 2040, and at the same time,
household heads aged 65 or older will rise from 36% currently to 44.2%.
That's almost half. ***Ed: These numbers start to make retirement homes
look like a good option.** (Source: TT commentary from asia.nikkei.com,
Jan 12, 2018)
=> Bike sharing challenges for Mobike in Japan
Bloomberg ran an article last week pointing out that the big Chinese
bike sharing companies Mobike and OFO are running up against the
Japanese penchant for being neat and tidy. While we see media images of
bikes on every city corner in major Chinese cities, shared bikes in
Japan are still somewhat of a rarity and despite their promise, fall far
short of what can be considered mass transit. Mobike has now partnered
with Line and its 71m subscribers to promote share cycles in Japan, but
is still stuck at first base with a couple of hundred test units in
Sapporo. OFO, likewise, has tied up with Softbank, but is still trying
to figure out where to get started. Both companies have the same
problem, which is that they can't use public land for parking, and so
are having to negotiate with chain store owners to use their parking.
***Ed: This point has been the same thing that has held DoCoMo's
Bikeshare business back for so long - having to negotiate with every
municipality one-by-one, and having to follow each area's detailed
regulations on the use of their public space. Hard to see the Chinese
wanting to go through this painstaking multi-year process. It would be
way quicker for them if they went the route of Airbnb and gave
individual "partners" some bikes each free of charge, let the partners
leave their bikes around the city, and do a revenue share on each bike's
income. This would devolve the responsibility to individuals and not the
operator. Worked for Airbnb...** (Source: TT commentary from
bloomberg.com, Jan 17, 2018)
=> 20% of Japan is unclaimed land, and unusable
The diet plans to pass legislation allowing public authorities take
control of unclaimed land, after appropriate attempts to notify the
owners, by unilaterally creating 5-year leases and paying nominal rent
into a trust fund just in case the rightful owners eventually come
forward. The new law is intended to ease the problem of uncontactable
multigenerational heirs of land in remote areas, who find it easier to
go missing than to pay the land taxes - thus creating a vacuum of
ownership information for many unclaimed land plots. Apparently the
amount of unclaimed land is around 43,000 sq. km (size of Denmark), and
by 2040 is expected to rise to around 70,000 sq. km. ***Ed: Despite the
reasoning here, that land owners are hard to identify, we find it
troubling that public authorities can quietly sneak themselves into the
picture as beneficiaries. Why doesn't the Tax Office simply seize and
resell the lands in question, just like they do with city dwellings? If
the problem is unpaid taxes, then the Tax Office should fix it. The
answer is not to give unclaimed lands to public bodies, because such
lands will never be returned to the private sector.** (Source: TT
commentary from ft.com, Jan 18, 2018)
* (If you're not a subscriber, you'll need to go to Google and search
the article under "Japan's lost lands:"
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
--------- Australia/NZ Japan Travel Seminars --------------
Title: "Latest Trends in Japan's Inbound Travel Boom"
A series of free travel seminars in Australia and New Zealand, by Terrie
Japan is in the midst of the world's largest inbound travel boom in the
last 20 years. From 2011 until 2017, the number of inbound travelers has
increased 450%, from 6.2m to 28m (estimated) by March 31st this year.
What is exciting about this US$40bn+ travel boom is that more than 50%
of the market is held by non-Japanese firms, and that means great
opportunities for Australian and Kiwi firms as the growth continues.
As founder and CEO of one of Japan's top inbound travel sites,
www.japantravel.com, Terrie Lloyd is at the forefront of the market,
helping to make and shape trends as the market evolves. His particular
focus is on repeat travelers, who now account for more than 55% of the
flow, and who are demanding more specialist experiences that typically
define a maturing market. His presentation will share the latest news on
what trends are emerging, and where the opportunities lie for Australian
and Kiwi firms.
Terrie will give some specific examples of new travel products and
services now under development, particularly highlighting hiking and
trekking trails in Kyushu, a still-underdeveloped part of Japan (read,
low cost, great food, and no hordes of tourists)
Seminars 1 & 2: Sydney, Australia, February 9/10 - location to be confirmed
Seminar 3: Auckland, New Zealand, February 14 - Crowne Plaza Hotel, Auckland
The seminars are free of charge. Other details will be confirmed as they
come to hand. Interested attendees can reserve a space, by emailing us
at jerome.lee at japantravel.com.
No events or corrections this week.
+++ TRAVEL DESTINATIONS PICKS
=> Nada-Kuroiwa Narcissus Field, Awajishima
One of Japan's top three wildflower fields
Located in the southern part of Awaji Island, the Nadakuroiwa narcissus
(daffodil) field is a meadow of wild daffodils growing on a steep
hillside overlooking the surrounding coast. With around five million
daffodil flowers, it is known as one of Japan's top three wild flower
The origin of this place can apparently be traced back to about 180
years ago, when local fisherman planted daffodil bulbs that had washed
ashore. Since then, the flowers have been naturally growing and
multiplying, and now they cover an area of about 7 hectares.
The entrance fee to the park is ¥500 for adults and ¥300 for children,
with free parking included. Be aware that the whole daffodil field is
located on a steep slope, so you have to climb up quite a bit to get
anywhere. It is definitely not accessible with wheelchairs or baby
After a few minutes of walking up and enjoying the surrounding flowers,
including their pleasant smell, you will reach the top of the mountain
ridge, which overlooks all sides of the field, as well as the nearby
Nushima Island. The whole area is just great for taking photos, so if
you are a fan of nature photography you really should visit this spot! I
would definitely recommend going on a sunny day though, because it can
get really windy at the top.
=> Reopening of Teien Art Museum, Shirokanedai
One of the most beautiful museums in Tokyo reopened November 2017, after
seven months of renovations to install an elevator that makes the second
floor accessible for the first time. Featuring an Art Deco mansion built
in 1933 for a member of the Imperial family, and a spacious Japanese
garden and teahouse, the Tokyo Metropolitan Teien Art Museum has long
been a favorite with international visitors to Tokyo.
The main building of the museum is the Prince Asaka Residence, which was
built in Art Deco style because the prince and his wife, who was the
eighth daughter of the Meiji Emperor, lived for a time in Paris.
Together they visited the world fair that was held there in 1925, and
which showcased a new wave in visual arts - what we now know as Art
Deco. The couple were enchanted by what they saw, and upon their return
to Japan had a new residence built in this very modern and international
style. In contrast to the Art Nouveau style that preceded it, Art Deco
motifs favored symmetry, straight lines, and repeated geometric shapes.
Several French designers were engaged to work on the new residence,
including famed glass artist René Lalique (1860-1945). Lalique provided
chandeliers for the salon and great dining hall, as well as
custom-designed glass-relief doors for the front entrance hall that are
one of Lalique's largest works and a must-see for Lalique fans visiting
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+++ ABOUT US
Written by: Terrie Lloyd (terrie.lloyd at japaninc.com)
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